Roblox – Building the Metaverse

Apart from the DAUs, bookings, engagement numbers and progress on ageing up the user base, there’s one other metric to track in the Roblox story that is now gaining more importance – advertising. Some interesting news coming up on the advertising bits from concall and recent interview. As mentioned in earlier posts, getting advertising right is critical for Roblox.

• They can’t do advertising in a way that interrupts play. They are in a way defining what advertising, advertising properties and metrics to measure advertising can look like in the virtual worlds.

• Advertising is super high gross margin revenues for Roblox. There are no developer payouts and app commissions here. To the extent, they can make it fully self serve in advertising for brands, this makes a large difference to margins and cash flows.

Notes from recent interviews on Roblox advertising.

Q: One of the things where you’re at is, and you see this in gaming on mobile broadly, is particularly with the recent changes in rules and regulations around ATT, that the [more integration the better]. And so you see all this integration happening in the gaming space, so they can know who their customers are. It’s funny, again, Roblox feels so far ahead of things where everything is one experience to the extent that you’re allowed to have these distinct experiences that are not defined as different apps, they’re defined as being part of one app, which is great for you from a monetization perspective and from a user experience perspective.

It also seems unbelievably compelling from an advertising perspective. I know you have ads on your website, and you’ve talked a bit about ads in the game, but given that your capability of understanding your customers and doing customer acquisition, not for yourself, but for your developers, you have so many advantages relative to anyone else, how much of a priority is that? And is that becoming more of a priority with these changes?

A: Yeah, one of the things we’ve seen working with brands, whether it’s Nike, or whoever, is they do want to create experiences and bring attention to that experience, so there’s a wonderful opportunity to build an elegant, consistent way for people to find those experiences on Roblox, and especially not go off platform and find them and do that, and so that’s really, really important. We have that in a primitive way right now, and we’re building a better way of doing that that we think is Roblox-authentic, is good for everyone on the platform, so more good stuff to come.

The other one would be just advertising in general. We’re being very, very cautious here because I think there’s a really exciting type of advertising on Roblox which involves: I go to the Nike store, I get to wear Nike shoes around, I love the brand, and I’m wearing that brand, rather than getting that brand flashed at me, that’s a native-digital type experience. We really want to make sure those types of things happen in an authentic way. So there’s a huge opportunity, we’re going pretty slowly actually, we’re working with a few brands, but if anything we’re focusing more on user engagement and quality of these experiences rather than the advertising money from them.

Q: So the focus is more on the brand advertising, as opposed to Roblox developers being able to acquire gamers for their particular experience.

A: I think there’s a place for Roblox developers to acquire gamers for their experience if we’re very clear that this is sponsored discovery rather than it’s unclear, “Are you showing this to me because it’s recommended for me or because it’s sponsored discovery?” I do think there’s a role for sponsored discovery for new developers who want to boost traffic or something.

Notes from concall:

The vision of immersive advertising has been around for a long time, and this is both performance as well as brand advertising. We are going to be rolling out tests ultimately along both of these lines. And it’s the notion that in an immersive 3D space, it’s a lot less – there’s a lot less friction when we see appropriate advertising, just like we would in the real world of billboard ads, for example, which we can scale across all the experiences on Roblox. But we’re also optimistic now that we see many brands establishing a presence in Roblox that some of these brands will also want performance marketing, which is a way for – in the appropriate case for people to be able to go to one of our brand partners directly from someone else’s 3D experience.

So traditionally, a lot of these experienced developers and brands have been saying, how do I boost more, how do I get more traffic to my experience? How do I do a test? How do I reliably bring 1 million users the data, this experience. And this is the wonderful opportunity for native immersive non-intrusive advertising in our platform. Imagine we are at one of our most popular Roblox experiences. Imagine a AAA partner had a small pop up in the town square and players will be able to choose whether to stop buy, use that pop up or portal or door, you name it to jump over to one of our brand experiences, experience something new, pick up some free merchant and back, pop back to the experience that they’re playing.

So this is a very scalable potential way to incorporate gently, both [ pay ] as well as performance and brand advertising. Given that we did 4.7 billion hours of engagement in the month of July, even at a very conservative gentle way is an initially trying this with top-notch brands, you can see the potential there relative to the advertising per hour.

So I said it before, this has been always a visionary type of advertising. It’s exciting because it doesn’t get in the way of a user or add friction like some other types of advertising. And we believe it will last in a fun and positive way that will complement our experiences.