How Roblox Become $30 Billion Company

Rate this post

If you don’t have kids, you probably never heard of one of this year’s most anticipated stock market debuts.

Today, more than half of the kids in America play something called Roblox.

It’s a social gaming platform that allows users to play, create games and hangout with their friends all in one place.

Roblox is now worth $29.5 dollars billion, according to its latest fundraising round.

That’s up seven times from its last round in February 2020, when it was valued at $4 billion dollars.

CEO Dave Baszucki’s ultimate vision for Roblox is an online world where we can work, play and entertain ourselves or what’s known as the

metaverse. A world where the limits of reality are your own imagination.

Yup, like the virtual universe in Ready Player One.

Here’s everything you need to know about one of the most popular gaming platforms in the U.S.

Today, Roblox has more than 150 million players on the platform.

This comes as more children are spending time at home during the pandemic and are turning to socializing online.

But when Roblox first launched in 2006, the gaming platform had struggled to find its footing.

It really started to capture a big audience in the last few years as there were more devices out there that were specifically for kids

that were very kid-friendly.

Roblox is a social game.

So if you sign on and you start playing and you realize that there are all these characters in these games, behind these characters or people, but you

don’t know any of them. You realize, well, this would be more enjoyable if I invited my friends.

It becomes sort of a social invite game and so one new addition to Roblox can mean three or four new people down the line.

In Roblox, players create an avatar they use in different games on the platform.

Users can change their avatar’s look, accessories or tools.

They can also pay for additional customization options with Roblox’s virtual currency, Robux.

Robux can be purchased using real money.

The most popular game, ‘Adopt Me’, has been played more than 10 billion times.

It’s a virtual city where players can raise and dress virtual pets.

In ‘Work at a Pizza Place’, players run a pizza shop with friends and in ‘ RoyaleHigh’ users attend a fantasy high school as a fairy or royal

character. Role playing and simulation games top Roblox’s list of most popular genres.

The gaming model for most major video game companies like Electronic Arts or Activision Blizzard revolve around blockbuster releases, so-called

triple-A games.

These are games that cost more than $100 million on development, promotion and marketing.

Think of games like the Call of Duty franchise, Assassin’s Creed or Grand Theft Auto.

What’s fascinating about Roblox is their margins theoretically should be a lot higher than traditional game makers and traditional platforms because

that content that’s driving users is being created by the users.

The cost that they have in content is really only in building that Roblox game engine for you and I to be able to easily make content.

Roblox’s game creation toolkit, Roblox Studio, allows anyone with an account to make a game on the platform.

Developers make money from the amount of Robuxs used in their games and the engagement time of premium users.

Roblox takes 30 percent of those profits.

As of July 2020, more than 345,000 developers are monetized on the platform.

Anne Shoemaker is one of those developers.

She joined Roblox eight years ago as a user.

She’s the creator of Roblox games ‘Mermaid Life’, a role playing game, and pet simulator ‘My Droplets’, and says she has since made more than

$500,000 on the games.

She started with Roblox Studio and thanks to the success of her games, has expanded to a full studio with a team of 14.

I had no prior coding experience.

My only experience was playing games where you could build things on the platform.

So when I open up Roblox Studio, they have this section of free models and you could just throw them into your workspace and they already had

different scripts in them that were functional.

And you could basically at that point just throw a game together just from using the free model section.

If you think about how to make a game 10 years ago, you had to have deep knowledge of programming languages.

Now, with Unity or Roblox or several other game engines that are out thereit is actually very easy or definitely much easier, but in some cases

very easy to build.

And so we think what you’re going to see is an explosion in content creation.

Roblox’s bet is that if it makes its game toolkit easier for users like Anne.

Then Roblox will get better content, more users will spend more time on the platform and ultimately will spend more Robux.

And all of that works together into sort of this very different kind of business model, which looks much more like a software business where

you can see these are the number of additional users we expect to get over the next month or the next quarter.

Our typical user spends this amount of money and so we can project what our revenue is going to be.

The best way to value Roblox will be on number of users and how deeply engaged they are.

So typically in a game like Roblox or free-to-play a game like Fortnite you have hundreds of millions of users, but

only a small subset actually spend money.

The beauty of Fortnite is that subsector’s bigger than most free-to-play games and Roblox appears to also have a very high stickiness around people

who spend real money on Robux.

Roblox’s IPO has been highly anticipated, but has had a series of delays.

The social gaming platform initially decided to go public in December 2020 and then postponed it to 2021.

In January 2021, the company announced it would go public via direct listing.

Later that month, Roblox delayed the debut over SEC scrutiny on how the company recognizes revenue through its virtual currency.

As of February 2021, the company is set to debut at the New York Stock Exchange in March.

Despite the delays, it doesn’t look like Roblox’s sky-high valuation will be dropping anytime soon.

The extreme valuation growth that we’ve seen of late going from $4 billion in 2019 to close to $30 billion in its

latest round, sort of its pre-public round just recently, is a reflection of a couple things really.

One is the growth of the company during Covid has been extremely impressive and very efficient.

So they are showing that they can attract new users and get those new users to spend money without spending a ton of money to acquire

them, to get them to play.

We know that they have Roblox has been able to maintain this level of strength for a long time.

And the market is just applying a very high multiple to cloud software and particularly the high-growth cloud software that has that shows clear path

to profitability. They’re in the right place at the right time now to try and hit the public market.

Roblox calls the games on their platform ‘immersive experiences’.

The company sees its competitors as Big Tech and entertainment companies like Apple, Facebook and Netflix.

It also competes with gaming companies like Activision Blizzard and Unity, and even social media platforms like Pinterest and Snap.

The company lists itself as a player in the attention wars, fighting for the user’s time.

One way the company is going beyond games is through virtual events.

In April 2020, the social gaming platform started allowing players to host virtual events like birthday parties.

Roblox is also working to make it easier for larger development teams to make games on the platform.

I’ve been getting a lot of messages from people outside of the platform who have their own studio.

So they develop games on four other platforms and they’re reaching out trying to get me to help them learn Roblox Studio to make games on Roblox

or just learn about the user base.

Just connect, make connections with different developers who kind of understand the platform a bit more.

It’s been happening so much more recently.

Two big questions for Roblox?

How to keep young gamers from moving onto games meant for older players and how to jump on China’s mobile gaming boom.

The consensus path is probably kids start in Roblox, move to Minecraft, move to Fortnite, move to Call of Duty.

So how do you keep kids within the Roblox ecosystem as they get older?

And then another area of growth is going to be from China.

They’re not currently in China.

They have a partnership with Tencent to build Roblox for China.

That’s a market that is ripe for a company like Roblox.

Leave a Reply

Your email address will not be published.