Roblox, the video game platform which has become wildly popular among preteens, raked in close to $1.2bn from selling virtual currency to its users in the first nine months of the year, as activity surged under lockdown.

The figure was included in a share prospectus for the company published on Thursday evening, where the company laid out its case for investors ahead of an initial public offering.

What the company labels “bookings” — sales activity that is not yet fully recorded as revenue — was almost entirely composed of virtual currency purchases in Roblox and the $1.2bn total represented a 171 per cent increase from the same period in 2019.

Roblox recognises revenue from sales of the digital currencies, known as Robux, over the average lifetime of a playing user, which it currently estimates at 23 months.

Even during a coronavirus pandemic boom for gaming companies, Roblox has had conspicuous success, coupled with concern from some parent groups about its potentially addictive nature and the existence of offensive content on the platform.

Roblox listed its ability to “provide a safe online environment for children” as a risk factor in the prospectus.

In the first nine months this year, the company boasted 31.1m daily active users spending 22.2bn hours on its platform. This year it overtook Minecraft, the video game acquired by Microsoft in 2014, in active monthly users.

Yet its losses have been expanding along with revenues. The Roblox prospectus reports net losses of $203m in the nine months to 30 September, on revenues of $589m, compared with losses of $46m on revenues of $350m in the same period last year.

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Roblox said it would raise as much as $1bn in its public offering, likely a place holder number, with Goldman Sachs, Morgan Stanley and JPMorgan acting as lead underwriters.

The start-up was most recently valued at $4bn when it raised a $150m funding round led by the venture capital group Andreessen Horowitz in February.


$209.2m


Amount earned by Roblux developers in the first nine months of 2020

Roblox’s success was rooted in its model as the “YouTube of the gaming world”, said Matthew Warneford, founder of children’s digital consultancy Dubit. Rather than creating games, it offers developers tools to build their own game worlds.

“That allows for innovation in a way that can’t exist [in traditional gaming] because of the cost it takes to compete,” he said. “All the big studios are . . . investing tens of millions into a game, hopefully having a big success . . . [whereas] it costs Roblox nothing to bring a new game on board.”

The 18m “experiences” available on the platform stretch across genres, ranging from unofficial versions of other titles, recreated with Roblox’s signature blocky characters, to digital pet adoption simulators, to virtual cities where young users can build homes, earn livelihoods and hang out.

While a subset of most popular games capture the bulk of players on the platform, there is still potential for new games to go viral, said Mr Warnefood. Survival horror game Piggy was created only in January but has been played more than 6.5bn times, making it the fourth-most popular game on the platform, according to data from Dubit.

The 18m ‘experiences’ available on Roblox range from unofficial versions of famous games to virtual cities where young users can build homes, earn livelihoods and hang out © REUTERS

Developers can earn money by selling in-game items, such as pets or guns, for the platform’s digital currency, Robux, bought with real money. Almost one-half of the earnings are split evenly between Robux and developers, with the remainder spent on platform costs such as hosting and app store and payment processing fees.

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Roblox said developers had earned $209.2m up to the end of September this year, compared to $72.2m during the same period in 2019.

“I wouldn’t say it’s mainly been successful [in encouraging innovation and retaining creators] because of developers being able to make money, but I do think it plays a role,” said Tom Wijman, senior analyst at market research group Newzoo.

John Poelking, senior gaming analyst at Mintel, added that young gamers were spending more of their own money on small in-game purchases, with data from pocket money app RoosterMoney showing that Robux is one of the top products which children are saving for this Christmas.

Mr Wijman emphasised that Roblox’s appeal, like that of Epic Games’ Fortnite, had transcended the pure gaming space. “It’s becoming an alternative place to hang out with friends . . . like another form of social media or perhaps even replacing social media,” he said, with popular games such as MeepCity boasting social role-play experiences similar to Second Life or Club Penguin.

Roblox’s status as a public square had been heightened by events such as virtual performances by rapper Lil Nas X’s concerts in November, which was viewed 33m times, according to the company. In April, a similar event by fellow musician Travis Scott on Fortnite was viewed more than 45m times.

Mr Warneford said that while Roblox still lacked polish in a number of areas, including its developer tools, these were “low-hanging fruit” for the company. “All of that is solvable [given] they managed to get [more than] 150m players every month without professionals making the games.”

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The demand Roblox had received during the pandemic was also unlikely to evaporate, said Mr Wijman, based on data coming out of markets in Asia that have left or are leaving lockdown. “Perhaps the level of engagement . . . will fall a little when there are other things to do,” he said, “but we don’t expect a large decline when the world goes back to normal.”

Via Financial Times