Roblox Gaming Platform
Inage credit: Peqsels

Roblox Video Game Platform Continues Record Growth

Roblox, the video game platform popular among children and teens, has grown at a record pace during the pandemic. The company’s first quarter revenue more than doubled. Moreover, the number of average daily users on the platform was 42.1 million for the first quarter. That represents a nearly 80% increase in average daily users from last year.

“Even for countries coming out of Covid, we have seen amazing stickiness with our daily active users and bookings. Hours per user is moving more toward historic levels, but we’re very optimistic,” states Roblox’s CEO Dave Baszucki.

Based on San Mateo, California, Roblox reported revenues of $387 million for the first quarter, up from $162 million a year ago. However, net losses also widened. Roblox reported a first quarter net loss of $134 million, up from $74 million in the same quarter last year. Some of the losses stem from the company’s recent direct listing on the New York Stock Exchange (NYSE).

In March 2021, Roblox made its public debut with a $40 billion valuation. Before going public, Roblox value equalled $29.5 billion in a January 2021 funding round. The stock closed at $69.50 on its first day of trading, significantly higher than the $45 per share reference price set by NYSE.

Craig Donato, Roblox’s Chief Business Officer, thinks that Roblox’s public debut will increase momentum for the company. “This will raise the visibility to the company, which is super important as we try to hire more and more folks to the company. Raising the profile of the company and supporting our recruiting efforts is a great thing. As you know, we have big aspirations for where Roblox can go,” Donato states.

In addition to higher user growth and revenues, users are also spending more money on Roblox’s platform. The increase in average spending has been aided by the platform’s virtual currency called Robux. Users can purchase Robux on Roblox’s mobile, browser, or Xbox One apps. They can then use virtual currency to buy items inside the games such as pets and costumes for the virtual avatars.

Founded in 2004, the Roblox online platform is free to users and accessible on video game consoles, computers, and mobile devices. Users have created millions of games now available on the platform. Revenues are shared with game developers and Roblox provides game-creation tools.

Although Roblox was founded in 2004 and launched its first game in 2006, it has only recently entered the mainstream. It added an estimated 50 million users during the pandemic alone. In 2018, Roblox had a valuation of $2.5 billion. By contrast, it had a nearly $40 billion valuation when it debuted on the New York Stock Exchange in March 2021.

The platform has been especially popular with users under the age of 13. “A lot of kids come to Roblox to play with their friends. It’s like a virtual playground where they tend to jump from game to game with their friends — almost like jumping like I used to jump from the swing set to the monkey bars,” remarks Craig Donato.

Roblox Children Online
Roblox Children Online
Photo by Annie Spratt on Unsplash

A number of concerns have been raised about the platform’s content and psychological effects on children. In some games, avatars simulate sex or the games contain sexually explicit content. This has sparked concerns that Roblox’s parental controls are insufficient. To address the problem, Roblox is working on developing content ratings for games and enhancing its parent control features.

As social distancing guidelines ease, Roblox’s growth may slow down. Roblox is still forecasting strong growth in 2021 and beyond, although at a slowed pace. It sees the number of daily active users expanding only 6% to 12% in 2021. It still predicts revenues will increase over 50%.

CEO Dave Baszucki remains optimistic about Roblox’s post-pandemic prospects: “Roblox has been growing for 15 years, driven by our community, driven by the awesome content, driven by our creators, and driven by our ability for people to do things together. That’s a long-term growth path, and we believe that continues forward, even after Covid.”

This view was further reaffirmed by Roblox’s Chief Financial Officer Michael Guthrie: “We headed in 2020 with strong organic growth which was further bolstered by social distancing restrictions. As those restrictions ease, we expect the rates of growth in 2021 will be well below the rates in 2020, however, we believe we will see absolute growth in most of our core metrics for the full year.”

The company is trying to attract older users to its platform. Roblox is also trying to expand its geographic footprint in regions such as Western Europe and East Asia. The core demographic is players between the ages of 9 to 15 years old in the United States. Thus, there are opportunities to appeal to other demographics.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.