Master the Meta: a first look at Roblox

The MTM team takes a dive into Roblox's S-1 filing

Master the Meta: a first look at Roblox

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Last week, Roblox released its S-1, the filing that shares info about the business ahead of the company’s IPO. There were lots of interesting details. For one, the company clearly laid out the characteristics it stands for: identity, friends, immersive, low friction, variety of content, anywhere, economy, and safety. Second, Roblox’s 2020 performance is insanely great; over the past nine months:

  • Daily active users grew 82 per cent to 31.1 million
  • Hours engaged grew 122 per cent to 22.2 billion (2.6 hours per DAU)
  • Bookings grew 171 per cent to $1.24 billion
  • FCF multiplied to $292.6 million (23.6 per cent of bookings)
  • Creator earnings grew 189.8 per cent to $209.2 million (960,000 earned anything; nearly 250 earned >$1 million)

This is a special business that’s clearly putting its best foot forward, and despite insanely great growth, management’s goal is exponentially larger: “Our mission is to build a human co-experience platform that enables shared experiences among billions of users.” Billions! How will they get there? Roblox calls out four key growth opportunities:

  • Platform Extension: Adding more realistic experiences and new features should unlock new types of experiences, which attract new users and more hours from existing users. There’s technical debt to work through, and Roblox must be careful to not lose its identity, but it’s certainly doable.
  • Age Demographic Expansion: Roblox is mostly a kid-oriented platform today, but it must find ways to win over adults if it wishes to reach its ultimate goal. Plus, it would make more money from adults, too.
  • International reach. 68 per cent and 19 per cent of bookings come from the US/Canada and Europe, respectively, but 67 per cent of DAUs are from non-US/Canada markets. There’s much more opportunity to capture around the globe, and the company also has a joint venture (Luobu) in China.
  • Monetisation: Through subscription services, helping developers use best monetization practices, and working with brands, Roblox sees greater upside here. A 30 per cent take-rate is already high, but I agree there’s more opportunity to capture.

The risks are mostly the converse of these opportunities. Failing to extend the platform or win over older audiences or succeed in new markets or monetise better is what would hold the company back. I’d also add that evolving App Store rules could always catch the company off guard, and even though Roblox has a massive head start, competitors like Manticore or Epic Games could chip away at market share in certain places over time.

Whatever the case, Roblox has executed incredibly well, and it has abundant opportunity left. This fact paired with ongoing “metaverse” hype means the company could start trading at a $30-35+ billion valuation out of the gate.

We’re going to dig deeper into Roblox in the future - and keep tabs on the company over time - so make sure to subscribe to receive all future updates straight in your inbox.

Master the Meta is a newsletter focused on analysing the business strategy of the gaming industry.It is run by Aaron Bush and Abhimanyu Kumar. To receive future editions in your inbox sign up here: regularly posts content from a variety of guest writers across the games industry. These encompass a wide range of topics and people from different backgrounds and diversities, sharing their opinion on the hottest trending topics, undiscovered gems and what the future of the business holds.