Roblox- Gaming, Metaverse, EdTech & Much More!
Roblox built a metaverse before it was mainstream & showcased the realm of social interactions in the near future. This was a fun & distracting piece– I got derailed in Roblox games often. Read on!
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As 2021 comes to an end, I wanted to cover a company I’ve been eyeing from the sidelines throughout this year. Meet Roblox - founded in 2004, it is a platform for game developers to create virtual experiences (games) for users globally! With a library of 20M games, Roblox entertains over 50M DAUs with a whopping $509M revenue in Q3 ’21.
Roblox’ history dates to 1989 (and EdTech), when David Baszuck launched ‘Interactive Physics’ a 2D simulated physics laboratory where users could drag parts, hinges, ropes, and springs to create and measure physics experiments on their PC.
Interactive Physics was acquired by MSC Software for $20M and laid foundation for Roblox.
“Students across the world used Interactive Physics to see how two cars would crash, or how they could build destructible houses. In starting Roblox in 2004, we wanted to replicate the inspiration of imagination and creativity we saw in Interactive Physics on a much grander scale by ushering in a new category of human interaction that did not exist at the time.” - Roblox Prospectus
Roblox Economy - Marketplace of experiences on the cloud!
Roblox presents a classic case of creator economy with strong communities on both the sides of the market.
Developers from across the world can build immersive experiences in the Roblox metaverse by using ‘Roblox Studio’.
Individuals can access these experiences, play with their friends, strangers and socialise in the virtual world.
Robux ($R)- Roblox’s currency can be bought on its platform and can be used to access premium features (such as skins, weapons, and collectibles) within the experience/ game. Since a premium subscriber spends time in the developer’s experience, the developer earns a pro-rated share of the user’s monthly subscription fee.
Developers are incentivised to build high quality experiences (‘UGC’), which attracts more users to engage with these experiences and invite more friends. This in turn enables higher reach and better monetisation for creators, incentivising them to build more experiences, and the flywheel kicks in!
With $500M+ revenue in Q3 2021, Roblox is valued at ~$60B
The rapid growth of the company is a testament to Roblox’s stellar flywheel, jumping from $4B valuation to $60B valuation within a year!
As is evident from the above, Roblox has been growing rapidly, with efficiency in sales and marketing, and infrastructure costs with scale. Its cost of revenue still remains high as there is a significant commission payout (30%) to App Store/ Play Store on each Robux purchase.
75% of American children in the 9-12 year age band use Roblox! The potential for Roblox to build depth in APAC is immense along with expanding to above 13 year age groups - the company seems to be acting on it!
Around 10% developers on Roblox are earning developers, with only 0.01% developers earning more than $10K annually. There is immense potential to enable the long tail developers to earn more as their experiences mature.
Roblox economy has uncanny parallels with Web3 world!
As mentioned above, users can access experiences and spend Robux (which is like a fungible token) to pay the creators for certain premium access. Similarly, Sandbox has SAND token, while Decentraland has MANA token. That being said, SAND and MANA can be traded on crypto exchanges, unlike Robux…yet!
Users can purchase unique accessories in Roblox for use in the games or hold as collectibles and trade in the future. Similarly, in Sandbox users can buy NFTs for virtual goods which can be used in experiences or traded.
Given the audience of Roblox, EdTech is a prominent use case!
It is no surprise that the company recently also announced its focus on education (here).
Roblox is an amazing teacher tool for creating immersive learning experiences forstudents (also the inception of the company).
For example, teachers can build games to teach alphabets:
With advent of online learning, there is potential for schools and universities to host classes in the metaverse. Roblox is also adding spatial audio to make the experience more immersive - and this could be a good substitute for Zoom university!
Learn Coding and Design
No doubt children love to participate in Roblox experiences…how about creating one? There are several platforms that have officially partnered with Roblox to teach coding by building Roblox experiences and games.
Roblox aspires to connect 1B people in the metaverse!
Since a significant portion of Roblox's users are often represented as ‘GenZ’, it will be interesting to see how Roblox shapes up when these users grow up and start making independent purchase decisions. It is possible that the virtual world will have much more significance than the real world, where owning a rare Nike sneaker in the metaverse would be more valuable than owning one in the real world. Maybe…
As these users start earning (thereby increasing their spending capacity), if they continue to be hooked to the metaverse, it could mean a lot more revenue for Roblox (and similar companies). With the amount of investment going into metaverse, I believe Roblox is likely to stay relevant over the next decade or so.
With spatial audio becoming a reality, Roblox could become an official place to hang out, hold meet ups, and even for work meetings.
“Within the next two or three years, I predict most virtual meetings will move from 2D camera image grids to the metaverse, a 3D space with digital avatars,” - Bill Gates.
Roblox is also becoming a destination for artists to host global concerts as well as launch albums in the metaverse and interact with their fans without any physical bottlenecks. Lil Nas X hosted his concert on Roblox in November 2020, which was viewed over 33M times! The largest concert I have been to was…just 75K people!
Paris Hilton has created a virtual island ‘Paris World’ on Roblox, and will be DJing there on New Year’s eve! Are you joining the party?
Roblox has become an important destination for brands to stay relevant. They are partnering directly with Roblox or with game developers for integration into their experiences. For example, Nascarpartnered with Badimo (Roblox Developer) for integration in Jail Break game.
Some brands are also building their own experiences. For example, Nike has an experience in Roblox called NIKELAND. The company plans to eventually integrate in-play moments that emulate global sporting events.
Imagine discovering a cool sneaker in the NIKELAND and being able to purchase it within the metaverse, with a virtual and real piece of it. Is this a peek into the future of retail?
Going forward, one aspect that Roblox and similar companies should watch out for is content moderation, especially as platforms are now gearing for more real time conversations using spatial audio. Given the dominant age group of the audience, it will be critical to maintain Roblox as a safe space.
Which Roblox experience you want to try as we transition to 2022? Greetings to all my readers for an exciting year ahead. Stay safe!