Roblox Picked a Great Time to Go Public
(Bloomberg Opinion) -- My son, Soren, might be the biggest Roblox fanboy in the world. On a typical day, he spends several hours playing different games on the platform — pretty much all of his free time when he’s not in virtual school or sleeping or being forced to take the dog for a walk. On the weekends or during school breaks, he often spends all day playing with friends a few zip codes away, but also with friends he has made in New York or Taipei or a town in Norway called Ålesund, moving across time zones like a pro.
If he’s not actually playing on the Roblox platform, he’s often watching live-streams of other people playing. The other day, I caught Soren looking at job postings on Roblox’s site and talking about all the cool perks that they offered and how he couldn’t wait to apply. He’s 10, so he’s nearly a decade away from being qualified to even apply for an internship.
It’s this fervor, in large part sparked by the pandemic, which explains why Roblox is about to go public this week. Soren, it turns out, is just one of the 32.5 million “daily active users” on the platform — a number which has nearly doubled over the past year, according to the three-hour video stream that CEO David Baszucki hosted for investors last week. Like Soren, more than half of Roblox’s users are under 13, although executives say that is changing and that they expect the majority of its users to be over 13 soon.
For those unfamiliar with Roblox, it’s an online platform where thousands of different games built by developers all over the world compete for the attention of people like Soren. You don’t need a particular device like a Wii or an Xbox, and you don’t need to buy expensive game cartridges. You can play on a laptop or a tablet or a phone and for the most part the games are free. It’s a perfect illustration of why companies like Gamestop, which sells gaming sets, accessories and cartridges, are struggling.
Although Roblox has been around since 2006, it has taken the better part of a decade to really catch on. Almost all of its growth has happened over the past three years, as more developers have flocked to the platform and the number of players has grown. In its prospectus, Roblox features pictures of some of these developers, none of whom are older than 30. One, a 21 year-old named Alex Balfanz, made enough money from Jailbreak, a game he co-created, that he was able to cover four years of tuition at Duke University.
As a parent, I used to worry about all the time Soren spent thinking and talking about Roblox. I couldn’t understand why he wanted me to spend real money on the game’s fake currency, which is called Robux and can be used to accessorize his avatar or pay for various perks, like a VIP pass to a server. I didn’t care about the latest twist in Piggy, a popular game about a murderous family of pigs that both Soren and my husband play incessantly. But given the lack of other things to occupy Soren’s mind over the past year, it seemed like a choice of a lesser evil. I also liked that they had a dedicated parents’ page and that they did a pretty good job of filtering out some of the toxic language that permeates online life these days.
During his investor presentation, Baszucki, in particular, spent a lot of time talking about the company’s values and his efforts to make Roblox “the world’s safest and most civil society.” At a time when kids even younger than Soren are being inundated with more toxic messages (and behavior) online, that seems almost old-fashioned and endearing, especially to parents who are paying a monthly fee for their kids to have these online experiences.
There’s also the fact that Soren has taught himself how to code using Roblox’s own tools and has published about 50 games. None of them have attracted more than a few players, but the whole process still seems more educational than just slipping a cartridge into his Xbox.
Roblox provided some projections on what the rest of 2021 will look like. The company still expects to grow, with daily active users reaching 35.5 million, up about 9% from 2020, and the total number of hours spent on the platform by all users remaining flat. Revenue is projected to increase by 60% in 2021 to nearly $1.5 billion as the company explores different ways to monetize its traffic, including what Baszucki described as “gentle advertising that doesn’t get in the way” of the core experience. For example, kids might be offered Nike sneakers to purchase for their avatars.
Of course, the big question is what happens when Soren and millions of other kids head back to school and real-life activities. Will they continue to spend large chunks of their time playing in a virtual world, or choose to engage in the actual world instead? The pandemic has been “an unfortunate and exceptional time where people are looking for a way to connect when they can’t meet at school or go to a playgroup,” said Baszucki. “But our core growth will continue once Covid is over.”
I’m not entirely convinced. Once Soren is back in school and we can do different things that have been difficult or impossible over the past year -- a trip to the beach, Universal Studios, Legoland — he simply won’t have the same amount of time. Will Roblox become the equivalent of his Magna-Tiles — a toy he once loved that now sits in our shed? Maybe. Or maybe he’ll continue to hone his coding skills and eventually develop a game that more than a few people play and be able to pay for his own college tuition in eight years. Time will tell. But I’m not cashing out the 529 plan quite yet.
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