Roblox is sketching out an ambitious 2024 road map for its ad business.
The online gaming platform announced a slate of new features for its Immersive Ads hub at its investor day on Wednesday, including video functionality and contextual and age-based targeting available on a self-serve basis.
As of now, brands can buy in-game display placements without having to create a virtual experience inside the platform. Starting next year, they can buy in-game video placements as well.
“What’s amazing is how far we’ve come without advertising,” CEO David Baszucki told investors. Now, the plan is for Roblox to build an ad business that can contribute to the company’s continued growth. Meanwhile, the platform will continue to bolster its virtual economy – in which users trade in-game goods using virtual currency – and its nascent real-world shopping economy, Baszucki said.
But it will take time before some of its more lofty plans come to fruition, such as ad measurement and an ecommerce offering for real-world purchases.
Ads are a “small contributor”
For all the advertiser interest in its young audience, Roblox’s ad business is still in its early days, Stephanie Latham, VP of global partnerships, told AdExchanger.
And despite its popularity among preteen and younger users, Roblox is not looking to monetize this cohort. It only serves ads to users who are 13 years old and up, which includes 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 Q3 revenue came from advertising, but “it’s been a very small contributor to date,” Latham said.
Roblox has no immediate plans to specify how much of its revenue comes from ads, Latham said. But ad revenue has been growing at a similar rate to industry averages, she added.
Opening up the platform
Thus far, Roblox’s ad business has been focused on promoting branded experiences and activations within its platform. Brands have created 240 such activations to this point, including full-scale experiences such as Mattel’s virtual Barbie Dreamhouse or Invisalign’s orthodontics-themed interactive games, and smaller activations such as wearable branded accessories for in-game avatars.
Historically, brands could buy ads on Roblox’s homepage and in-game virtual billboards – but these ads would mostly be purchased to promote in-game activations.
However, brands can purchase billboard-style ads regardless of whether they also have an in-game experience. These ads are sold through open auction via Roblox’s in-house self-serve ad platform.
(Roblox’s Portal ads, which teleport users between virtual worlds, still require an in-game experience.)
In addition, Roblox will launch video functionality for all its in-game billboards starting in Q1 2024. The ads will play as a user approaches them and will be muted by default.
These placements can also have rewarded video functionality. For example, users might receive a branded accessory for their in-game avatar after watching a video ad.
Since video inventory is in high demand, these units will be instrumental in expanding Roblox’s current advertiser base, Latham said.
Full-funnel campaigns
The expanded video offering should also help Roblox generate more ad revenue since video ads can be sold for more than display ads.
Ultimately, Roblox hopes to compete with major platforms like Meta and TikTok on ad revenue, Chief Partnerships Officer Christina Wootton told investors. But for that to be realistic, it needs to scale its ads business significantly.
First, Roblox plans to hire salespeople with video advertising experience in key verticals like CPG and automotive. Second, it will build out its first-party brand lift and third-party measurement capabilities via verification partners. Lastly, it will add more game developers to its partner program that can build branded experiences and offer marketing support to promote them.
It is also working on establishing partnerships with DSPs, resellers, agencies and brands, which could be announced by Q2 or Q3 next year, Latham said.
Roblox also sees its efforts to build a shopping platform for real-world purchases as a way to create a full-funnel offering for marketers, Latham said. But that part of Roblox’s commerce business is still in the “early days of exploration,” she said, and there won’t be any updates on that front until the back half of next year.
Targeting control and developer monetization
Happening sooner is a revamp of Roblox’s self-serve targeting capabilities to entice more advertisers to its platform.
Advertisers are currently able to target users based on age, gender or the device they’re using.
But previously, ad campaigns could only be run in Roblox experiences that are open to all users (although only users age 13 and up would see the ads). Starting next year, advertisers can target experiences that are rated for ages 17 and up.
Going further, Roblox is introducing contextual targeting capabilities based on the genre of in-game environments and their style of gameplay. Potential targetable categories include sports, action, role-playing and fashion. (Roblox is still finalizing the targetable categories.)
But Roblox isn’t only focused on buy-side functionality. It announced on Wednesday that it’s expanding its subscription offering for game developers, too.
Every creator on the platform will be able to offer paid subscriptions. For the first three months of a subscription sold to a user on desktop, developers will keep 70% of revenue, with Roblox taking a 30% cut. After three months of renewals, Roblox will reduce its cut to 15%. However, on Apple and Google devices, Roblox’s cut will remain 30% even after three months so it can cover the 15% fees charged by their app stores.
Currently, hundreds of user-generated experiences on Roblox are monetized with ads. Roblox declined to reveal what its ad rev-share deal is with creators.
With all these pieces in place, Roblox believes it’s in a good position to grow its advertiser base over the next 12 months.
“We’re removing barriers to entry,” Latham said. “We have over 200 brands on the platform, and we’d love to see that number grow the right way through education and meeting the industry where they are.”
Update 11/16/23: A previous version of this article said that in-game billboards could previously only be used to promote in-game experiences on Roblox’s platform. Roblox clarified that advertisers have been able to run static display ads on in-game billboards without creating an in-game experience, but to this point, this inventory has mostly been used to promote in-game experiences. The introduction of video functionality to these in-game billboards next year is meant to encourage wider adoption among brands that have not built Roblox experiences.
In addition, a previous version of this article said that Roblox is introducing age-based targeting next year. Roblox clarified that advertisers were previously able to target their campaigns to specific age groups (but only to users age 13 and up). However, advertisers could only run ads in experiences rated for all ages. Next year, Roblox is adding the ability to target only experiences that are rated for ages 17 and up.
We have also clarified that the genre-based targeting categories Roblox teased at its investor day are experimental and subject to change.
