Roblox is laying out an ambitious plan for its advertising business through 2024.
The online gaming platform announced a number of new features for its immersive advertising hub at its investor day on Wednesday, including video features and self-service contextual and age targeting.
Brands can also now buy in-game video and put it on their screens without having to create a virtual experience within the platform.
“What’s amazing is how far we’ve come without advertising,” CEO David Baszucki told investors. Now, Roblox’s plan is to build an advertising business that can fuel the company’s continued growth. Meanwhile, the platform will continue to support its virtual economy, in which users trade in-game goods using virtual currency, and its nascent real-world trading economy, Basuki said.
But it will be time before some of its more ambitious plans come to fruition, such as ad measurement and offering e-commerce for actual shopping.
Advertising makes a “small contribution”
Despite all the advertiser interest in young audiences, Roblox’s advertising business is still in its early stages, Stephanie Latham, vice president of global partnerships, told AdExchanger.
And despite its popularity among users aged ten and under, Roblox does not seek to monetize this group. It only shows ads to users 13 and older, which makes up 57% of its audience, or about 39.9 million daily active users. (Roblox introduced age verification in 2021, but users are not required to use it.)
The company did not disclose how much of the $713.2 million it reported in the third quarter came from advertising, but “to date it has contributed very little,” Latham said.
Roblox has no immediate plans to specify how much of its revenue comes from advertising, Latham said. But advertising revenues are growing at the same rate as the industry average, she added.
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Until now, Roblox’s advertising business has been focused on creating branded experiences on its platform. To date, brands have created 240 similar projects, such as Mattel’s virtual Barbie Dream House or Invisalign’s interactive orthodontics-themed games.
Historically, brands could buy advertising on the Roblox homepage and virtual billboards in the game, but these ads could only be purchased to promote in-game activations.
However, brands can now purchase advertising in the form of billboards regardless of whether they have gaming experience. These listings will be sold by public auction through Roblox’s proprietary self-serve advertising platform.
(Ads on Roblox that teleport users between virtual worlds still require in-game activation.)
Additionally, starting in the first quarter of 2024, Roblox will launch a video feature for all of its in-game billboards. The advertisement will play as the user gets closer to it and will change by default.
These placements will also have a video reward feature. For example, users can receive a branded accessory for their in-game avatar after watching a video ad.
With video inventory in high demand, these units will help expand Roblox’s current advertiser base, Latham said.
The expanded video offering should also help Roblox generate more ad revenue, since video ads can be sold at a higher price than display ads.
Ultimately, Roblox hopes to compete with major platforms like Meta and TikTok in advertising revenue, chief partnerships officer Christina Wootton told investors. But to do this, she needs to significantly expand her advertising business.
First, Roblox plans to hire salespeople with video advertising experience in key industries such as consumer goods and automobiles. Second, the company will develop its own branding capabilities and third-party measurement capabilities through verification partners. Finally, it will add more game developers to its affiliate program, which will be able to create branded experiences and offer marketing support to promote them.
The company is also working on establishing partnerships with DSPs, resellers, agencies and brands, which could be announced in the second or third quarter of next year, Latham said.
Roblox also sees its efforts to create a real-life shopping platform as a way to create a full-funnel offering for marketers, Latham said. But that part of Roblox’s commercial business is still in the “early research stages,” she said, and there won’t be any updates on that front until the second half of next year.
Targeting control and developer monetization
Roblox will soon be updating its self-serve capabilities to attract more advertisers to its platform.
Previously, advertising campaigns had to target all users aged 13 and over. Starting next year, advertisers will be able to target users by age, gender or the device they use.
Going further, Roblox is introducing contextual targeting capabilities based on in-game environment genre and gameplay style. Target categories include sports, action, role-playing games and fashion.
But Roblox isn’t just about functionality for customers. The company announced Wednesday that it is expanding its subscription offering to game developers.
Every creator on the platform will be able to offer paid subscriptions. For the first three months of a subscription sold to a desktop user, developers will keep 70% of the revenue and Roblox will keep 30%. After three months of renewals, Roblox will reduce the discount to 15%. However, on Apple and Google devices, Roblox’s share will remain 30% even after three months, so it can cover the 15% fees charged by their app stores.
Currently, hundreds of user events on Roblox are monetized through advertising. Roblox declined to disclose its ad revenue share deal with creators.
With all these capabilities, Roblox believes it is well positioned to expand its advertising base over the next 12 months.
“We are removing barriers to entry,” Latham said. “We have 200 brands on the platform and we would like to see that number grow the right way through education and exposure to the industry where they are.”