Roblox - Profit from platform microtransactions, intellectual property rights

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This is a game/platform whose target audience is primarily 7-12 year old children who play online. The platform also has an Age Up section that restricts some parts of the platform from users under 13 years old.
“Roblox said in its S-1 that 25 percent of its users are under the age of 9, and 29 percent are between the ages of 9 and 12.” Source

This differs from other platforms in that content creators can themselves create a game/community using the Roblox platform, from which the content creator can earn revenue.

How is this revenue obtained? Content creators create cosmetic and pay-to-win style “additional services” for their content, and pre-teens seem happy to pay for them. An example of this is artist Lil Nas X, who performed (you can’t call it a gig) in the Roblox world. In connection with the performance, Roblox users were able to purchase items for their wardrobe as an “additional service,” such as angel wings.

Popular permanent communities apparently include Adopt Me! and Bloxburg. The Adopt Me! user community had over 1.6 million registered users in April 2020, and in March 2020, the Adopt Me! community reached approximately 7.8 billion visits. Source

How revenue from Robux is distributed:

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To my eye, the revenue distribution looks bad, but frankly, I have no idea how, for example, Fortnite’s revenue is distributed.

When the company sought funding from the market, the funding received grew at an astonishing rate. Source

Regarding the results:
The company’s profit is in the negative, but trending upwards. I cannot interpret these figures from this sector. Someone smarter can review them if interested.

2018, 2019 results:

Speculation: If and when the corona situation continues to impose restrictions on outdoor activities and hobbies during Q1-Q2, I would see significant growth opportunities for a platform like this. In addition to the platform being reasonably smart in my opinion, the company’s way of earning revenue from it is, in my opinion, reasonably sustainable. At least, if user numbers grow.

I mainly wanted to open a thread about this, as an IPO is coming and there hasn’t been focused discussion yet. Hopefully, it wasn’t too confusing a hodgepodge.

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Good opening! I find it a really interesting company. Here’s a good video about the company, you can get a good idea of what it’s all about.

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Trading in Roblox stock begins today. NYSE set a reference price of $45, which would give it a market value of approximately $30B. https://www.marketwatch.com/story/roblox-direct-listing-gets-45-reference-price-from-nyse-11615329126

For comparison, here are the market values of gaming companies:
Activision Blizzard $71B
Nintendo $65B
EA $37B
Ubisoft $9B

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Pelialan päivän polttavat, uutiset ja yhtiöt
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Predicting an opening of $65-$70.
https://seekingalpha.com/news/3671236-roblox-indicated-to-open-65-70share-in-nyse-trading

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The indicative opening price is currently 65-70 USD per share, which would correspond to a valuation of 41-44 billion dollars.

Here are some back-of-the-napkin metrics for what that market value would mean relative to the 2020 COVID-boosted figures:

  • EV/Free cash flow = 103
  • EV/Bookings = 22 (bookings refers to purchases made by users, which is different from revenue due to accruals)
  • EV/Daily Active User = 1300 (meaning one user would now be worth 1300 dollars; for comparison, one DAU spent 57 dollars in 2020 and 39 dollars in 2019)
  • EV/Hours Engaged = 1.4 dollars (for comparison, 6 cents in Bookings were generated per hour)

So, even though the company grew tremendously last year, the valuation has been pumped up so high that one has to look long-term and trust the story.

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I’m planning on participating with a small budget. Any idea what time I should start getting ready to buy?

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The trade started at 8:32 PM.

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Yes, our child plays this too, and so do the neighbors, but they don’t pay anything for it (hopefully).
There would be interest, but it’s far too expensive.

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some pay, some don’t

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For some reason, I can’t trade on IB, damn.

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Interesting company, but here too, transactions probably only apply to a very small portion of players, as is common in the gaming industry. For this reason, I consider it overpriced.

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Our foster kids do like playing Roblox, but they don’t pay anything for it. As a player myself, I find that all Roblox “games” seem to be mindless grinding with no real game-like aspects. Some games literally involve just holding one button down. I would never introduce this game platform to my own child. If the valuation is indeed $1300 per user, then there needs to be considerable growth for the investment to make sense.

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My 6-year-old kid plays Minecraft. Today I asked if they knew what Roblox was. The answer was, of course, they know, all their friends play it, but apparently it doesn’t work on our Xbox.
Well, we started the game and at the beginning, we had to register an account and create a password. Now we’re just playing Roblox at our place too.

I added this today. I don’t understand these myself, but I believe the kids know better.

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I started FOMOing yesterday, and I believe it won’t be a bad investment in the future. These “so-called” free systems have ultimately been better, especially since the word spreads among children. There’s plenty of market. And of course, they’re also considering the possibility of making money with games and selling them to others. Is it a money grab? Probably, but I won’t comment on that further.

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One interesting growth driver for Roblox is the increase in compensation paid to game developers. Developers who publish their games on the platform receive a share of the in-game currency spent by players, which developers can convert into dollars. Developers’ earnings grew by nearly 200% last year, from $112 million to $329 million.

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While most of the over one million developers only receive crumbs, there were over 300 developers in the financially significant group earning over $100,000.

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As Roblox as a company invests in game development tools, the financial interest in Roblox development will certainly also grow as the pie to be shared expands.

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We also play games, but I don’t think it’s just “mindless grinding.” For example, my daughter and her “Roblox” friends have designed and built a hotel in “Bloxburg” :smiley: with a small group, which they now operate for other Roblox users. This has had a certain social aspect and also required creativity when building something new. As a parent, I appreciate that platform security is a top priority for Roblox.

I haven’t jumped on this bandwagon yet, I’m monitoring the situation, and I definitely need to examine the valuation level more closely, which seems to be quite high based on the comments.

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I’ve been playing Roblox games since probably around 2013, but I’ve never even considered spending money on them. I have, however, encountered people who have spent hundreds of dollars on just one game. The valuation is so high that I wouldn’t consider buying the stock, especially since I’m in the USA where Nordnet’s fees are 15e.

As for the post above, I can relate to Roblox’s responsibility. Roblox’s chat sometimes filters almost everything, from numbers to curse words, perhaps even too effectively for me.

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My child has been playing various Roblox games for about three years. Weekly, at best/worst daily. Money has never been needed, and he hasn’t even whined for money (Robux?). Once I offered him “Robux” as a reward for a good performance, and he preferred Hesburger instead :smiley:

With that valuation and this extremely small experience of one person, I can’t really get involved yet, even though it would be fun to tell the kid that I own some of that :slight_smile:

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Okay, apparently our proteges only play the most idiotic games. :slight_smile: There are so many different games there. Good if they also find some sensible stuff.