Video games are turning into streaming TV, putting ads into America's favorite entertainment form
Whether we like it or not, the internet age is fueled by advertisements, and increasingly they are seeping into forms of entertainment you might not expect.
It all started on social media, where advertisers jumped on the chance to target ads based on what people were actually interested in and clicked on, thanks to Facebook’s tracking technology and social-media dominance. Later, streaming, which was once pitched as a haven from ad-laden traditional TV, turned to free ad-supported tiers and even paid ad-tiers to drive profitability partly in response to demands from Wall Street.
Now, video games are joining the world of ubiquitous advertising, with Roblox announcing this week it was taking a step forward in showing targeted video ads to many of its millions of users by the end of the year.
Roblox’s wildly popular digital platform allows around 71 million users a day to create their own worlds and games. It’s now working to launch video ads on virtual billboards targeted at players 13 and older. Users who are playing games or walking around the virtual world will stumble upon the video billboards, just as they might in the real world.
Yet, unlike the real world, the ads will be much more targeted, thanks to help from ad-technology company PubMatic, which partnered with Roblox this week to bring programmatic ad buys to the video billboards.
Courtesy of Roblox
Roblox is betting that it will stand out in a competitive ad landscape because of its sought-after audience of young gamers and because it is making it easy for advertisers to add it as a channel through PubMatic.
“Roblox stands out to advertisers as a platform where they can reach a highly engaged Gen Z audience that’s otherwise not easy to reach,” Stephanie Latham, the vice president of global partnerships at Roblox, said in an email to Fortune. “We are excited to enable more brands to engage this community seamlessly and at scale through programmatic partners they are already buying through.”
Previously, the company has worked with advertisers interested in creating their own virtual worlds, including a Walmart-branded experience complete with free virtual clothes for gamers’ avatars and a taco truck displaying a recipe that incorporated ingredients from the company’s Great Value brand. In 2023, it also introduced static image advertisements and “portal ads” that invite users to teleport to an experience sponsored by a brand.
Through its new targeted video billboards, Roblox is hoping to increase its share of the video game advertising market, which is estimated to grow 13.4% to $8.5 billion this year, the Wall Street Journal reported, citing data from eMarketer.
The increased advertising push could be timely for Roblox, as its stock has fallen 8% year-to-date and a whopping 70% from its pandemic-fueled high in November 2021. In December, one of its investors, Sahil Alvi, called for the company to make changes to regain investor trust. The company is not profitable.
Roblox’s ad push is just the latest example of a new phase in advertising. Any company with first-party customer data is suddenly looking to capitalize on it with advertising, said mobile marketing expert Eric Seufert, whose 2021 prediction that “Everything is an Ad Network,” has increasingly proven accurate.
“These platforms realize they have a valuable asset that wasn’t competitive with what Facebook offered before. But now it is,” Seufert told Fortune.
Video game companies have recently faced backlash from gamers upset over the growing financialization of video games, which includes everything from paid loot boxes to pricey NFT in-game equipment.
Still, Roblox’s Latham said it has been testing its video ads since last year and wants to make sure they are “immersive and non-interruptive.” In adding more marketing content, she noted, video games are only taking cues from the rest of life.
“Knowing advertising will naturally exist in 3D immersive spaces – just as it does in other parts of people’s lives where they interact with their favorite brands – we are focused on creating solutions that enable brands and creators to launch innovative ad products on Roblox that people enjoy,” Latham said.
