Roblox Ads Face Developer Pushback

• Developer pushback and safety concerns are slowing Roblox’s ad rollout.
• Young users and regulatory limits make advertisers cautious.
• Roblox intends to explore newer ad formats, but revenue impact and incentives remain limited.

Roblox Corp. has been working hard since its IPO in 2021 to convert its virtual worlds into ad real estate. The gaming platform hopes to capitalize on its 150 million users, who reportedly spend approximately two hours every day. The initiative, however, has stalled due to skeptical sponsors, cautious developers, and regulatory hurdles.

As per Roblox, brands can use their "experiences" to display themselves on the virtual billboards or play short video ads within games, along with the possibility of offering modest in-game prizes for users watching them.

Roblox CEO David Baszucki says that the approach has the potential to create a massive new business for the company. However, the gaming platform's most recent earnings reports suggest that ad revenue remains small and contributes little to overall revenue. This is because most developers are reluctant to accept advertisements, making it a significant obstacle. 

Why are Developers Hesitant to Advertise on Roblox?

According to ad executives such as Dario Raciti of Omnicom's Zero Code, ad rates for video games range from a fraction of a cent to only 55 cents per thousand visitors, which is far lower than the industry average for video games. In contrast, many people still prefer selling in-game assets.

Embedding ads can also interrupt the gameplay experience, particularly on a platform like Roblox, which is valued for immersive, creator-driven realms, says Ben Spoont, CEO of Misfits Gaming, an interactive entertainment business that runs multiple Roblox games. Apart from that, industry reports also identify age to be a major concern for advertisers.

Roblox Ad Restrictions and Child Safety

Roblox has a large under-13 audience, accounting for around one-third of its users, so advertisers exercise caution. Roblox’s ongoing global criticism of child safety issues also adds to this concern.

Additionally, U.S. regulations restrict how companies may advertise to children, especially those under the age of 13, adding to the reluctance. As a result, Roblox disables targeted ads for younger users, requiring developers to hide or restrict ads for them.

However, there have been mistakes. Ads for games like Dress To Impress and the film Wicked (a partnership with Universal Pictures) were visible to platform users who were a little over the age of five. This happened because Roblox separately labels games with advertisements. 

Watchdog groups like Truth In Advertising filed a complaint with the Federal Trade Commission in 2022, stating that youngsters were not always aware they were being marketed or advertised. Despite such restrictions, Roblox's ad formats are growing.

Roblox Bolstering its Ad Economy

The company stated in April that it would collaborate with Google to launch "Rewarded Video" ads, which are full-screen videos up to 30 seconds. Such ads could be watched by players who are at least 13 years old and who can get in-game rewards in return. As per industry reports, the company’s internal surveys found that 87% of consumers preferred this format.

However, Roblox still retains around 70% of ad revenue, leaving developers with a minimal stake, which is often viewed as insufficient. Even major games like Brookhaven generate roughly $65,000 USD each month, which is considered modest given their size.

Further market complications arise in ad measurement. Brands also demand proof that in-game activity leads to real-world consequences, such as foot traffic, purchases, or awareness, an outcome which Roblox has not fully delivered. Most industry analysts say that a lack of transparent real-world provenance undermines advertiser faith.

Roblox has downplayed the ad revenue for the foreseeable future, stating that advertising is still "in its early days." However, analyst firms like Morgan Stanley have claim that the rewarded video ads might be worth $3 billion USD by 2027.