Roblox a gaming platform that was born as an early physics engine and created by Eric Cassel and David Baszucki, has delayed its plans for a 2020 IPO (initial public offering) and has instead booked a large private round. The latest round values the company at $29.5Bn and received a cash injection of $520m, which has been led by investors Altimeter Capital and Dragoneer Investment Group. On a recent podcast with Greylock, the founder Baszucki also known to the gaming world as BuilderMan, discussed that the platform was in hypergrowth with a near vertical growth curve and had much to do, as it looks to expand internationally and prepares for other languages and local market tailoring. It now plans to list directly, which is a much more cost efficient move and will help ROBLOX sidestep intermediaries (this is not great news for a number of investment banks that typically play the intermediary or middleman).
Cassel and Baszucki founded ROBLOX and initially gave it the name Dynablocks (they purchased GoBlocks.com on December 2, 2003) to be a physics engine that could mimic real world physics in the metaverse. Today it boasts an incredible and engaged community of mostly aged 8-12 year olds that are playing on the platform daily. This has caused a massive spike in Daily Active Users (DAU) since the lockdown began, as kids piled into virtual platforms while locked down at home and frustrated parents gave up resistance, ultimately leading to more money being spent in game and the fortunes of the company taking a sharp exit to a listing decision. The platform, while not a new kid on the block, was significantly trailing Minecraft (prior to its purchase by Microsoft in 2014). The founder has mentioned that they have a very different DNA, in that while both have a strong element of User Generated Content, ROBLOX is really a UGC platform that allows content creators to create a game that can be different than the fixed aspect of Minecraft and its more rigid survivalist rules. The platform is a continuation of the great games that continue to come out of the United States. Another recent winner is Epic Games, the creator of Fortnite. It does feel like gaming has now entered into the golden age of UGC and what has differentiated the ROBLOX approach is its Omni-channel playability with mobile and PC compatibility, allowing the hundreds of millions to swarm to the online entertainment mecca.
The fact that Warner Music is amongst the investors and is promoting concerts aimed at the K-12 age group within the platform (virtual avatar led concerts for fans), also belies the longer term ambition of the platform becoming much more than a simple gaming platform. They plan on taking on all of entertainment from the looks of that move. Other brands have already collaborated directly with ROBLOX to look at the launch of products and connecting with fans that will likely be a large part of their future customer base. No other platform at the time of writing has this level of uptake and visibility for brands. One brand that has jumped onto the opportunity is Nike. They are launching their Nike Air Max 720 model shoes, together with a number of influencer players, such as Oli ZigZag, Kroma Blitz and Aurora Spark. The big change anticipated however is that ROBLOX is now pushing brands to collaborate directly with indie developers and the multitude of smaller studios that have cropped up rather than only engaging directly with the brands. This is a far more scalable model and more in-line with what we see happening on other platforms today.
Many of the games that exist on ROBLOX have been created by Indie developers (some have been developing games since 2007) that have banded together into studios where great creative meets technical resources. AdoptMe, the largest franchise, has a few Billion players and boasts thousands of kids running around on a multitude of servers, collecting virtual goods (like gingerbread men) and trying to earn ROBUX (the in-game currency) to then be able to either win or trade their way to collectible pets that they have to take of. Other games like Jailbreak (developed by a high school student, Alex Balfanz at the time) have also had success with the ability for players to choose between being Police or Criminals and interact with each other on the platform. Jailbreak also boasts close to 3 Bn plays. In-game chat with this level of UGC however never comes without its share of challenges but ROBLOX seems to be doing an excellent job of policing content and players and the chat is well parsed for inappropriate content or language. Children playing the game are asking their parents to purchase ROBUX which can be utilised for in-game purchases (the main revenue lever for the company) as in game advertising is non-existent barring activities like the Nike partnership, that has been mentioned. The platform has its choice of brands that it can collaborate with as every company is screaming for the attention of the next generation of consumers. Developers are in line to make over $200M this year as the platform seeks to attract top developers to its platform.
While the cute avatars are enabling personalisation, the game is not yet as immersive as Spielberg’s vision for Ready Player 1 however we can see that this is fast becoming a reality. VR does present a massive opportunity for the platform in the near future however the founder was quoted on Masters of Scale as saying that the timing for VR may well be too early. One thing that is not early is the timing to launch a successful platform strategy for gaming that has captured the imagination of millions and continues to expand into exciting geographies such as India and China. In Dec 2020 the company announced that they had already obtained 2 licences from the state regulator in China and a Chinese language download of ROBLOX is already available. The large private round will likely position ROBLOX for an incredible debut on the public markets and one should keep an eye out for their exciting growth plans in the months ahead. In the meantime you can rest assured that parents will be digging deep for the accelerating ROBUX spend in game.