Roblox (RBLX -0.54%) continues to see daily active users grow, but new users are not spending as much money on virtual content as they were during the pandemic. Bookings (a non-GAAP measure of revenue) flattened out over the last year, contributing to an underperforming stock price. 

Roblox recently announced improvements to the marketplace that could incentivize more spending by players. Perhaps an even bigger opportunity is the upcoming launch of 3D advertising.

Let's look at what the company is up to and whether it will be enough to lift the stock next year.

Roblox is making marketplace improvements

Roblox now has 59.9 million daily active users, up from 52 million at the end of the second quarter. There's clearly inherent value here. Having more users gives Roblox a greater opportunity to increase revenue from experiences and content.

A bar chart showing daily active users up over threefold since 2019.

Image source: Roblox.

Identity is a big deal to Roblox players. One-in-five users updated their avatars in 2021. That small percentage contributes a lot of revenue for Roblox. Goldman Sachs estimates that about 25% of total revenue is generated from the Roblox Marketplace, where users buy virtual items, such as digital clothing. Earlier this year, the company introduced layered clothing, allowing players more ways to mix and match styles with their avatars. 

In the coming months, Roblox will introduce new marketplace mechanics that give creators more control over the quantity of limited-edition items. This could lift the average resale value of collectible items on the Roblox marketplace. Management sees a "huge opportunity" to boost the Roblox economy with item scarcity initiatives. 

Roblox is going after immersive advertising

Another opportunity is advertising. Players spent 4.7 billion hours on the platform in the month of July, and as the user base continues to increase, this number will only grow larger. The more this metric grows, the more attractive Roblox is to major brands.

A bar chart showing Roblox hours engaged growing threefold since 2019.

Image source: Roblox.

Brands have been asking Roblox how they can drive more traffic to their experiences. The company's answer is to integrate 3D ads into these virtual worlds.

With immersive ads, a brand can display a virtual billboard in a town that allows players to instantly jump through a portal to another experience. It's like clicking a link on a web page, but 3D ads are deeply engaging and can increase time spent on the platform. 

In-game advertising is estimated to be a $12.3 billion market, increasing about 10% per year through 2028, according to Vantage Market Research. With Nike, Vans, Warner Bros. Discovery, and more already partnering with Roblox to build experiences, there is already a built-in group of brands that could make the launch of immersive ads a big success next year.

Roblox's stock is still expensive

The shares fetch a steep price-to-sales (P/S) ratio of 9.9, which implies the expectation for high growth over the long term. This means higher growth might not be enough to send the stock higher. 

Roblox stock is still more expensive than other metaverse stocks on a P/S basis.

RBLX PS Ratio Chart

Data by YCharts.

By the end of 2023, Roblox should have between 65 million to 70 million daily active users. If the improvements to the marketplace can stabilize bookings per user at the current $12.25, that would put Roblox's annualized bookings on pace for $3.4 billion, up from $2.7 billion in 2021. 

The dilemma for investors is that Roblox could return to double-digit growth next year, but the shares may not move much. Given the stock's high valuation, investors might want to consider other metaverse stocks right now and wait to see how the new initiatives work out before buying shares at these valuation levels.