Microsoft and Sony are reportedly planning to add advertising in some of their free-to-play video … [+]
Last month it was reported that both Microsoft and Sony have been considering bringing ads to some of their free-to-play video games on Xbox and PlayStation.
An Insider article said Microsoft has been strategizing on a plan that would enable marketers to advertise on their free-to-play Xbox games. The aim is to have these ads unobtrusive so it will not be disruptive and alienate gamers. Among the popular free-to-play games on Xbox include Fortnite, Rocket League, and Apex Legends.
Insider also reported that Microsoft doesn’t intend to take a cut of ad dollars and will instead allow game developers and ad tech companies to share in the revenue. There is speculation the ad revenue allocated for developers would be a financial inducement. An ad supported launch could come as quickly as third quarter and Microsoft may be already reaching out to the ad community. One potential hurdle facing marketers is the amount of gratuitous violence and mature themes in video games which may not be a suitable environment for some brands.
This would not be Microsoft’s first venture with ads in video games. In 2006 Microsoft acquired Massive, an ad tech company with plans to put ads in selected Xbox games. Four years later Massive was closed down. Nonetheless, there are current Xbox games that have ad messaging in one form or another.
Video gamers are an attractive target for many advertisers who are more likely to be cord cutters and increasingly difficult to reach via traditional media. According to Deloitte’s latest Digital Media Trends Report released in March, 80% of Americans are video gamers with one-half of smartphone owners responding they play video games every day. Younger age groups are most likely to play video games, Deloitte found in the U.S., 96% of Generation Z (age 14-25) and Millennials (age 26-39) are gamers. In addition, Gen Z spends 11 hours each week playing video games and Millennials play games an average of 13 hours every week, higher than any age group.
Microsoft has also been in an acquisition mode of late. In January, they announced the acquisition of Activision Blizzard
Last December Microsoft announced they had acquired Xandr from AT&T
Sony is also said to be exploring ad supported video games. It’s been reported Sony is looking into selling and placing unobtrusive in-game ads in their free-to-play PlayStation such as billboards in auto racing games. The ad revenue can also be used as a source for game developers. It is possible Sony may get a share of the ad dollars. An ad supported PlayStation could be operational by year end.
Chris Hanson, a Syracuse University Arts & Sciences professor notes, “It is entirely unsurprising that Sony and Microsoft are exploring inserting advertising into their free-to-play games. F2P (free-to-play) games have historically used alternative revenue models for generating income, rather than asking consumers to pay for the game up front as other games do. Instead, F2P games utilize virtual items and add-ons for which players may opt to spend money, such as different characters, abilities, or sometimes purely cosmetic options (e.g., costumes or outfits) that do not affect game-play. One key thing to keep in mind for F2P games is that while they may be “free-to-play”, they are neither free to develop or free to maintain, so companies are going to try to find ways to recoup costs in whatever ways that they can without upsetting their players and fanbases. There is a parallel here to watching broadcast television shows for “free”, with the caveat that they will feature commercial breaks that effectively help “pay” for the show or with a streaming platform like Hulu that offers discounted rates for programming with advertising.”
Hanson continues, “Adding advertising inside of a game simply serves as another way for a “free” game to make revenue to help pay for the substantial costs associated with game development and maintenance, and could also allow for Sony, Microsoft, and others to interchangeably slot in different advertising to games for set periods of time in much the same way that syndicated broadcast television shows allow for different advertisements to be shown during each commercial break and each time the television show is shown. For example, Sony or Microsoft could insert a virtual billboard with one product advertisement for a set duration, such as to promote a summer blockbuster film before and during its opening week, before then swapping this virtual billboard for one advertising something else. This is a tricky business, however, and game companies are often in a delicate balancing act with their player communities over how much they may change a game or try to monetize aspects of a game—such as by adding advertising—before players revolt and leave the game to find a different one instead to play.”
Dave Morgan, CEO & Founder Simulmedia, says, “It’s clear that advertising will be a significant pillar in the future of premium console and PC video games, assuming that companies put the gamers’ interest front and center in their implementations. At Simulmedia’s PlayerWON unit, this means delivering opt-in, shippable and rewarded dynamic sponsorship videos that enable gamers to “watch to earn” the same kinds of rewards that they receive in play-to-earn and pay-to earn-modes. Since the vast majority of players in free-to-play games don’t pay for rewards – in Fortnite, for example, 90+ % of the gamers don’t pay – having a way for the rest of the players to participate in the rewards currency helps both gamers and the publishers, since they can now monetize much more of the gameplay. PlayerWON is now doing this with more than ten AAA games and millions of gamers around the world.”
As its subscription numbers and revenue slow down, Netflix
This year there will be new advertising opportunities for marketers to target a hard to reach demographic.
Source: https://www.forbes.com/sites/bradadgate/2022/05/05/microsoft-and-sony-are-looking-at-ads-on-free-to-play-video-game/