When Roblox debuted on the NYSE in 2021, the company’s market capitalization totaled $80 billion. In 2022, however, with slowing revenue growth and a tough economy, Roblox has lost 60% of its value. The metaverse platform has been making the vast majority of its money through in-app purchases and selling its virtual currency, Robux, to its audience of 52 million users. The next step in the company’s growth strategy appears to be serving ads, as Roblox announced during its annual developer conference that it’s begun testing in-game advertising with select brands and expects a complete rollout of the offering next year.
The ad formats could either be like static images on objects or buildings in the virtual world (akin to billboards), or as we’ve seen with brands entering the metaverse, entire virtual spaces can be constructed. Roblox has already worked with several companies in this way, including Vans and Warner Bros. Roblox noted that Warner Bros. has been “fascinated by the results.” Roblox is promising drag-and-drop ease of use to developers using the platform.
“We’re building from the ground up a new ad system that will deliver 3D immersive ad experiences,” said Richard Sim, senior product director for monetization at Roblox. “But we want to do it in a way that is safe, that’s creative and drives value to users, that keeps our users’ data privacy safe.”
The latter point is a key one, as many big tech companies have come under scrutiny for the user data they collect. Roblox understands that it has a large base of kids on its platform and has promised to keep any advertising away from any individual under age 13. It also will avoid the third-party tracking and data harvesting that is typical on social media platforms – although the full user data policy doesn’t appear to be crystal clear yet.
Roblox faces stiff competition in the advertising category, as giants like Amazon and Apple are also investing more heavily in their own ad offerings. As CNBC points out, Roblox “will have to prove its value before brands will open their wallets in any meaningful way.” Roblox is betting that the metaverse distinction will help to differentiate its offering for brands. According to Interpret’s New Media Measure®, aside from playing games, encountering experiences or characters from TV shows or movies and buying items for avatars are two big use cases for those interested in the metaverse. These are facets of the platform that Roblox can lean into as major entertainment brands seek further engagement with consumers.