Happy holidays! As the year comes to an end I wanted to cram out one last edition of In Transit for 2023. I’m excited for this one!

Thanks for following a long, and see you next year. Next week I’ll send a special year-in-review edition + some 2024 predictions. See you on the other side!

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The Next Big Move for Roblox

Taking the first steps towards a trillion-dollar pie. 

Key takeaways:

• Reached 70 million daily users and $3.5B in GDP.

• Focusing on social networking, commerce, and entertainment.

• Plans to integrate with real-world e-commerce platforms.

• Aiming for a share of the $10 trillion e-commerce market.

• Targeting Gen Z users to reshape online consumer behavior.

Let's be honest; 2022 was a wild Metaverse ride. This year, many experts, like Business Insider, couldn't get enough of writing obituaries for the fantastical new place on the internet that barely saw the light of day before being pronounced dead. While everyone seemed busy beating the bag and/or berating Mark Zuckerberg and his horizon world, Roblox was busy doing other things.

Big things.

This continues to live rent-free in my head and on my desktop. (I can't wait to mail a framed version to the author in five years...)

Roblox is on a spectacular trajectory. Consider these statistics:

• 70 million daily active users, a 20% increase year-over-year.

• 16 billion quarterly engagement hours, up by 20% year-over-year.

• On track for $3.5 billion in GDP/bookings, also a 20% increase year-over-year.

If Roblox were a country, its economy would now be the world's 153rd largest, climbing from 157th last year.

However, this is just the start. Roblox is advancing along three crucial fronts to carve its niche in the Metaverse:

• Social networking and communications: like avatar video calls

• Commerce and shopping: The focus of today's post

• Entertainment: more creator activity, early experiments in new formats (short-form video)

With its latest announcement, Roblox is eyeing a share of a trillion-dollar market.

Real-World Commerce

Roblox's recent announcement to introduce "real world commerce" in the coming year marks a significant shift. Until now, the Roblox economy thrived in a self-contained ecosystem, driven by virtual item transactions. But compared to the broader e-commerce landscape, this market is relatively small, even though it will grow considerably in the coming years, too (as we have discussed before).

Historically, Roblox has been somewhat insular, limiting external links to social networks. The introduction of real-world commerce will change this, allowing brands to link from Roblox experiences to their websites and e-commerce platforms. This move represents an initial step towards tapping into global commerce, adhering to a simple rule: where attention goes, commerce follows.

I wrote about this regarding Roblox in August (conveniently for me, this was before they announced these latest plans).

• As attention shifted online, e-commerce boomed.

• Facebook's rise was accompanied by a surge in social commerce.

• TikTok's popularity led to a similar commercial expansion.

Now, with Roblox rapidly gaining attention, it's poised to follow a similar trajectory, starting with external website links.

The Trillion-Dollar Opportunity

The global retail e-commerce market, valued at $6 trillion and projected to reach nearly $10 trillion by 2028, represents the colossal opportunity ahead for Roblox.

While initially, Roblox's approach to commerce will involve simple external links, I believe it will evolve into integrated, immersive shopping experiences. This evolution will not only enhance shopping convenience but also significantly boost the platform's GDP and introduce innovative retail concepts.

Roblox primarily engages Gen Z consumers, with 60% of its users under 17. This demographic views the internet as an immersive, three-dimensional space, not just a flat, clickable interface. This perception will inevitably shape future consumer preferences and purchasing habits, particularly in virtual goods and fashion.

Roblox is ideally positioned to lead and benefit from this shift in consumer behavior and expectations.

Consumer brands are already pouring onto the Roblox platform for the attention. They will stay for the commerce.

From brand activations to immersive online stores.

For size comparison, here's Roblox's current GDP compared to the opportunity of capturing some market share in global e-commerce by 2028 (5 years from now).

If a mere 0.50% of global retail e-commerce takes place on the Roblox platform in 2028, it equates to almost 10x GDP growth. And this doesn't include the expected market growth of virtual items.

Moving into commerce also unlocks downstream value from Roblox. One example is that the ad economy will grow and shift from awareness only to conversion-oriented ad formats.

A Full-Scale Economy

What sets Roblox apart from previous social networks and attention platforms is its multifaceted nature. It combines elements of a social platform, entertainment hub, immersive space, and a virtual economy.

The last part is crucial as it unlocks opportunities for Roblox that previous attention could not access. Roblox users have a wallet with a balance (Robux).

• Net-new product demand: Roblox's high-fidelity space, combined with consumers increasingly valuing their digital avtars, fuels demand for virtual goods and new "phygital" products.

• A new currency: Robux, Roblox's on-platform currency, can potentially be used for purchasing physical products, blending digital earning with physical buying. This in turn, creates new incentives for users to create and contribute to the platform.

• New loyalty experiences: Engage and create with brands to earn. Redeem for products inside immersive stores. Or buy in a physical store and unlock a digital twin when you visit the immersive store. It creates a new design space for loyalty, combining engagement, currency, and transactions without friction. 

This is all before exploring how this economy could super-charge if it moves to become an economy fully open to import/export by leveraging web3 technology. The Roblox CEO has already hinted that virtual items on Roblox might be NFTs in the future. We'll explore all of this in a later post. 

Roblox's move to integrate real-world commerce might seem like a routine feature update at first glance. However, it signals a strategic, directional shift in the platform's evolution.

Where attention goes, commerce follows.

My prediction: Real-world commerce on immersive platforms like Roblox will be a major trend to watch in 2024.

Thanks for reading another edition of In Transit. 

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