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11 May 2022
Roblox results hint at how ads will look in metaverse
Another day another tech company missing analyst estimates, and the larger story of the tech selloff moves on, but Roblox’s results reveal deeper insights about user behaviour, and how advertising might look in the metaverse.
Why it matters
Even with overall revenues up, the gaming and creation platform Roblox has missed external expectations. But what the firm’s earnings suggest is that even with greater daily users and more engagement, users are spending less.
While Roblox isn’t alone in facing a tough quarter after a strong pandemic period that saw usage and spending on the platform grow steadily, it points to a larger truth that metaverse activities aren’t decoupled from the real world, especially with the downward trend in the company’s bookings.
Advertising is coming. The firm is talking about how a deeper suite of products and capabilities for brands is developing in Roblox, which will be crucial to more brands being able to experiment with metaversal experiences.
Why bookings matter
Bookings differ from revenues in that it takes into account “deferred revenue”, which includes what users have spent on Roblox’s virtual currency Robux.
This currency is at the core of how we ought to read Roblox in the context of a commercially useful metaverse, as it signals the willingness of users to spend money on virtual world money that is used to purchase virtual items that constitute one of the main opportunities in the metaverse.
By the numbers
Revenue: up 39% year-over-year to $537.1m.
Bookings (the important one): down 3% to $631.2m versus Q1 21.
Losses: up from $160.2m from $134.2m in Q1 21, a 19% increase.
Daily Active Users: up 28% YOY to 54.1m
Average bookings per daily user: $11.67, down from $15.57 in Q4 2021, and down from $15.48 on Q1 2021.
Of course, the pandemic was a ridiculously strong time for Roblox, when people had not only spare cash but spare time. Now, the world is both opened up and inflation is putting pressure on people’s disposable incomes – for many of the kids on the platform this means their folks aren’t quite as willing to indulge a Roblox wardrobe.
While labour costs will have increased, it has also had to spend heavily on its innovation roadmap. “Over the past two quarters, we have launched a number of notable innovations including spatial voice and layered clothing that will continue driving user growth, engagement and monetization,” said David Baszucki, Roblox chief executive in a statement. This remains a priority for the company.
The results follow less than expected growth in Q4 and full year 2021, even though it showed strong bookings growth and a changing, slightly wealthier user base.
Validation: Baszucki noted the development of validated brand accounts to help prospective customers know whether they’re buying an item from a real brand or not was in train. This will be positive news to many brands
Promotion: Brands will soon be able to “boost their experiences” on the Roblox homepage, suggesting a direct front page advertising offer alongside the development of an “immersive advertising system”, which is the firm’s long-term goal.
Asked about how an ad offer would look in practice, Baszucki articulated how one could imagine an ad tier on Roblox looking something like a billboard-portals that can take users to a brand or developer experience via dynamically inserted ads.
Offered a comparison with fellow metaversal companies like Epic Games, which work directly with brands, Roblox sees its brand offer as far more self-serve driven.
“I personally believe there's enormous scalability in building a self-service platform in all of these dimensions, a single unified platform where ultimately a brand like Lego would build a Lego experience on top of Roblox, and more and more be able to present that as their unique experience. So this is more the direction we're going.”