If you don’t live with teens and tweens, you may never have heard of Roblox. If you do live with them, you may hear about nothing else. More than 31 million daily users engage with the free platform’s 12 million games (or “experiences,” in Roblox-ese), and in a regulatory filing ahead of its planned initial public offering, Roblox said users spent 22.2 billion hours on its site during the first nine months of 2020—an average of 2.6 hours a day. If you’re a parent, that’s worrying. If you’re a potential investor, it’s exciting.
Here’s how it works: Players like my 10-year-old daughter create avatars, which they use to visit different games. Avatars are personalized, with virtually unlimited options for customizing their appearance (my daughter prefers hers to be eating a popsicle while hefting a sniper rifle). The basic structure of the games is the same: Players manipulate their avatars through virtual worlds to solve mysteries, build hotels, or slay aliens. Accomplishments are awarded with badges, and a homepage keeps track of your games, which can tally in the hundreds.
The engine that truly makes Roblox go is the army of developers who make its games. While developers share in the revenue Roblox makes from its premium audience—subscribers shell out up to $20 a month for various perks—most can only monetize their work by charging for in-game upgrades paid for with in-game currency called “robux.” Of the nearly 7 million developers building games on the site, less than a million made any money at all in the 12 month ending Sept. 30. (Three made more than $10 million.)
Developers play in the games as well, and can monetize their Roblox celebrity to make money off-site. Fans of Nightbarbie, one popular developer, can watch her build games on Twitch, the streaming platform where she has 44,000 followers.
There’s a live chat feature too, perhaps the element of Roblox that causes the most consternation among parents. Chats for players 12 and under are filtered—inappropriate words are replaced with hashtags—while older players have more license. There is human moderation too, but with millions of games, moderators can’t be everywhere.
Over the company’s 16-year history, there have been some high-profile incidents of inappropriate behavior, including young players lured into adult-oriented games. There is also believed to be an active community of players using Roblox to find real-life partners.
Less scary, but still worrisome, are scams run on Roblox by players who use stolen credit card numbers to buy robux, then sell the digital currency on third-party sites at a discount. According to the company’s IPO prospectus, 5% of purchases made on the site in the nine months ending Sept. 30 had to be refunded to players disputing charges.
At a minimum, Roblox understands these risks. In its prospectus, the company cautions: “The success of our business model is contingent upon our ability to provide a safe online environment for children to experience and if we are not able to continue to provide a safe environment, our business will suffer dramatically.”
What she said
Here’s my daughter explaining why she likes Roblox:
“I like Roblox mainly because of the variety of games it has and the customization options. But I also think something that is really cool about Roblox is that many talented people can create on Roblox. From creating basic designs to really detailed 3D items to even massive games!”
And here’s her avatar, sniper rifle included.
Roblox by the numbers
17: Years Roblox has been in business. The company was founded in 2004 by David Baszucki and Erik Cassel, who previously founded a simulated physics lab called Interactive Physics.
37 million: Number of daily active Roblox users at the end of 2020, up from 19 million at the start of the year
$923.9 million: Roblox’s 2020 revenue
$0: Roblox’s profit in 2020 (the company reported a loss of $253.3 million)
$29.5 billion: Amount of the company’s most recent valuation
$250 million: Estimated amount earned by Roblox developers in 2020
199 million: Number of shares up for grabs in today’s direct listing
The opportunity
Roblox has demographics that speak to a bright future. More than half of its users are under age 13, and 44% of its players are female, bringing the site closer to gender parity than many video games. Those 2.6 hours its users spend per day on the site is more than twice as much as users spend on TikTok.
If Roblox can keep those tweens and teens engaged and loyal, it could challenge the dominance of Facebook and “disrupt the kid-attention economy,” as NYU professor Scott Galloway wrote on his Medium blog.
Roblox anticipates growing through increased interest from older players, and overseas expansion, particularly in China, where it has a partnership with Tencent. It also anticipates monetizing its huge audience by selling marketing opportunities. The NFL, Marvel, and WWE have all created content on Roblox.
This rapid growth and enticing user base had investors anticipating an IPO before the end of 2020, but the company postponed it until next year, citing the uncertainty in the IPO market. Earlier this month, IPOs for Airbnb and Doordash surged wildly in their first day of trading, creating huge windfalls for speculative investors but not the company or its founders and employees. Roblox, it appears, wants to make sure it doesn’t leave money on the table when it comes time to sell shares to the public.
Keep reading:
- Roblox’s S-1 filing
- Roblox is betting big on the kid-attention economy
- A parent’s guide to Roblox
- Roblox is creating a generation of video game entrepreneurs
- Inside Roblox’s war on p*rn
