Dubit CEO Matthew Warneford outlines how his company is using data to fuel UGC sales.
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In Roblox's 2023 Digital Expression, Fashion and Beauty Trends Report, 56% of Gen Z survey respondents in the the US and UK said that styling their avatar is more important to them than styling themselves in the physical world.
Taken alone in isolation, this stat can be hard to believe. Why would be young people care so much about how their avatar looks?
But when you consider how much time the average player spends on Roblox (2.5 hours) and how more attention that is than on platforms like TikTok and YouTube, it starts to become far more understandable. Layer in the fact that Roblox is a social platform where over 3 billion messages are sent every single day, it's easier to see that this platform is a place where lots of people go to hang out.
And while I'm far removed from being considered a young person, I can relate to the importance of looking good on Roblox. Personally, I've experienced feeling out of place when my avatar hasn't been dressed to my liking, such as a shirt or hair not appearing on my avatar. In those moments, I've felt naked and embarrassed.
The important role that UGC virtual items play within the Roblox ecosystem has led me to closely examine UGC trends such as cute faces, Roblox Avatar Shops, and the work of talented UGC creators such as Soulskor.
And from a brand perspective, UGC is interesting because it can lead to generating revenue. While generating revenue from UGC is very difficult, it is possible.
Matthew Warneford at Dubit caught my attention when he posted on LinkedIn about earning $50K in UGC sales. $50K is a significant amount of money, especially when you consider that virtual item sales are micro-transactions that require a very high volume to add up. This is even more difficult when you consider that Roblox takes 70% of the revenue from marketplace sales, leaving only 30% to the item creator.
I reached out to Matthew to share more about why and how his company is growing their UGC revenue. I was impressed by the data-driven approach that his team has used to scale their UGC sales. Here's what Matthew had to say.
Why has Dubit been creating your own UGC?
Matthew: Last year, Roblox players bought over 2 billion virtual items. They spent more on virtual Roblox clothes than storied fashion brand D&G earns in a year! And those numbers are only going up.Â
It’s pretty clear, immersive retail is a terrific opportunity for brands to generate revenue selling virtual clothes, or to promote real world clothes inside immersive stores.Â
We intend to help those brands succeed. To do that, Dubit is producing hundreds of items a week so that we can learn what works, gather data, and guide our brand partners. Â
Why are you so confident the UGC market will grow?Â
Matthew: We’ve seen this story before. This is the beginning of the third wave of UGC disruption.Â
The first wave was UGC text, where platforms like Wordpress and Twitter enabled anyone to publish written content for free. Millions of people started publishing written content, and this was hugely disruptive to newspapers and magazines.Â
Next, as technology and bandwidth improved, it became possible to publish UGC video. YouTube and Tiktok have been tremendously disruptive to broadcast TV, taking a huge share of consumer time.
Now it’s the third wave, UGC 3D. Platforms like Roblox are making it possible for millions of people to create 3D games, experiences, and virtual clothes. Like the platforms from the earlier waves, Roblox benefits from a strong creator flywheel: more creators means more content, more content attracts more players, more players spend more money, and that money brings in more creators.Â
In the case of Roblox, that flywheel is about to get a big shot in the arm. Generative AI is making creation 10x easier which massively expands the pool of creators. Of course, more creators means more content, and that means many many MANY more players over the coming years…
This third wave will also be hugely disruptive too. There’s no question it is already disrupting the video games industry, a $200b market, but it’s going to disrupt fashion too.Â
Virtual fashion is already a multi billion dollar market. If the UGC 3D wave is anything like UGC video and UGC text waves, before the end of the decade there will be well over 1 billion people playing, shopping, and socialising in 3D spaces.Â
Naturally, the more time we spend in virtual worlds the more we care more about our virtual identity. As this transition takes place, players will begin to move spend and will shift from real world fashion to their virtual identity. Whatever you think about NFTs, I believe they’re an early sign of this transition, and the need to convey status in virtual spaces.Â
If we are right, then it is a hugely important market for the brands we work with, and Dubit needs to be ready to lead them successfully.
You mentioned selling a mech. What Roblox UGC items did you release as part of this?
Matthew: We've released four mechs (with more coming): https://www.roblox.com/catalog?Keyword=mech&Category=1&CreatorName=dubit_games&salesTypeFilter=1
They’re designed as a swappable system: players that have two or more mechs can swap the heads, arms, legs, torsos, to create a completely unique mech. They can further customize with various turret, wings, and shield accessories:Â
The idea for a swappable system came about when we saw players switching out elements from unrelated character bundles. However, more often than not the proportions don’t match up… so we made some that fit perfectly!
How did you approach pricing these items?Â
Matthew: The swappable system is more fun when players buy two or more mechs, so we priced as low as Roblox permits! We hoped players would buy multiple mechs and accessories and create novel new combinations, and they did!
What did you do (if anything) to promote these items?
Matthew: We have a network of 3D stores inside popular Roblox games. When we see an item (or collection) starting to break out, we feature it in the 3D stores. That gets the item in front of millions of players, and helps our partner games make money from the best selling items.Â
Why do you think the items have been so successful?
Matthew: We’re data driven. We’ve published thousands of items, we track what sells, we track what players say in the comments, and what they try on in our 3D stores. All of this data helps us understand what's trending, what's crowded, and where there’s blue ocean.Â
In this case, we saw that players are starting to combine characters in new ways. Taking the legs from one, and combining with the arms from another. Most characters don’t fit together, so we made a set of mechs designed to work perfectly with this emerging behaviour.Â
Lastly, we try to dial into existing fan bases. For the mechs, we targeted Gundam, Transformers, Armoured Core, Pacific Rim and Mech Warrior.Â
What are some of the learnings you've had from this project?
Matthew: I don’t think we have space for it all! But the most important piece of advice, follow the data.Â
We learned early on that your instinct is probably wrong, you’ll never cease to be amazed about what may become a bestseller, and what may not sell at all well!Â
How did we get data? We started by making lots of different items, literally hundreds of different items. From there, we tracked what sold and followed the data. Within 10 weeks we increased our average revenue per item by 4x. That growth has continued…Â
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Stephen Dypiangco is the CEO of Metaverse Marcom, a strategy and consulting firm helping entertainment and sports brands enter Roblox.