The news: Microsoft patented an ad system for video games that could eventually support placements on its new free tier for Xbox, per Respawn First.
How it works: The system would show in-game ads when users run out of ad-free credit. At the start of a game, a user receives this credit, allowing a period of uninterrupted gameplay. When that credit expires, the gameplay stops and the user is shown an ad. The system then gives the user new credit, and gameplay resumes.
Gaming engines will also signal when natural pauses are reached, such as the end of a level or a loading screen. These are meant to help the system choose less disruptive moments to show ads. The patent does not detail which gaming formats the system is designed to support.
Why it matters: A novel, user-friendly approach to showing ads in video games could entice advertisers to Microsoft’s new free tier in Xbox, which the company formally launched in July.
The ad system seems relatively respectful of the user, giving them ad-free play upfront and then quickly restoring that credit after an ad is shown. Immediate, undisrupted gameplay could be better received by users than two minutes of unskippable pre-roll ads, which launched on Xbox earlier this year. Plus, users are bound to feel less frustrated by ads that appear in natural moments of downtime.
The challenge: Microsoft’s gaming division has faced major instability, and a new ad system may not be enough to attract brands.
In July, Microsoft laid off 20% of Xbox employees and spun out its gaming studios following a loss of millions of subscribers. That restructuring could disrupt the quality of ad inventory and support that advertisers need, especially for a novel ad system.
Implications for gaming advertisers: Microsoft’s new ad system is still just a patent, so its actual implementation could take on many different forms—if Microsoft chooses to go through with it at all. But the patent signals that Microsoft wants to explore ad formats built around gameplay, not just recycle traditional offerings.
In the meantime, advertisers should prioritize mobile gaming inventory over console-based inventory, since users are most receptive to ads in the mobile format. Some 71% of US mobile game users report a positive experience with ads, per Axon/AppLovin. Perhaps Microsoft can flip this trend in Xbox’s favor, but it will take more than a lone patent to do so.
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