Roblox users battle tornadoes and raise pets. Will they watch ads, too?

Summary
The online-entertainment company is hiring ad-tech player PubMatic to help juice sales of new video ads displayed on virtual billboards.Roblox users are accustomed to seeing games and concerts while roaming the platform, but not ads. That is about to change.
The online-entertainment company is ramping up its push to attract ad dollars, a move that comes as many of its tech-industry peers are leaning more on Madison Avenue to generate revenue. It has tapped ad-technology firm PubMatic to help juice sales of video ads on its platform, which averages more than 71 million daily users.
Roblox comprises millions of animated, three-dimensional realms that its own users create and hang out in. Most feature games. The company last year began testing a small number of video ads, which appear on virtual billboards only for certain users.
Soon, PubMatic will enable brands to purchase video-ad inventory through a traditional online-bidding process, to be seen by users who are 13 years or older. Realm creators that opt to show the ads will get a cut of the ad revenue that Roblox makes.
The goal is to “remove friction and make it seamless to buy Roblox ads at scale," said Stephanie Latham, vice president of global partnerships at the company. “We are very intentionally looking for ways to bring our audience thoughtfully to all brands."
Launched in 2006, Roblox went public in 2021 after undergoing a pandemic-fueled growth spurt in users and engagement. The company, which isn’t profitable, monetizes mainly from sales of virtual currency that players use to buy outfits for their avatars, vehicles and other perks.
The push into video ads signals that San Mateo, Calif.-based Roblox wants a bigger slice of spending on U.S. game advertising, which is expected to rise 13.4% to $8.5 billion this year, or 2.8% of overall digital ad sales, according to Emarketer.
“Advertisers, in general, are still far behind in understanding the gaming space and engaging with this audience," said Dario Raciti, managing director of gaming and esports for ad giant Omnicom Media Group.
So far Roblox has taken an atypical approach to advertising by encouraging brands to build their own realms on the platform; make and sell their own virtual goods on it; and host special events, such as scavenger hunts, inside existing realms.
Hundreds of brands, including Nike, Gucci, Chipotle and the National Football League, have invested in one or more of these options, in most cases by hiring a developer studio. Building a brand-specific realm is typically the most expensive, costing anywhere from $100,000 to several million dollars, according to ad buyers.
Brands can draw attention to their creations by purchasing static billboard ads from Roblox and what the company calls Portal Ads, both of which launched last year. Portals are glowing virtual gates that instantly transport users from one Roblox experience to another.
Now, Roblox is pushing video ads, ripping a page from other digital-ad sellers by making advertising on the platform easier and potentially less expensive. It also has hired ad-industry veterans from companies including Meta Platforms, X, Alphabet and Yahoo to help grow its ad business.
With PubMatic’s automated ad-buying tools, brands will be able to purchase video ads that promote their products and services, and not necessarily a Roblox-specific experience. Roblox said it would review the ads before they post in its platform.
PubMatic will also create so-called private exchanges to pool Roblox’s ad inventory, giving the company more control over ad prices and which brands are allowed to buy ads. At some point in the future, Roblox said it plans to move to open exchanges.
The video ads are due to launch fully later this year. Brands can use their existing video-ad inventory rather than having to create new ads that mirror the platform’s animated aesthetic.
Last year, Roblox started giving advertisers the ability to target users who are ages 18 and up, which some ad buyers said could help attract brands that have avoided the platform because its user base skews young.
The company has already faced some blowback from its work with brands. Last year an ad-industry watchdog said Roblox violated its guidelines for marketing to children younger than 13. At the time, a Roblox spokeswoman said that branded virtual worlds on its platform don’t constitute advertising and that it doesn’t let users under 13 see ads it serves directly.
Bringing easy-to-use video advertising to Roblox is critical if the company wants a shot at competing against other digital-ad players, according to ad buyers. Platforms such as Instagram and YouTube have succeeded in part by streamlining the buying and targeting of ads with the help of sophisticated technology that largely automates the process.
Further, supporting video ads in particular—as opposed to just sticking with the static kind—is essential for Roblox to have a successful ad business, ad buyers say. Brands are drawn to how video ads use sight, sound and motion, plus they command higher ad rates than static ads.
Tech companies from Uber Technologies and Instacart to Netflix and Reddit have also been putting a greater emphasis on growing revenue through ad sales in recent years. Still, introducing ads or showing more of them poses risks, as they can turn off users, raise privacy concerns and draw regulatory scrutiny.
Amazon.com’s recent move to bring ads to its Prime Video service drew a harsh reaction from subscribers, some of whom canceled their memberships.
“You don’t want to pull back from the enjoyment of the experience, and ads have a way of doing that," said Benchmark entertainment and digital-media analyst Mike Hickey. “They can be a distraction."
Write to Suzanne Vranica at Suzanne.Vranica@wsj.com and Sarah E. Needleman at Sarah.Needleman@wsj.com
