Roblox is the next big games advertising platform


The success of Roblox is hard to overstate: the developer behind the eponymously named game development and distribution platform raised $150MM in Series G financing in February of this year, and it announced at its Roblox Developers Conference in July that its user base has swelled to 150MM MAU, with $250MM in payments expected to be made to creators in 2020.

Roblox is a platform that allows users to create games that can be distributed through Roblox’s app store.


Each game hosts its own app store page, containing information about the title provided by the developer, such as a description and in-game screenshots.


Most games within the Roblox ecosystem are free-to-play. Roblox features a platform-wide hard currency called Robux, which can be used to purchase paid games and to purchase in-game items within the various games on the platform. Roblox offers one-off Robux packages as well as a monthly Robux subscription product that is discounted relative to one-off purchases.


Interestingly, the middle-tier Robux currency pack is more expensive on a USD-Robux basis than the most expensive or least expensive tiers:


A deeper analysis of the Roblox gaming ecosystem can be found elsewhere and is outside the scope of this article. What’s potentially more interesting than Roblox’s fairly standard app store structure is its native advertising system. Roblox offers creators four ad units across the Roblox app store to drive discovery for their Roblox games:

  1. Banner unit (available in the PC desktop app store);
  2. Skyscraper unit (available in the PC desktop app store);
  3. Rectangle unit (available in the PC desktop app store, but very rarely surfaced);
  4. Promoted game placement (available in the PC desktop, mobile, and Xbox app stores).

The rectangle and skyscraper units are highlighted in red (top and right) in the screenshot below:


The three ad units — banner, skyscraper, and rectangle — are purchased through an ads manager, and each unit runs in its own auction. A campaign can only be run with one ad creative (there is no ad group), and the bid is denominated in Robux. The ad destination can’t be input free-form by the advertiser but is rather pre-populated by the ads manager interface based on what is being advertised. Campaigns are run for 24 hours from the time of ad creation.


The bid system for Roblox campaigns is non-standard: bids are not made on the basis of CPM or CPA, but rather as a declaration of total spend over the life of the campaign. When creating an advertising campaign, an advertiser provides a bid, in Robux, which represents the total amount of Robux that they want to spend in the 24-hour period over which their campaign will run. When the bid is initially set, the ads manager provides an estimated count of impressions that the campaign will receive.


The impression estimate provided is an approximation based, presumably, on historical ad impressions in that 24-hour period for that day of the week; in the above example, the advertiser’s CPM would be roughly 9.5 Robux, or about $0.07 ($4.99 / 4 / ~10.4).


Measurement with Roblox ads is limited: the only performance metric that is surfaced is CTR, and CTR merely measures clicks from the ad to the game’s store page and doesn’t track to the actual game install. Game developers can make money from their games via paid access and in-app purchases, neither of which is measurable in the existing advertising workflow. Each of the arrows with dotted borders below represents a step in the advertising process that is unattributed, or not measured, from the initial ad click.


It is peculiar that these steps aren’t measured against the ad click, since a user must be logged into their Roblox account to even browse the Roblox app store: every step in the above user flow can be attributed to the initial ad click, and it’s not clear why they aren’t.

This lack of transparency leaves advertisers with recourse to very few performance measurement tools. The most obvious is a high-level regression on revenue as a function of spend, similar to a media mix model, although made more straightforward by the fact that only one advertising channel exists for promoting Roblox games. Advertisers could use an expected baseline daily organic contribution to modify the estimated install contribution of advertising, potentially testing this value intermittently by pausing all spend (as is sometimes done with incrementality testing).

One important (and potentially confounding) factor here is that Roblox operates a very prominent “Popular” chart in its app store that highlights the most currently popular (via some apparently blended DAU metric) games in the catalogue. Achieving placement on this list provides a game with a heightened level of visibility that likely drives an increase in organic game adoption. This list is reminiscent of the “Top Downloaded Apps” list that featured prominently in the iOS App Store and drove additional visibility before it was relegated to deep within the app catalogue. “Charting,” or paying for traffic on an unprofitable basis in order to reach a visible position on the Top Downloaded chart, with the expectation that the additional exposure would offset the loss of traffic acquisition, was a popular mobile user acquisition strategy in the 2012-2015 era.


The lack of measurement in the Roblox ads ecosystem is a missed opportunity: Roblox could give developers much greater control over the distribution of their games if they provided ads performance visibility that would be fairly straightforward to implement. Roblox serves as the ideal ad platform, given that the company operates:

  1. The game development environment;
  2. The game distribution environment (app store);
  3. The ad network, and;
  4. The currency used across all apps.

Roblox essentially owns the entire ecosystem value chain: production, distribution, and monetization. Not only could Roblox use this end-to-end ownership to build a transparent, measurable ads infrastructure, but it could also provide development and analysis tools to help its developer ecosystem better monetize and engage users. But a good first step would be simply allowing advertisers to track revenue to ad spend at the campaign level, which is uncomplicated given that all user activity happens within Roblox-owned properties while users are logged in.

Note that this doesn’t necessitate making user-level data available to the advertiser. It’s actually easier for Roblox to facilitate advertising measurement granularity in a way that preserves user privacy because it owns the entire environment: no middle-men ad tech services are needed to track behaviors at the level of the user, which is how those behaviors are indexed between ad interactions and in-app interactions and reconciled for performance measurement when different advertising services must interface. Because Roblox operates the entire environment, it can measure behaviors at the user level but only make performance data available to the advertiser at the campaign level.

Given Roblox’s audience — over half of all children in the United States play games through Roblox — the company of course needs to treat targeting and data privacy with intense sensitivity and care. And because Roblox operates the entire value chain, it can: it has total agency over the data that is surfaced and exposed to advertisers, since there is no need for third parties to intermediate the relationship between Roblox, developers / advertisers, and customers.

By implementing some core functionality, Roblox could bring tremendous value to its advertising platform and improve game distribution on the platform. These three broad functionality feature sets would fundamentally improve the efficiency of the ads platform:

  1. Institute CPM bidding, which is more straightforward and standardized than Roblox’s existing bidding structure and allows advertisers to transition their campaign strategies toward outcome optimization;
  2. Allow advertisers to schedule campaign delivery, rather than running campaigns for fixed 24-hour timelines;
  3. Track in-game conversions at the campaign level (app open, purchases, etc.) to allow advertisers to optimize ad spend for performance, eg. Return on Ad Spend (ROAS).

Roblox has the potential to become one of gaming’s important ad platforms. With sufficient investment — at the very least, a rollout of the above functionality — the Roblox advertising platform could create important avenues to scale for Roblox’s developer community, allowing developers to reach relevant audiences without compromising user privacy.