Earlier this April, a partnership between Roblox and PubMatic was announced. PubMatic is a scaled digital advertising platform that leverages its own specialised cloud infrastructure. In this partnership, PubMatic will enable programmatic media buying of Roblox’s video advertising inventory when it becomes available later in 2024. Video advertising will only be shown to Roblox users aged 13 years or older. Roblox already has an age verification strategy in place.

Why are games companies looking to advertising as a source of revenue?

Free-to-play games face the challenge of offering compelling in-game purchases to players, the majority of whom never spend a dollar. Mobile has had a head start on this challenge, as most mobile games are offered as free-to-play with in-app purchases, and more so, with in-app banner and video ads. PC and Console platform developers have experimented with in-game ad placement, such as a billboards or branded items, but the platforms have not seen consistent, scaled ad buying/selling solutions. In mid-2022, Microsoft and Sony were rumoured to be looking at ad solutions for free-to-play games on their platforms. A concern for advertisers, though, is the amount of violent and mature themes in many of the games which might not be suitable for some brands. 

The implementation of a scalable advertising solution is another building block towards Roblox's ambition to become a full-featured online platform where both interactive entertainment and brands meet.  

The Roblox opportunity

Currently, Roblox has existing advertising initiatives like in-game billboards and 'Portals' for its immersive ads. It has also enabled numerous custom brand activations with companies such as Gucci, Samsung, Nike and Ralph Lauren. The next evolution of its advertising strategy will be from these specialised brand integrations to a broader, high-volume model.

Per its Q4 2023 earnings release, Roblox has more than 71m daily active users, about half (~35m) of whom are Gen Z - a highly coveted audience to capture. The company has been ageing up during the last few years, and its recent product strategy reflects its aim to engage more adult gamers. In a May 2023 Roblox blog post, the company stated its fastest-growing demographic segment is 17-24-year-old users. This could be one of the largest places advertisers can go to capture a segment of gamers who partake in a variety of experiences, beyond single experiences like Candy Crush, or relying on TikTok where advertisers have to cast a wider net. Gen Z is known to spend a lot of screen time on TikTok and other mobile apps, and this new partnership could serve as a big opportunity to advertise to them on PC and console platforms. However, it’s currently unclear whether the ad network will extend to console platforms, or if Roblox will need to adopt Sony and Microsoft’s rumoured solutions in the future.