Oct. 8, 2013 at 4:10 PM ET
No stranger to controversy when it comes to the Xbox One, Microsoft found itself in hot water again this week over a story in Advertising Age about the company's future plans for advertising on the next-generation video game console. And while Microsoft said that it is "actively seeking a correction" to the original story, the kerfuffle it kicked up over user privacy showed that the company has its work cut out for it when it comes to winning back gamers' trust in the Xbox One.
In a piece on Yusuf Mehdi, Microsoft's corporate vice president for marketing and strategy, AdAge suggested that the Xbox One could give advertisers access to "a huge new trove of data about what's going on in living rooms," bringing back longstanding concerns about the next-gen console's privacy settings.
"We are trying to bridge some of the world between online and offline," Medhi said of the Microsoft's future advertising plans in an Oct. 5 speech at the Association of National Advertisers Masters of Marketing Conference in Phoenix. "That's a little bit of a holy grail in terms of how you understand the consumer in that 360 degrees of their life."
Once the quote hit AdAge, gaming blogs were quick to react. Kotaku's Owen Good wrote that "while Xbox One isn't selling the stuff Kinect collects from your living room to marketers right out of the box, the capacity is there, and it could be the kind of game-changer that makes ad buyers swoon."
Microsoft, for its part, reiterated its commitment to the Xbox One privacy policies it had spelled out over the summer.
"We do not have plans to target ads or content to you based on any data Kinect collects," Microsoft told NBC News in an emailed statement. "We have a long-standing commitment to your privacy and will not target ads to you based on any data Kinect collects unless you choose to allow us to do so. Furthermore, we will give you a clear explanation of what is collected and how it will be used."
Microsoft added in a statement to AllThingsD that AdAge's report of Mehdi's talk was "based on misinterpretation."
“Yusuf Mehdi spoke about how consumers are investing their time across multiple devices in the 360 degrees of their life and how there is an opportunity for advertising experiences to evolve and become more unified across those devices," the company told NBC News in an emailed statement. "For example, just as Xbox SmartGlass allows companion mobile experiences that are synchronous to what is being watched on TV, advertisers could create new experiences unifying their content across devices. The quote from Yusuf in Ad Age is not in relation to Kinect.”
What bothered gamers about the original news was the fear that Microsoft was using its new advertising technology known as "natural user interface ads" (NUads, for short) to turn the Xbox Live dashboard into a freemium service like Gmail or Facebook: one that would essentially monetize gamers by tracking their habits and reactions to advertisements.
And while Microsoft once again insisted that it has "strict policies to protect your privacy and these policies will continue to be upheld with our next generation product," gamers remained wary.
"You guys want to make advertising money with the Kinect but you also want to make console/game selling money [from] us," Pete Dodd, the man who started a social media campaign against digital rights management (DRM) on the PlayStation 4 and Xbox One this summer, wrote on the popular gaming forum NeoGAF Monday. "I don't know how you can do both."
Yannick LeJacq is a contributing writer for NBC News who has also covered technology and games for Kill Screen, The Wall Street Journal and The Atlantic. You can follow him on Twitter at @YannickLeJacq and reach him by email at: Yannick.LeJacq@nbcuni.com.