Shares in Roblox, the virtual gaming world that has proved to be a lockdown winner with hundreds of millions of mostly young players, have surged 60% valuing it at $47bn after an investor frenzy on its first day of trading on the New York stock exchange.
Roblox may not have the profile of a Fortnite or Minecraft, but its formula – allowing players to develop simple multiplayer games, socialise with friends and buy its digital currency to pay for virtual items – has made it a global phenomenon.
The combination has proved particularly addictive among children; 56% of its 200 million monthly users and 33 million daily users are aged under 13.
Roblox, like the gaming industry as a whole, has been a huge pandemic winner. A year ago, when parents found themselves stuck on Zoom calls working remotely, children stuck at home turned to games, and Roblox saw usage surge by 40% in a matter of weeks.
Over the last year, daily user numbers have rocketed by 85%, monthly users are up 75%, and the number of hours spent playing have more than doubled to more than 30bn. The coronavirus has made a mockery of the $4bn the company was valued at after a funding round early last year.
When David Baszucki, the co-founder and chief executive, rang the opening bell at the New York stock exchange on Wednesday, the company started its first day trading with a valuation of $29.5bn. The 58-year-old, better known to Roblox users as his avatar, Builderman, saw his net worth hit $2.8bn after its last funding round in January.
The company was given a reference launch price debut of $45 a share by the NYSE based on that funding round. However, huge demand saw the share price surge 60% on opening to $72 a share, valuing the business at $47bn and Baszucki’s stake at nearly $5bn.
In 2004, we founded @Roblox with the vision of connecting the world. Today, as we celebrate our direct listing on the @NYSE, we recognize the potential ahead of us: to build the platform where billions of people come together to learn, work, and play. #RobloxIPO
— David Baszucki (@DavidBaszucki) March 10, 2021
Roblox’s tens of millions of player-created games may look simple to adults – in Adopt Me!, players acquire virtual pets and complete tasks – but they are proving to be extremely lucrative.
At the heart of the business model its digital currency, Robux, which Roblox sells to players to spend on games and items. Developers of games, typically aged between 14 and 25, get 70% of the Robux spent on their games. Roblox users bought and spent $1.9bn of its digital currency last year, enough to make it one of the top-grossing apps on Apple and Google devices.
Robux can be turned into real-world cash and is making the developers of the most successful games very wealthy.
There are 300 developers making more than $100,000 annually on the platform, and more than 1,250 developers made at least $10,000 from virtual sales last year.
Stories abound of the creators of super-successful games such as Alex Balfanz, who as a teenager co-developed the cops-and-robbers game Jailbreak after school in his spare time, that has been played three billion times and made him a millionaire.
Last year, the company paid out a total of $328.7m to developers, an almost 200% increase on 2019. The virtuous circle for Roblox – more creators means more players spending more money on Robux – fuelled an 82% surge in revenues to $923m last year.
“Content is king, even in the virtual world,” said Brand Ross, a tech, media and telecoms analyst at LightShed Partners.
However, Roblox’s overwhelmingly young user base means it has also been a targeted by elements seeking to exploit them. The most infamous incident occurred in June 2018, when a seven-year-old player’s avatar was attacked by two male avatars, whose controllers had hacked the game’s code to show explicit imagery.
The company implemented a range of safety tools, from algorithms blocking swear-words, names and addresses in text chats to being able to detect whether players’ avatars are wearing “appropriate” attire.
With the core of the Roblox model based on buying and spending its virtual currency, it is also not surprising that there have been cases of children running up big bills. Last month, a father revealed that his 11-year-old daughter had made more than 300 in-app purchases over five days on Roblox, resulting in a £2,400 bill on his wife’s PayPal account.