Roblox is getting up to Evolve

Roblox — and the millions of people creating games for the platform — will soon have a new way to make money and the opportunity to target a slightly older demographic.

The changes are a significant step in how Roblox thinks of its users and how the company approaches advertising.

Roblox’s ability to become a billion-person platform with thousands of creators supporting themselves on it will depend on whether it can translate these new features into growth and profit.

At the company’s annual developer conference today, Baszucki announced a slew of sweeping changes to the platform, among them a new immersive ads system that will allow advertisers to reach players in millions of games — or “experiences” as they’re called on Roblox.

Until now, creators purchased banner ads using the in-game currency Robux, often resulting in nonsensical meme-like creations made to entice players to visit and play their games. However, high-profile brands have ventured into Roblox, too, by working with developers to create custom experiences. Gucci Town, Spotify Island, and even a virtual Chipotle restaurant, among others.

Roblox hinged a wave of pandemic-era transition to a seven-fold value increase, an exploding user base, and a remarkably popular Lil Nas X concert with tens of millions of attendees. That conquest came all thanks to Roblox’s core user base of young and highly engaged players.

Those children are getting older, and Roblox is endeavoring to grow up, too. The all-ages, the user-generated gaming forum, is announcing plans today to add age guidelines to its games and particularly expand its advertising business as it functions to court an older demographic, boost its revenue streams, and still support the needs of its millions of young players.

The new ads system, meanwhile, is a way for brands to advertise across Roblox experiences through interactive billboards, posters, and other surfaces. The new ad system will allow creators to drop 3D ads into their own experiences — like a billboard in a sports stadium or on top of a cab in a game, working initially with a group of selected companies and developers — to get a cut of the ad revenue. In addition to ads within user-created experiences, brands will also be able to have “portals” that act like a tunnel between games, taking players to a new branded area in Roblox, like a shoe store or a coffee shop. The company will begin testing immersive ads by the end of the year, with a full launch planned for next year.

Advertising in the metaverse is unproven, but brands are already eyeing it as the next place to target potential customers. In-game purchases on platforms like Roblox and Fortnite might signify the money to be made in the metaverse: Fortnite made $50 million off skins from just one partnership with the NFL, for example, and in Roblox, some players paid thousands for virtual Gucci products.

But Roblox “bookings” — the amount players spend on Robux, of which the company gets a cut — missed estimates last quarter. Roblox went public last year following an explosion in popularity during the pandemic, but its stock has fallen and is not yet profitable.

The push to bring more ads to Roblox is coming while scrutiny of how the company handles the advertising already happening on its platform. In a Federal Trade Commission complaint filed earlier this year, watchdog group Truth in Advertising says branded Roblox experiences are poorly identified, making it hard to discern whether a game is sponsored, especially for young kids.

If immersive ads are a boon to Roblox’s business, the same promise exists for the developers responsible for making the games. Roblox developers have a handful of ways to make money on the platform: they can create and sell items like clothes for avatars or offer in-game purchases, which players can buy using Robux.

In 2020, Roblox introduced premium payouts, which pay game developers based on time spent in the experience they’ve created.

Currently, after app store fees and Roblox taking its cut, creators are left with around 30 percent of revenue from in-app purchases — significantly lower than on other platforms. Some creators say that it was difficult to make a profit despite pouring time into developing games, especially for the millions of kid developers who start doing something they love only to get burnt out trying to make their game successful.