Microsoft Could Be Bringing Advertising Billboards To Xbox Games: Here's What Gamers And Investors Should Know

The owner of the Xbox franchise is bringing advertisements into its games. Here’s the latest.

What Happened: Microsoft Corp MSFT is building an advertising program inside its free-to-play games, according to a recent Insider report.

The report says Microsoft is working with advertising technology companies to create in-game inventory to place the ads inside the games. By using partners, Microsoft believes it will increase the amount of advertising opportunities.

Examples given by sources include putting digital advertising billboards inside of car racing games. Other examples are video ads playing inside of game lobbies.

The report says the advertisements in Xbox games could begin in the third quarter.

“We are always looking for ways to improve the experience for players and developers, but we don’t have anything further to share,” a Microsoft spokesperson told Insider.

Related Link: Microsoft Q2 Earnings Takeaways: Cloud Revenue Hits $22.1B, Xbox Revenue Up 10% And More 

Why It’s Important: Free-to-play mobile games have relied on advertising to provide revenue for parent companies.

Microsoft currently allows limited ads in certain games, but the new move could bring additional revenue generating opportunities to the video game company.

Microsoft has plans to launch a “private marketplace” that will only allow select brands the ability to place in-game ads, in an attempt to limit the disruption to gamers.

Activision Blizzard ATVI, which is in the process of an acquisition by Microsoft, has its own advertising network, which could play into the larger future plans.

While the move could bring additional revenue to Microsoft if the company takes a large cut from advertising network partners, the initiative may be more about taking on rival Sony Group Corp SONY and others.

Microsoft could lure smaller game companies to its platform, with some being exclusive, with a promise of allowing the gaming companies a split of in-game advertising revenue.

Xbox segment revenue was up 10% year-over-year in the most recently reported quarter.

Microsoft is scheduled to report quarterly earnings on April 26. The company has beaten revenue estimates from the street in the last 12 straight quarters, according to data from Benzinga Pro.

MSFT Price Action: Microsoft shares closed up 0.25% at $280.52 on Monday.

Photo: Courtesy of ArtBrom on Flickr