The goal, according to the report, is to provide a new revenue stream for developers--Microsoft itself would not be taking a cut of the ad revenue generated. Examples of how ads might be placed include billboards in a racing game.
While that might sound somewhat natural, it's noted that Microsoft is aware of the potentially off-putting nature of advertising in games--something that is still rare in PC and consoles games. (Past implementations, such as the infamous billboards in Battlefield 2042, have gone over poorly with players.) That apparently is not enough to dissuade Microsoft from pursuing this avenue, but the report states that a "private marketplace" could be created so that only certain brands can participate.
Microsoft did not specifically address the report, saying in a statement, "We are always looking for ways to improve the experience for players and developers but we don't have anything further to share."
According to Business Insider, this program could be ready later this year, though it remains to be seen whether or not it will come together. Advertising on Xbox has largely been relegated to the system's dashboard, rather than inside of games themselves.
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Source: https://www.gamespot.com/articles/microsoft-reportedly-working-to-bring-in-game-ads-to-free-to-play-games/1100-6502528/
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