Roblox will begin testing real-world commerce with brands in H2 2024.
In May of 2022, I made my first purchase of a real-world item in a virtual space. I bought a Weezer x PLEASURES t-shirt that featured album artwork from the rock band's 1996 release Pinkerton (which is a great album BTW, "Across the Sea" is my favorite track).
I carried out this transaction in Complexland, a 2-day pop up virtual environment that I accessed via my computer's web browser. Organized by media company Complex, the space featured branded shops and installations (including one from ESPN and the NBA), where people could purchase products or enter to win prizes.
I guided my avatar around the colorful map, checking out different 3D spaces and stumbling across the t-shirt I ultimately whipped out my credit card to buy.
The experience gave me a glimpse of what the future of the internet could look like, where people maneuver their avatars around immersive spaces and then make real-world purchases.
Over a year and a half later, that vision of an immersive and shoppable internet experience is now closer than ever thanks to Roblox.
Most Brands Use Roblox Today for Marketing, not Monetization
Most brands currently active on Roblox are using it as a marketing channel to reach Gen Z consumers.
Whether they're launching UGC items in the marketplace, integrating into existing games, or building custom experiences, more and more brands are using Roblox to build awareness and engagement with young audiences on the platform.
While I've spoken with many brands who are interested in monetization on Roblox, the truth is that it's incredibly difficult to make money on the platform, whose economy is focused on the sale of virtual goods (UGC clothing, game passes, etc.).
Reasons why monetization on Roblox is so difficult right now:
Sales of virtual goods are almost exclusively micro-transactions. That means you need a LOT of them to add up to a meaningful amount.
Roblox takes 70% of all revenue from UGC items sold through their marketplace, leaving only 30% to creators.
When someone wants to cash out their Robux earnings into real-world currency such as US Dollars, they must do so at the DevEx exchange rate, which is a little over 1/4 the value of the Robux if you were to purchase them.
Connecting the Digital and Physical Worlds
While most brands have used Roblox as a marketing channel, there have been some brands that have been innovating with real-world product tie ins.
Retailer Forever21, Rihanna's Fenty beauty, and fashion designer Carolina Herrera have all created digital assets that have real-world versions available for purchase.
In 2021, Chipotle ran a popular campaign on Roblox, which involved giving away free burritos IRL via digital codes on Roblox. This led to record-level app downloads, loyalty program sign ups, and strong sales.
These early, innovative campaigns have shown the appetite for brands to drive real-world commerce via Roblox.
And success stories like Chipotle show that Roblox players are willing to spend real money in the physical world.
Roblox has Been Teasing Real-World Commerce for Over a Year
In October of 2022 on the Tech Talks podcast, Roblox CEO Dave Baszucki and then VP of Global Partnerships (now Chief Partnerships Officer) Christina Wootton discussed this topic. Dave said he envisioned a future where a person watches a virtual concert in Roblox and is able to purchase an outfit for their avatar while also getting a physical version shipped to their home. He didn't share a timeline for when this functionality would come, but he said it was on the company's long term roadmap.
At the Roblox Developers Conference (RDC) this past September, Dave made a related prediction that in the future some creators will make more money from selling physical merchandise on Roblox than virtual merchandise.
While this prediction did not garner much attention from attendees or press, it really stuck out to me because it signaled that Roblox continues to see e-commerce as part of its future growth plans.
Roblox Announced Their Forthcoming E-commerce Plans at Investor Day
At Roblox's recent investor day, the company finally revealed its plans to begin offering real world commerce on its platform.
As part of her presentation, Christina Wootton touted Roblox's impressive reach with Gen Z, who make up 34 million daily active users on the platform. She also explained that the average branded experience has 11 minutes of engagement time from Gen Z users. On top of that, branded experiences have amassed 1.8 billion visits in the first three quarters of 2023.
With these impressive stats to show that brands can use Roblox as a discovery tool, Wootton then explained that Roblox will start facilitating real-world commerce. Roblox will evolve from being a discovery platform with a virtual economy into a discovery platform with a virtual economy, advertising economy, and a shopping economy.
According to Wootton, Roblox will to begin testing commerce in the second half of 2024.
How Will Roblox Drive E-commerce for Brands?
Details are fuzzy at this point, but Wootton made comments that help shed light on what this might look like.
"Real world commerce through web linking will guide users from engagement straight to their websites," said Wootton.
The key term here is "web linking." This is what Roblox is signaling it will use to connect their user base with brands' websites.
Currently, users cannot link out from Roblox to external websites. The only links that are allowed are ones that point to other pages on Roblox (UGC pages, group pages, etc.) and to select social media platforms such as YouTube, Discord and Twitter/X.
E-commerce on Roblox Provides Brands with Major Revenue Potential
E-commerce has the potential to be huge for brands.
As I mentioned earlier, is it incredibly difficult to drive real revenue just selling virtual goods. You're doing really well if selling virtual items generates tens of thousands or maybe hundreds of thousands of dollars. But those numbers are just not big enough for most big corporations, which need to be generating millions or tens of millions of dollars in revenue to justify their investments.
But when brands can start selling physical items, the economics change drastically. Instead of selling customers virtual items for $1 and taking home $0.28, brands will be able to theoretically drive orders for $25, $50 or even more. This can quickly add up to large sums that brands are looking to unlock, especially from the highly-coveted Gen Z demographic.
Which Brands Will Succeed Selling Physical Items on Roblox?
Brands that are best poised to find success selling real-world items on Roblox are the ones that are already actively building on the platform, learning what works, and earning the attention of existing players.
A look at my most recent 10 Top Roblox Brand Games list features a lot of brands that could stand to benefit from this development. Barbie can sell more toys, Sonic can sell more video games, Warrior Cats can sell more books, Walmart can sell more of everything, and so on.
The first brand I helped bring to Roblox was retailer Hot Topic, who I helped launch UGC items in the marketplace. The experience and learnings gained from this activation will only help Hot Topic succeed in selling physical items in the future.
Who stands to lose out? Well, it's those brands that are sitting on the sidelines. They will be left further behind as the internet continues to become more immersive and shopping becomes more gamified.
Will Consumers Spend on Roblox?
Roblox undoubtedly has scale and deep user engagement, but that doesn't mean that this e-commerce play will be a success right away.
It's uncertain who among Roblox's user base will want to purchase physical products this way. The US market accounts for a large portion of Roblox's current virtual goods sales, so the US would likely be the top market for real-world commerce.
And it's more likely that older users with their own credit cards will be ready to purchase physical items than young children without their own ways to spend money.
On the brand side, there will certainly be brands that put a lot of effort into launching products on the platform only to hear crickets.
But the brands that not only launch products, but then go on to track performance, analyze data, and develop tests that help them optimize will be the ones who find success over the long term.
Stephen Dypiangco is the CEO of Metaverse Marcom, a strategy and consulting firm helping entertainment and sports brands enter Roblox.
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