Video is a big part of the company's plans to scale advertising revenue in 2024 and beyond
On a recent Friday night after a long day of work, my 7-year-old son was playing video games on his ipad.
He asked me if I wanted to play Roblox with him, so I pulled out my mobile phone and opened up the app.
After joining him in one of his favorite games, I was surprised to see video playing in the distance. I walked up to the billboard and saw my first Roblox video ad, which was for the upcoming Aquaman sequel from Warner Brothers.
After several months of anticipation, I am now happy to see that Roblox has officially launched video ads on their platform.
Here's why this is huge, and what I'm noticing...
What Video Ads Mean for Roblox
💰 Ad Revenue
By offering video ads (instead of just static image billboards), Roblox is able to charge advertisers higher CPM rates, much like YouTube or TikTok.
Given the fact that Roblox has tremendous scale (70M daily active users) and tons of engagement (avg session time of 2.5 hours / daily active user), the platform is ripe for advertising.
Roblox has said that only 20% of the hours spent on their platform are currently being monetized. So that leaves a whopping 80% of engagement time that can be monetized. I imagine video ads are a big part of the plans to monetize this engagement time.
📈 2024 Revenue Priority
Launching video ads in Q4 '23 keeps Roblox on track to scale advertising revenue in 2024, which was a key pillar of their growth story outlined by CFO Michael Guthrie and Chief Partnerships Officer Christina Wootton at the company's recent Investor Day.
In their presentation, Guthrie described Roblox's current revenue driver being their virtual economy. But in 2024, they will stand up their advertising economy.
In order to lead this charge, Roblox hired Stephanie Latham, a former Meta executive who is tasked with bringing on board more brand advertisers.
What Video Ads Mean for Brands
📢 Greater Reach Into Gen Z
Brands who already extend their brand-level marketing campaigns onto social media platforms like Instagram and TikTok will now be able to easily scale those paid media campaigns to Roblox, which is very popular with hard-to-reach younger audiences, especially Gen Z.
👀 Deeper Ad Engagement
This is a win for brands who want to reach Roblox's 70M DAUs with the power of video, which can capture audience attention more effectively than static imagery.
🗣️ Brand Awareness, Not Direct Response...Yet
Video ads are good at raising top of funnel awareness, but marketers won't be able to attribute sales from these impressions until Roblox enables real-world commerce, which they will start testing in H2 2024.
What Advertisers Should Consider with Roblox Video Ads
🎥 Premium Production Value
As the Aquaman trailer above from Warner Bros. Entertainment / DC Comics shows, big-budget video assets can really stand out and impress viewers.
Lots of time, energy, and money goes into producing movie trailers. Their incredible quality and eye-catching visuals work really well in this environment.
I'm sure we'll see more modestlly budgeted assets created and finding success as well. But time will tell what types of video styles and formats perform best on the platform.
🤩 Star Power Sells
In the video ad above, actor Jason Mamoa stars as Aquaman. Just like any commercial, having celebrities featured attracts more interest from more people. There's a reason stars are paid a lot of money. It's because they drive awareness and sales.
Celebrities who have already appeared on the platform with their own Roblox experiences include Paris Hilton, Karlie Kloss and Olivia Rodrigo. Will we see them in Roblox video ads soon?
Music artists whose careers have spanned decades such as Elton John, Cher and Mariah Carey have shown up on the platform as well.
How long will it be before we see big-name celebrities starring in ads that are specifically-made for Roblox? It's hard to say, but it's just a matter of time.
How Roblox Players Experience Video Ads
🔁 Video Plays on Loop
When you see a video ad on the platform, it's already playing. And that video definitely catches your attention. As you approach it, it keeps playing and takes up only part of the screen. But if you press a button on the ad, it extends to full screen with sound up
👂 Audio Experience Not Perfect
The native audio in an experience can clash with the audio from the video ad, which seems like a mistake that leads to a poor user experience for players and brands.
Big Opportunity for Brands That Move Quickly
As I've outlined, video ads are a big development for Roblox, brands and players. For the brands that jump in and master the space first, there's a big opportunity to build greater brand affinity and eventually drive real-world commerce.
Stephen Dypiangco is the CEO of Metaverse Marcom, a strategy and consulting firm helping entertainment and sports brands enter Roblox.