Could Microsoft be plotting a CTV sneak attack?

The Xbox was supposed to the OS of the living room. There's still time.

Nobody remembers this, but one of the first places you could watch Netflix was the Nintendo Wii.

This was back in 2010, when streaming was still relatively new, and few people had smart TVs or streaming sticks. Gaming consoles were the defacto first wave of OTT devices. And while the Xbox 306 and PlayStation 3 helped get Netflix off the ground, the hugely popular Wii helped bring it to the masses.

Soon, media companies started build apps for consoles, and then eventually for Rokus and Amazon Fires and TV apps stores. But before that became widespread, there was serious talk about how the gaming console might become the centerpiece of the living room experience. Before we talked about owning the TV OS, Microsoft’s Xbox was making a play for it.

Does anyone remember the big rollout of “NuAds” at Cannes one year? These supposedly futuristic interactive TV ads were probably ahead of their time, but Xbox was onto something. It had every right to be able to sell ads on TV, because its apps, its devices, were increasingly how many people were watching.

Eventually NuAds disappeared, along with Microsoft’s overall ad ambitions under former CEO Steve Ballmer. People still stream via gaming devices, but their market share has continued to fade.

Yet under Satya Nadella, Microsoft has pushed back into advertising, through buying Linkedin, making Bing into a legit money maker, and eventually snatching up Xandr last year. Now, Business Insider is reporting that Microsoft is looking to build an in-game ad network within free-to-play Xbox games

At the same time the company is in the midst of (maybe) buying Activision Blizzard, which is one of the few game publishers to aggressively go after in-game advertising.
So Microsoft making a play for video game advertising makes all the sense in the world. But could they go bigger?

After all, gaming and entertainment are blurring rapidly. A few weeks back at the IAB PlayFronts, Activision Blizzard’s Jonathan Stringfield talked about how habitual game playing is for multiple generations (84% of 18-34 year olds play each week, along with 72% of 35-54 year olds), and how so many of these gamers play while watching TV, or jumping back and forth.

“All of these various ecosystems are interacting in a really interesting way,” he said.

So as big as streaming has become for just about everyone, if for a generation or two gaming is becoming their primary entertainment vehicle, gaming devices might be the only way for brands and media companies to access these folks.

That’s the bet that Simulmedia is making with PlayerWON, which brings CTV-like ad inventory to free-to-play games. At the NewFronts, PlayerWON president Dave Madden talked about how at least today, the company’s ad network skews heavily toward hard core male gamers - a third of whom say they never watch any TV. But so far, they are ok with ads in games, as long as they provide value, Madden said. This is a really unique audience that is all in on gaming,” he said. “They are off the radar for brands.”

So maybe this is where Microsoft is headed - to capture a chunk of the traditional TV market and the new one? Sure, it’s quite possible that their interest in gaming in strictly about the coming metaverse. As Stringfield put it, “understanding immersive media will become one of the seminal skill sets for businesses and marketers.” So getting ahead on those skills would serve the software giant well.

But then again, they must have something planned for Xandr, which AT&T/WarnerMedia had tried to fashion into some sort of marketplace platform for video ads. Could team Xbox start with ads in free-to-play games, maybe partner with a Simulmedia on ‘TV-like’ inventory, before making another push into the TV ad market?

Because eventually, if and when cloud gaming takes hold, you won’t need an expensive console. And the Xbox could be the TV OS that goes everywhere - which could be -wait for it - a real game changer.