The CQ: Should your brand be in the metaverse?
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Roblox’s engagement and Gen Z popularity piques the interest of brands
By Fawzi Itani, Investor
Virtual spaces like Roblox and Minecraft have become compelling destinations for brand activations. Not only do these platforms hold a captive audience of teenagers and pre-teenagers, they provide the flexibility for brands to create engaging experiences for relatively low costs that have the potential to reach millions while generating revenue. Roblox, for example, now has 57M+ daily active users and supported activations across fashion, entertainment, and more.
As cost per thousand of impressions (CPMs) have risen across a variety of channels, brands are looking to other platforms that generate awareness in non-traditional ways. Let’s break down the opportunity to build branded experiences in Roblox.
The Value and Timing of a Branded Experience:
Importantly, virtual spaces are great for brand awareness and short-term brand engagement. You can think of these as “pop-ups” that can be updated, edited, and iterated. To date, this strategy seems to do relatively well for brands in that they still see engagement up to a year later (it turns out people love in-game cosmetics).
As traditional marketing channels become more saturated, virtual spaces have grown into differentiated new ways for reaching digitally-native audiences and increasing top-of-funnel exposure. Many branded experiences go a step further than awareness to build and sell in-game items, diversifying near-term revenue around the pop-up event (for example, this Gucci bag).
Roblox has prioritized branded experiences as a part of their own strategy to increase the diversity of experiences on their platform, while catering to the demand from brands. Given the relative newness of this approach, Roblox has made a concerted push to help market the launch of these events (see bottom left preview of Stranger Things & Elton John). Additionally, with current industry interest around what the “metaverse” means and what we can do with it, publications and creators are quick to pick up on unique brand activations and provide their take. For example: a YouTuber gave a tour of Walmart Land, Sonic Speed Simulator has a dedicated subreddit, and Gucci Gardens was covered in The Verge, Vogue Business, WWD, and many others.
Cost and Data:
Roblox users are always looking for new experiences to engage with, evident given the prioritization of branded experiences, which launched around one year ago in earnest. We’ve gathered these experiences cost $500K on the upper bound to build (and more for additional live services).
Below is Roblox performance data for select brands. This data represents brands that have continued presence on the Roblox site. For reference, here is a list of Roblox experiences with the most visits (to be fair, the disparity comes from a highly competitive market that sees 1M+ new experiences each year).
These events have a wide range of engagement levels from three to twenty minutes per session. Additionally, some of these events see longevity even one year after release, which could be driven by new users coming to the platform or older users wanting to check out the game after an update, and / or traffic driven by a great game experience that is replayable. The best branded experiences create a game to supplement the brand engagement, such as Sonic — the most popular branded experience on the platform with a solid, replayable game – and the cosmetics brand NARS, which includes a cosmetic and adventure mini-game.
Relevant Market Metrics:
Perhaps surprisingly, Roblox CPMs are lower than both digital marketing and brand advertising comps. Given its nascency, TikTok remains a compelling marketing channel for impressions. And YouTube still maintains dominance in both pricing and relevance. To be clear, Roblox advertisements optimize for brand awareness and a largely younger, Gen Z demographic (Roblox, does in fact have a burgeoning over-thirteen demographic, a testament to their “aging up” priority), so it’s likely a better comp to advertising like TV / Streaming. However, there is an opportunity to see ROI through diversified revenue streams, like in-game items, to offset the lack of measurement on conversion.
Today, Roblox has 270M registered users with unparalleled within certain age demographics. What makes Roblox increasingly compelling as a marketing channel is its ability to engage (and re-engage) consumers. Roblox users are spending more time on average engaging with the experiences than any other user spends engaging with ads on other platforms.
Thought Exercise: Brand Criteria
Some might say the best time to build a branded experience was a year ago. But as more of these experiences pop up, each subsequent experience will likely become more sophisticated and innovative. It’ll also probably be more difficult to rise above the noise.
To wrap up, we thought it would be fun to share our thought process for how brands can leverage Roblox (to the extent that brand marketing is a priority).
Demographic fit with younger, Gen Z crowd
Brand potential around which to create a fun, engaging virtual experience
Company has reached a sense of scale within market and resonance with consumers
In-game revenue potential by selling virtual items outside of branded experience or creating objectives with in-game cosmetic rewards
Company could benefit from brand awareness campaign and has historically relied on other advertising channels
Ability to flex marketing budget and / or has brand marketing aspirations
Accessible price point for product
Do these companies have brand marketing budgets within the $250-500K range? If they’re already deploying it, where to?
How does the brand think about longer ROI cycles and time takes to develop these branded experiences? (e.g NARS took ~6 months to complete)
Given current priorities, does a brand activation like this make sense for the company?
Are there any key events / moments to tie in a metaverse experience?
The one caveat here is tracking ROI, which can be hard given the nascency of the branded experience within the Roblox ecosystem. Setting priorities around what ROI means for your brand will be paramount, as Roblox will accomplish certain goals but not all. Consider this in the context of budget, demographic, and goals.
Best of luck, and we’d love to hear any use cases or jam on this potential avenue with brands!
This Week’s Top 10 Consumer Insights
Economic uncertainty is leading many to reconsider retail subscriptions. Nearly 43% doubt that they will renew one or more of their subscriptions.
As consumers return to brick-and-mortar shopping, retailers are looking to combine ecommerce and in-person experiences (ex: Nike providing QR codes).
While nearly everyone is feeling the squeeze from inflation, Gen Z is getting hit the hardest. A new survey reveals almost 75% of Gen Z’ers have trouble paying their bills on time each month.
TikTok’s ad revenue is expected to nearly double this year from last, while social media giants like Meta, Twitter, and YouTube are seeing declines.
Nike launches .Swoosh, a Web3-enabled platform where people can collect, trade, and co-design virtual products.
Aside from protecting privacy and data, people ranked access to discounts and perks as what mattered most in a brand’s metaverse platform.
Amazon is launching a telehealth platform for conditions like acne, hair loss, and allergies.
The Federal Reserve Bank of New York reports that American household debt is climbing at the fastest pace in 15 years, with credit card balances increasing at their largest rate in two decades.
Social media is a shopping destination for Gen Z and millennials’ gift-giving, with 60% of Gen Z and 56% of millennials planning to shop on TikTok, Instagram and YouTube for holiday gifts, up from 49% and 46%, respectively, from last year.
YouTube is trying out new shopping features including affiliate marketing and allowing influencers to tag their products in Shorts that can then be purchased.
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CNBC and TechCrunch report on how Attabotics raised $71 million to build its vertical storage warehouse.
Eclipse is ranked #1 in Business Insider’s round-up of the 25 fastest-growing DTC brands.
MarketWatch, The Motley Fool, and Yahoo!Finance report Hims & Hers’ rising stock prices.
New York Magazine says Away is the “perfect carry-on” according to flight attendants.
WWD covers the hiring of Brad Hiranaga as chief brand officer of Cotopaxi.
The Skimm gives the Oura ring “straight A’s” in breadth of stats, battery life, style and size.
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