Cheat Sheet: Why Roblox is fast becoming one of the most important media businesses of the future
Roblox crushed its first quarter as a public company earlier this week, proving it’s more of a game-creation platform than a game per se. In fact, Robox has become a bellwether for a user-generated gaming medium well on its way to being a cornerstone of a wider creator economy.
“The types of experiences in the metaverse are going to be supported by engagement, they’re going to be supported by transactions and they’re going to be supported by advertising,” said Dave Baszucki, CEO of Roblox, who describes the future of the company as a metaverse. “When we look at some of the types of experiences that we can imagine on the platform, there will be some experiences that are more and more subscription-supported, just like many of our experiences are freemium right now. So there is a range of functionality that we will be rolling out over the next few years to support those types of experiences.”
Naturally, some advertisers are already circling Roblox. That said, the gaming platform is still an unknown entity to much of the industry. It seemed like a good moment, then, to look through its latest numbers and get a better sense of why it’s often regarded as one of the biggest things happening in media and tech today.
The key numbers
- Roblox’s bookings — the amount of virtual currency purchased by users — rose 161% to $652.3 million in the quarter with average bookers per daily active user up 46% to $15.48.
- Gamers spent 9.7 billion hours on the platform in the first three months of the year. For context: Twitch reported a record 6.3 billion hours watched over the same period.
- Growth in engagement came down to two things: first, an 87% increase in daily active users (DAUs) outside the U.S. and Canada: second, a 111% jump in DAUs over the age of 13 years old — proof that Roblox isn’t just a kids platform.
- Developer exchange fees — the money that’s paid out to creators on Roblox — came in at $118.9 million in the quarter, up 167% in the same period last year. Interestingly Roblox said it would pay out nearly $500 million to developers this year. In 2018, that figure was just $72 million. It’s easy to see why the platform has become a key part of the creator economy. Making Roblox games is a cash spinner.
- Roblox made $923 million in revenue in 2020, which is an 82% increase compared to 2019 figures.
Isn’t this just down to the fact that kids are spending more time at home during the pandemic?
Of course, Roblox is undoubtedly one of the biggest entertainment success stories of the pandemic. But its growth shows no sign of slowing. Its bookings for April are forecasted to be up by around 60% compared to the same period last year. So even as vaccinations ramp up on both sides of the Atlantic and kids return to other activities, Roblox continues to post strong numbers. Last month’s jump in bookings is a testament to this. It suggests that the gaming platform is finding new ways to convince people to pay for its in-game currency, which gives players upgrades and other special features.
“People are starting to develop a deeper connection with the digital world via things like cryptocurrencies, NFTs, avatars, and immersive gaming experiences,” said Doug Scott, chief managing director at gaming entertainment holding company Subnation. “And as people further develop their digital identity, platforms like Roblox are providing a home for the community.”
Why should marketers take notice?
For marketers, this is a chance to trade in passive ad exposures for immersive opportunities that actually play a role in the digital lives people are building for themselves.
Moreover, Roblox provides a glimpse into how the video game industry is evolving and changing.
Just 26% of developer Electronic Arts’ revenue came from premium game sales in its fiscal year, per Niko Partners. The rest came from live services, downloadable content and mobile microtransactions. Meanwhile, Ubisoft has said it is shifting away from launching three to four premium titles a year and instead plans to launch what it called “high-end free-to-play games.”
Put another way: the costs of developing big-budget games are getting unwieldy for the largest developers so they’re turning to alternative business models, particularly ads, subscriptions and microtransactions to fund free-to-play releases. Indeed, many of the most popular Roblox experiences are free. The platform makes its money via a 30% tax on its virtual currency as well as through its subscription service Roblux Premium and other partnerships. For example, it has a deal with toymaker Hasbro that will see Roblox-game-inspired NERF blasters, a Monopoly board game and a NERF experience within the gaming platform arrive later in the year.
But what could go wrong for Roblox?
As impressive as Roblox’s growth is, there are some risks. Despite a growing number of older games, the gaming platform is most popular among younger players who are notoriously fickle. Therefore, its biggest challenge will be staying relevant to those players for years to come. There’s also the issue of inappropriate content. With an ever-expanding audience of younger playing the game at any given moment, Roblox execs will need to ensure high safety standards are enforced. Falling to do so could impact the platform’s reputation.
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