Free game companies like Roblox (NYSE: RBLX) can monetize users in a variety of ways, one of which is by displaying advertisements. However, no one really likes their game being interrupted by a 30-second video. Therefore, businesses have to straddle a difficult line between maximizing revenue and satisfying users.
In this video by Motley Fool Pass behind the scenes, recorded on September 27Fool contributor Jose Najarro explains to analyst Sanmeet Deo and colleague Jon Quast how Roblox is getting creative when it comes to advertising. Increasingly, users may not even realize they are being shown an ad, thanks to this new strategy that several video game companies are trying.
Deo Sanmeet: Now, I think, Jose, when we were talking a little offline, you were talking about ads and how Roblox and some of these other companies are using ads or partnerships and what that trend is. I’d like to hear your thoughts on that a bit as well.
José Najarro: Definitely, for me I’m thinking of the gaming world, especially with Roblox and Fortnite, two companies that are really known for, I mean the early stages of the metaverse. I have the impression that companies are using this tool to advertise to consumers without us consumers noticing. Because right now the typical way for us to get ads if we watch YouTube, we’re going to be hit with a 30 second ad. If we watch some form of TV we’re going to switch to some form of advertising, and it’s not for us, I mean a positive experience to some extent, unless the ad is super funny, to Unless we’re really, really enjoying the actors or something, that advertising experience is not a pleasant one.
I think of the metaverse with Roblox and Fortnite, with like musical evenings. Musical nights are pretty much just a huge publicity for this CD, but create that publicity and more of a positive aspect where we as consumers don’t know what we are advertising about. I think Roblox in early September they partnered with Vans [part of VF Corporation], many know them for skate shoes. They created this form of skate park inside the metaverse. Again, this is a free experience for anyone to play. But it’s also more of a form of free advertising to an extent, as it still has to do with the overall development of the game. But I believe that with Roblox, it’s not a super expensive that develops. its own game. But in this Vans skatepark you can see all of their shoes, you can see some of the skateboards they might sell or some of their skateboard collections.
For me, I think this metaverse is going to allow new users or consumers to advertise in a more enjoyable or positive way. I think there was also, it’s a super expensive clothing line, Balenciaga [part of Kering], that they partnered up with Fortnite so that if you buy a really expensive hoodie I think it was around $ 650 you also get a digital code to wear that hoodie in your avatar to some extent . If you don’t want to spend $ 650, I think you can always buy the digital hoodie yourself. But then again, now you are paying to wear this digital hoodie and again, in some form of advertisement, you will be showing this digital hoodie to everyone in Fortnite. Again, this will be another positive way for large companies to use this tool where even we as consumers don’t mind. I think this is going to provide some great conversion rates that businesses are going to love very much.
Deo: Yeah, I know, absolutely. I just wanted to share this screen here so viewers get a feel for what we’re talking about here. Roblox, if you see this pic here, it’s a little skate park experience they have in Roblox. The advertising is very subtle. You can see the Vans logos on this guy’s shirt. You can see here on the side of the table.
They do that in movies too, it’s like the same movie ad they do in the metaverse of this world. Then if I want to buy Vans shoes or shirts, or items in Roblox, you get Roblox, you pay Roblox to get that ad, and you equip your avatar with that experience or that tool. Then also as you were talking about Fortnite, Balenciaga. You can see a photo now.
Did you say you know what the price is for it in Fortnite?
Najarro: I think for the hoodie itself if you want to get the real hoodie and with the code it was $ 650 or $ 750 or you can just use the skin itself. I think the skin includes the dog. It’s not just the hoodie itself, it includes the dog or whoever it is. It’s about, I think, $ 8 just for the hoodie and the playable character. Then they also have different, I think, the shoes, I think it’s different price too, but I think the higher was not more than, I think, $ 12, and it’s so cheap than a dollar.
Deo: Yes. You can see some of these pictures, Tier-2 with a hoodie, these outfits different things you can buy. Here is. The cost of the fees, this hoodie, for example, costs $ 725 here. Then it’s still a steal compared to what I’m guessing for real hoodies which would be $ 995.
But it’s amazing to me because my son also plays Fortnite and it almost seems every other day he asks for V-Bucks, which is Fortnite’s virtual currency. Then he outfitted his character, it was like he got LeBron’s new drop or I think he had Ronaldo or one of the famous soccer players.
There is also a question for you, how do you see this merger with NFTs? Because it’s basically like an NFT. Obviously we can buy a bunch of these Balenciaga Fortnite hoodies, but maybe they drop on one of those metavers or games in Fortnite or Roblox, a unique thing where we pull out a LeBron jersey. signed or something and it’s a one-time item that you can buy from Fortnite or Roblox or whatever and it’s basically an NFT. Do you think these things are going to merge at some point?
Jon Quest: Definitely in the sense that someone is going to try it without a doubt. Just for those unfamiliar with an NFT, a non-fungible token. These are digital items that are unique and can be owned. I think these are the two real properties that would distinguish a TVN. Anything on my computer I can hit copy paste and now it’s not unique. You cannot do this with an NFT. They are one of a kind and you can link your property to them through the blockchain.
Yes, the digital artist is taking off, people are creating these works of art in their computers, their NFTs, and they can be bought and sold. The question is whether these will exist in the Metaverse? To some extent, they already do. I heard about a house in the Metaverse that sold for more than the house I live in. It’s on the metaverse, it’s not even real.
On the one hand, I would say yes, you’re going to see NFTs in the metaverse. On the other hand, what you see here from Balenciaga, they make it once and they sell it over and over again. There are better margins here than if you were to modify it to make it a single item for an NFT. I think brands are going to have more incentive to go the Balenciaga way of selling a sweatshirt but to as many people as we want we will sell it a million times. It doesn’t matter to us because it’s basically pure profit at this point.
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