Roblox Launches Rewarded Ads – Here's What it Means

[Music] Yeah, Roblox. So, today they announced, which I thought they already announced at GDC, so I'm a little bit confused about this or maybe I was just hearing it from people, but they announced that they are launching a new form of advertising. A new form. Yeah. Well, for the platform, right, for the platform is rewarded video ads. And they're partnering with Google advertising solutions to make that happen. This is a big deal, right? And for me it's a big deal because they have completely capitulated to the idea that you need advertising on their platform. And this is like something that, you know, obviously they've been talking about for about a year, but this is like really kind of going down a rabbit hole of of actually monetizing the unmonetizable. And I think it's actually really really strong for Roblox in general. And rewarded ads are obviously so much so much better than the [ __ ] like, you know, static ads that they had inside the experiences that. So anyway, I think this is huge for them. Here, here, here, here, you know, transforms it into an ad platform, right? You've got crazy DIU,

low monetization, and if we look at the monetization that they do disclose, because remember they do that in their quarterly earnings, they tell you what the average bookings per monthly unique payer are. And so that is about $20 on average. It's been remarkably stable. There's cyclical trends here, which is why you see Q4 always spike, but they haven't really been able to increase it, which is an achievement because they've scaled to a lot of tier three regions, as you're quick to point out, Eric, like the fact that they can maintain this level of monetization despite scaling with that DAU, I think, is still impressive. But regardless, it hasn't grown. So, I guess if you're looking at this from financial perspective, you know, what do you add on top of this $20 in terms of ad revenue? And we know the platform already kind of plays hyper casual-ish. People play as though there's a feed, you know, there's an update, I go to that one, there's another update, go to that one. So, like, why not just like embrace the hyper casual playbook and put more and more ads in? I think this is a good thing to do. Yeah, let me just plus one everything you guys are saying. This is going to be a boring segment because we all agree. This is like when the Supreme

Court goes 70. Like, this is awesome. I know. Yeah, this is this is crazy. This is this is the liberals and the conservatives unite. [ __ ] huge. And so let me a couple of different things I want to break down. Their current ad business has not worked really well. It has been an immersive you know them showing billboards but not only from a player perspective from a platform perspective. So here is like the amazing thing that is happening. This partnership with Google ad platforms with this kind of immersive ads does a couple of things. It gives them programmatic advertising. So programmatic means you can automate as a brand, as an advertiser. All of this is automated. You're not doing anything manually. You're going in and you're bidding. So the entire business can start to almost in a sense run on AI, which means a lot of money. So they also have the ability because of the partnerships to track the KPIs in a way that the brands can get the data they

need to go improve the ROI of these ads. From a player perspective, here's what's also fascinating. They've run some tests. This is Roblox saying this. They said they had an 80% completion rate. This is a full screen ad. So, you're playing on a mobile screen. You click the ad, comes up full screen for a 30- secondond ad, it goes away. So, people actually watching the full ad to get their reward, just like we know in mobile, is actually working. In some cases, they said they had a 90% completion rate. So from a player perspective, right, these are kids who often don't have a lot of money, who are like, "Sure, I'll watch an ad to get my thing." Advertisers who want to hit this highly, highly valuable Gen Alpha target or early Gen Z target. So this is like win-winwins like all across the board. This got announced at what's called the IAB, which is the interactive ad bureau. So there was a big kind of like ad conference crest, which is why you're hearing about this in addition to GDC. So, a couple other things if you're a parent. Number one is so many of the

Roblox developers are under the age of 17. As a developer, you have to be 18 years old to put ads into your game. So, it's kind of interesting that, you know, you've got to be like an adult to as you're building your games to make money off of ads. That was really interesting. And number two is they're not going to show ads to under 13 kids, which I think many of us, press included, will laugh at because we all know, as any of us that have kids, everyone lies about their age on that platform. And it is really, really difficult. So your kids are now going to be, you know, consumers. Yeah. Of a new ad product. Get ready. Yeah. Every time I hear this [ __ ] it gets Eric Seer's [ __ ] voice in my brain. Everything is an ad network thing. I [ __ ] hate that [ __ ] But yes, everything is everything is an ad network. Anyway, two challenges. One is that the sophistication of the developers are relatively low. So integrating ads is a challenge, right? So that is going to be the one roadblock

and the second roadblock which is not a roadblock is this 13 age requirement as you suggested is that this actually helps them because they're 13 and over group is far exaggerated in my view. Like everyone is opting in. There's no age verification whatsoever. So, their audience is going to look a lot bigger than it really is when it's a bunch of eight-year-olds that are saying that they're 14, you know. So, but the relative share has increased, right? Like that's the thing. Like I agree with you that maybe that's a level change, but you have to explain the rate of change. There are more older kids playing on the platform. And the third problem again is the majority of their MAU or DAU is from third world countries and tier three countries that are not tier one English countries which is where advertising is the most valuable right so that is the other challenge from that perspective is that I don't give a [ __ ] about advertising in India right like it doesn't matter how many DAUs you have in

India that advertising is not worth as much as the US and so But other than that like this is a great addition to the platform. My regional DAU is the US is 22%. Europe is 24% APAC 30 or 25% rest of world. So US is about a fourth of the overall DAOU. To your point they still are going to have lower ECPMs because their monetization just overall is still bad. I mean, if you look at the difference in average bookings per player per region, they have a sub breakdown of that. And the difference is like $40 for the United States, and I think it's around $6 for one of the lowest performing regions. So, I mean, there's going to be huge differences by region. I mean, Eric's not wrong about that. Yeah. But still, like, what are they at like 90 million? What's a fourth of 90 million? You know, you've got Yeah. You know, 15 to 20 million DAU getting ads. I'm just saying if if

people start putting like ECPI or whatever the [ __ ] times 90 million or whatever the [ __ ] net they have, then they're going to get these numbers that are so ridiculous. That's what they were doing. That's what they were doing when back in the day with with Candy Crush, right? And King stuff when they started talking about advertising and they were expecting like three or four billion dollars of revenue. It was like five to600 million, you know, like at the end at the peak after like six years, you know. Yeah. And they built a whole organization to manage those ads. Do you remember when King was like, "Oh, we're not going to do programmatic. We're going to have like, you know, salespeople handling the ads. It's like an old school, so it's probably expensive and not very efficient." So, what's this Roblox Like? Is it going to be that powerful? Because like you're advertising to kids. Well, there are 13 plus. So, so technically, okay, Roblox, but there is almost no other place that advertisers can advertise to get to this audience. So the CPMs are going to be likely a little bit higher because you know everyone's looking for how do I

show Red Bull to a well probably a bad example. How does prize picks advertise to the next level? You know they got a big deal to get the next like degenederate gamblers. Oh, I I do imagine typically ad platforms won't allow gambling, tobacco, you know, there's a lot of product. Once you get into this business, dude, you get filthy, dude. You get filthy like everything's an ad network, right? Because it's [ __ ] dirty birdie. [Music]