Publications
Publications
- February 2023
- HBS Case Collection
Roblox: Virtual Commerce in the Metaverse
By: Ayelet Israeli and Nicole Tempest Keller
Abstract
In 2022, Roblox had 58.8 million daily active users, including over half of all children and teens under the age of 16 in the United States. Roblox, a free-to-use “co-experience platform”, allowed users to come together in immersive 3D experiences to socialize, work, play, learn, and purchase virtual and real goods. Brands saw Roblox as a major metaverse testing ground and experimented by offering a variety of branded items and experiences.
In 2022, Roblox was grappling with how to maintain revenue growth and generate profits, considering two key decisions. First, how should Roblox expand its partnerships with brands, and should Roblox allow brands to offer immersive advertising within experiences? Roblox would have to tread carefully to not raise the ire of watchdog groups who were wary of advertising targeted at children. Second, should Roblox change its economic model which was free to publish, and adopt a “scarcity economy” whereby Roblox would allow creators to only publish items in limited quantities and charge an upfront fee for item creation, similar to a manufacturing fee? On one hand, scarcity could prevent excess supply from driving down prices, but culturally Roblox users and developers were accustomed to unlimited supply, low prices, and virtually no upfront fees.
In 2022, Roblox was grappling with how to maintain revenue growth and generate profits, considering two key decisions. First, how should Roblox expand its partnerships with brands, and should Roblox allow brands to offer immersive advertising within experiences? Roblox would have to tread carefully to not raise the ire of watchdog groups who were wary of advertising targeted at children. Second, should Roblox change its economic model which was free to publish, and adopt a “scarcity economy” whereby Roblox would allow creators to only publish items in limited quantities and charge an upfront fee for item creation, similar to a manufacturing fee? On one hand, scarcity could prevent excess supply from driving down prices, but culturally Roblox users and developers were accustomed to unlimited supply, low prices, and virtually no upfront fees.
Keywords
Entertainment; Games, Gaming, and Gambling; Market Design; Marketing; Brands and Branding; Marketing Channels; Marketing Strategy; Business Strategy; Economics; Economy; Economic Systems; Advertising; Advertising Campaigns; Digital Platforms; Markets; Price; Innovation and Management; Entertainment and Recreation Industry; Video Game Industry; Technology Industry; United States; California; North America; South America; Asia; Europe
Citation
Israeli, Ayelet, and Nicole Tempest Keller. "Roblox: Virtual Commerce in the Metaverse." Harvard Business School Case 523-028, February 2023.