There have been signs of improving activity lately on the two leading Metaverse platforms, Roblox and Epic. While the former posted growth in average daily active users in a 17-22% range in recent quarters, the latter opened its Fortnite virtual world to major brands Lego and Disney that have or are in the process of building their own lands, likely to attract massive new audiences (see our previous report).
If the attractiveness of virtual worlds is then intact, their monetization remains a challenge as illustrated by Roblox’s underwhelming bookings guidance last week. That said, we believe that the monetization of Metaverse platforms is taking shape with Roblox announcing in recent weeks a flurry of initiatives.
First, the company announced that it’s relaxing the requirements for publishing and selling 3D content on its Marketplace. While this option was previously open to a limited number of creators, now any creator will have the possibility to design and sell avatars, clothing and accessories. That should give a boost to user-generated content, that has been key to the platform’s success, and lift transaction-based revenue.
Second, Roblox launched an e-commerce experience with Walmart that lets users shop directly physical goods on the Roblox platform and have them shipped to their doorsteps. Users entering Walmart Discovered will be greeted with a storefront showcasing digital replicas of select physical items sold at real-life Walmart stores.
This test with Walmart is the first of multiple e-commerce tests that Roblox is planning with different brands and will gauge users’ willingness to purchase physical goods on the platform. If successful, this could be a pivotal moment for Roblox and the Metaverse platforms’ ambitions to become an all-encompassing destination for virtual life and would put them on track to mimick the evolution of Tech giants such as Meta that has now also become a shopping/product discovery and dating destination.
Such an evolution would be positive not only for transaction-based revenue as Roblox would take a cut on all transactions made on its platform (shopping, dating…) but also for user engagement and stickiness to the platform as users would find little incentive to leave the platform if it lets them manage most of their daily digital activities.
Finally, Roblox is making inroads into advertising. The company recently announced a partnership with ad-tech company PubMatic to offer in-game billboards and other ad formats to advertisers and opened video ads to all advertisers. The opportunity is massive for the company (just like it has been for Amazon which introduced advertising in recent years) as Roblox boasts a base of tens of millions of Gen Z users who are a highly coveted audience.
In conclusion, Roblox, Epic and Asian platforms (such as Sea Ltd, Tencent and Krafton) are expected to harness soon three sources of high-margin revenue (marketplace, e-commerce, advertising), with a major positive impact on both their topline and margins. The rise of advertising and online commerce on Metaverse platforms is also likely to be a boon for digital ad firms (AppLovin…) that have historically handled advertising inventory for gaming companies.