8 reasons why you should keep an eye on metaverse player Roblox

When you compare Facebook’s 1.96 billion daily active users with Roblox’ 52.2 million daily active users, you could indeed assume that Roblox has nothing over Facebook. But when you realize that Meta’s own metaverse platform – the Horizon suite - has only 300.000 active users … per month, then the situation looks very different, right?

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Maybe you think something along the lines of “Even so, Roblox is just a kids game” while Meta’s ambitions reach far, far beyond that”. Well, actually no. I think that people may really underestimate Roblox. And so I’d like to give you some reasons to keep an eye on them.

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But, first, for those of you who are not familiar with Roblox, this is what Wikipedia has to say about it (Is that lazy? I’m not at liberty to discuss that right now.):

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Roblox is an online game platform and game creation system developed by Roblox Corporation that allows users to program games and play games created by other users. Created by David Baszucki and Erik Cassel in 2004 and released in 2006, the platform hosts user-created games of multiple genres coded in the programming language Lua. For most of Roblox's history, it was relatively small, both as a platform and as a company. Roblox began to grow rapidly in the second half of the 2010s, and this growth has been accelerated by the COVID-19 pandemic.

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Put this way, it’s quite easy to underestimate its significance. So I’ll start by debunking some myths, first:

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Myth nr 1: Roblox is just for kids

It may be true that more than 50 percent of Roblox players are still under the age of 13. But 30 percent of its players are older than 17 now. And, perhaps most relevant: the groups aged 13–17 and 17–24 are its fastest-growing demographics.

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Yes, that is still a young audience, but it is evolving ànd Roblox has shown ambitions in markets that are specifically aimed at older audiences too.

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Myth nr 2: Roblox is just a game

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No. It is definitely much more than a game. Above all, Roblox is part of the creator economy. “What is the creator economy?” Well, I’m glad you ask, Lindsey. According to The Verge:

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In a creator economy, creators do not require a parent company to act as an employer; they are able to work when they want, produce whatever content they please, and have full autonomy over how they monetize their content. This new ownership structure is symbolic of a greater power shift in the employer-employee dynamic. Within the first two economic phases, power resided almost entirely in the hands of the employer. The creator economy, meanwhile, enables individuals creating content to hold onto the power to own and govern their work.

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You can’t just play games on Roblox. You can build them. Basically, anyone can create video games and experiences and monetize them directly on the platform. Why is that something awesome? Well, the whole point of the metaverse is that it is makeable: unlike the “real” (well, you know what I mean) world, users could shape their own metaverse reality as they want to. Maybe not today – for laymen I mean – but certainly in the future. And who is investing in easy-to-use tools and support for regular (non-developer) people to shape experiences in the metaverse? Yep. Roblox.

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“Metaverse creators” will definitely be a thing and are likely to become an active and profitable vertical of the creator economy in the years to come. And quite a few  of them - 12 million - are learning the trade on Roblox, having created a total of 32 million “experiences” by now. But just imagine what Roblox could offer their users if they pump up their development platform with visual AI like Dall-E or Stable Diffusion. How this could democratize metaverse building.  

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Also, Roblox allows to build “experiences”. Because not everything that people create or do on Roblox is a game. There are shopping possibilities, award shows, concerts, special places to visit (like Stranger Things’ Starcourt Mall), meetings to hold or just ways to hang out with your friends. But using the word “experiences” instead of “games”, as Roblox does, is not just about semantics (because yes, most experiences are in fact games). It’s also about ambition and vision. Because it’s clear that they want to move beyond just entertainment. Important to note here, as is the case with a lot of metaverse experiences, the community, the social part – the “hanging out” – is actually more important than the playing.

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Myth nr 3: Roblox has no scale

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Correct. Not if you compare it to Facebook, YouTube, TikTok or even LinkedIn. But if you compare it to their metaverse endeavours, it has scale. Meta’s metaverse platform - Horizon Worlds - has only 300.000 active users per month. Roblox has 203 million.

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That also makes it one of the biggest metaverse platforms out there, and one of Google Play store’s most downloaded apps, with over 500 million downloads since its launch. To compare, Axie Infinity (NFT game) has about 2.2 million monthly active users. Decentralized (Web3) metaverse platforms Sandbox and Decentraland have 300.000 monthly active users.

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Myth nr 4: Roblox is not really a metaverse

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A lot of people are confused about the metaverse. That’s because it’s still being built and we don’t really know what it will be like. Some people feel that a metaverse has to be decentralized, which would also make it part of the Web3 movement. But that would exclude many current players from the metaverse, including Meta’s Horizon suite or even VR chat. As I said, I believe that the next internet will probably be a convergence of metaverse + Web3, but I don’t see decentralization or blockchain as a necessary feature of a current metaverse.

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However, interoperability is another important feature of the metaverse: being able to offer “ways to portal into any other worlds besides its own”. And it’s a fact that you can’t hop from Roblox to another world or webpage. So, even if Roblox does have many of the features of a typical metaverse - community, social, real time interaction, VR, immersion, creator economy,… - it does lack some other crucial characteristics like tokenomics and interoperability. That’s why some people like to call it a proto-metaverse (thanks Anna Mogutova for introducing me to that term).

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So it may not be a fully-fledged metaverse player YET (like Meta, for that matter, which is also not decentralized and not interoperable). But is most probably will be.

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What’s the business model?

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Roblox has an interestingly diversified business model, unlike the Web2 giants which all have a data business model, based on adverts. Why is that important? Because Web3 will allow users to own their own data at one point and companies will no longer be able to monetize it without a very good reason and offering a lot of added value (which, let’s be honest, advertising cannot offer ). (Read more about Web3 here.) And yes, Roblox has recently started to dabble in (immersive) advertising as well, but it mostly makes money through:

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1. Advanced features and customizations (it’s a freemium model for players): players can buy Robux - digital in-game currency - which allows them to customize their avatars, buy their way into certain experiences, or enhance these experiences.

2. A paid monthly Roblox Premium subscription: monthly subscribers receive Robux and other benefits like store discounts, increased returns when reselling items, or the ability to trade items with other users.

3. Collaborations with big brands like Walmart, Disney, Lego, Sony Music, NFL, Gucci, Spotify, Chipotle, Ralph Lauren, Nike, Gap, etc.

So, finally we come to the part that my clickbaity title (What? You’re here, right? So it kinda worked?) has promised all along: the reasons why I think you should definitely keep an eye on Roblox. Why it might get to play an important part in the metaverse. And what you could learn from that.

Why you should keep looking

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1. Its user base is evolving

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Minors were indeed the company’s initial demographic, but in recent years it has become a popular destination for teens and young adults. As stated earlier, over half its users are now over 13 and 30 percent of players are older than 17. Ages 13–17 and 17–24 are its fastest-growing demographics. Some events, like certain concerts, already tend to draw an older crowd.

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Interestingly, young people seem loyal to Roblox as a place to hang out with friends and express themselves, even as they move on from high school into college or the working world. So their users are growing (up) with them. That’s also what happened with Facebook, of course, as it grew but the difference is that – though the older generations seem to stick around – fresh blood is very hesitant to join Facebook.

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2. It's real-time community-driven

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One of the things that struck me the most on our Web3 & Metaverse tour in London this May (check our upcoming awesome Metaverse (Paris) and Web3 Tours (London), by the way), was the almost obsessive attention speakers held for all things community. While Web2 was all about social interactivity and creation, the next form of the internet - most likely a convergence of Web3 and the metaverse – will focus on community and empowerment.

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What’s the difference? Well, I’m glad you ask, Jordan. Community may be a social concept, but not all social interactions are necessarily about community. The latter is more about like-minded people talking, playing, listening or creating together.

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For instance, if you create and post a picture or a video on Instagram, TikTok or Facebook, there is a hierarchy: the post is the core, the top if you will, and the reactions will always structurally be dependent and submissive to it. Remove the post and the social interactions and comments “die” too. There is no such structural hierarchy in a community-driven environment (yes, there will always be a social hierarchy, but it will not be integrated into the design). The communication on Facebook is mostly about reaction (to a piece of content), on Roblox users act and talk together, synchronously in real time in a game, concert or just casual hangout.

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“Playing a “good” Roblox game or even being good at a game is secondary to just hanging out with your friends”, as this Verge article explains so well.

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Also, don’t make the mistake of thinking that the metaverse will be only about immersion, about virtual reality. Its direction and ambition are much more complex than that. To quote Matthew Ball, who wrote “The Metaverse”:

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“The Metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”

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3. An empowered creator economy

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As stated above, Roblox is just as much a creator economy as it is a provider of experiences (among which games). The beautiful part is that literally anyone can join and earn money. The latter is possible through premium payouts (premium member developers are paid based on time spent in the experience they’ve created), by creating and selling items like clothes for avatars in-game or through or via 3D ads into their own experiences (like a billboard in a sports stadium or on top of a cab in a game).

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Though Roblox is not (yet) a decentralized - Web3 - metaverse platform, it also has one Web3-ish characteristic in that it really empowers its users to help them develop experiences. Roblox Studio offers free plug-and-play game development tools with a beginner-friendly, powerful and efficient programming language that really democratize the development of games. Its developer's hub offers access to tutorials, extensive documentation and guides and there is a community for resources and support.

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It even has a game fund, an accelerator program, a community fund (which pays out for educational projects) and a matchmaking talent hub.

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4. It understands education

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Many think that (immersive) education could be an important use case for the metaverse. Meta clearly believes that, seeing that it is for instance currently helping 10 universities in launching campuses that will be built on metaverse “soil.”

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It’s no mean feat to make that leap if you have no prior experience in education. So what can a developer platform and experience company do to familiarize itself with the educational context? Well, stimulate educational project with funds (see above). And it certainly helps that it has already been organizing tutorials for its developer community. The fact that Roblox does understand how teaching and learning could work in the metaverse, could certainly be interesting for its future endeavors.  

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5. Realism & emotions

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One of the big challenges in metaverse contexts is realism. Remember Mark Zuckerberg's super awkward 3D selfie which everyone made fun of because it was so rudimentary?

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Well, one way to make metaverse avatars a lot more realistic is through eye-tracking and face-tracking in order to capture users’ emotional expressions and replicate them in real time on avatars. Roblox is doing exactly that, with players able to chat with each other using avatars, with their camera animating their avatar’s expressions. To be fair, it’s not the only one. Meta’s “social presence” is aiming to do exactly the same. Also, the technique is not revolutionary, since it’s very similar to the Apple iPhone’s Bitmoji.

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But it does show that Roblox keeps working on improving the user experience: previous avatars on Roblox did have expressions, by the way, but Bjorn Book-Larsson, vice president of product and avatars at Roblox, described them as “two-dimensional.

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As a bonus, measuring facial expressions and tracking eye movement is a clever way to gather very valuable emotive data, which might allow it one day to provide services directly related to emotional wellbeing.

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6. Creative advertising

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The business of online advertising is currently challenging, with for instance Apple’s privacy changes in iOS making targeting more difficult and the economic situation having many companies cutting back on their budgets. Plus, Web3’s upcoming changes in data ownership - to the user - may make advertising less effective in the future.

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But, for now, it is also still a very effective way to make money, if done right. And Roblox is one of the first major, free-to-play games to fully implement in-game advertising, in 2 major ways:

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1. Ads within user-created experiences: brands can advertise across Roblox experiences through interactive billboards, posters, and other surfaces which allows creators to receive a cut of the ad revenue.

2. Brands will also be able to have “portals” that act like a tunnel between games, taking players to a new branded area in Roblox. A 3D portal to Vans World could be an example. The interesting part is that this means that brands can advertise across multiple games, not just in one experience.

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Though ad business models are pretty traditional and not very exciting, Roblox seems to be experimenting with them in creative ways. No wonder that big brands like Gucci, Ralph Lauren, Givenchy, Tommy Hilfiger and Walmart seem to love collaborating with them.

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7. Web3

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Many feel that the most interesting platforms in the metaverse are those that have a decentralized blockchain based format, which would make them part of the Web3 movement. Roblox is not decentralized, but it’s interesting to see that it has been looking for Web3 developers.

8. It has big ambitions

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It’s clear that Roblox does want to go beyond offering (mostly) gaming experiences to the younger generations. Their mission statement says that they want to connect a billion people with optimism and civility. And Roblox CEO David Baszucki told The Verge that “We’re very optimistic that long term, this type of technology is going to support people all around the world and in a wide range of ways of connecting and being together.”

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Not there yet

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Does all of the above mean that I think that Roblox will “win” the metaverse game? Not exactly.

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Yes, I think it’s doing really interesting things and that it’s DNA - of community-drivenness, real time interaction, creator focus, empowerment, immersion etc. - is a great fit for where the metaverse seems to be heading.

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But I also believe that it still have many obstacles to take:

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1. If Web3 and blockchain will indeed be the backbone of the next iteration of the internet, it still has a lot to do. Could be that Decentraland and the Sandbox (which are Web3) could have the advantage there.

2. Recently, Roblox has unfortunately been falling short of its financial goals; the company’s most recent financial report shows that it missed both its top and bottom lines.

3. Though the fact that many non-professional developers are creating experiences in Roblox allows for more serendipity and is great for community, it is also true that that its controls & graphics are fairly simple and rudimentary. To quote Wedbush analyst Nick McKay: “In particular, we are skeptical that Roblox’s game engine is sufficiently robust to enable it to retain older and wealthier users. In our opinion, the Roblox platform’s graphics seem comparable to those seen on consoles a decade or more ago in certain situations, and several of the initiatives it presented at its analyst day appeared to be already-proven concepts from other platforms.”

4. Roblox has also been blamed of exploiting its young user-creators with an unfair revenue split: after app store fees and Roblox taking its own cut (which can go up to 73 percent), creators are left with around 30 percent of revenue from in-app purchases which is significantly lower than on other platforms. Epic Games, for instance takes a 12 percent from games on the Epic Games Store.

5. When it comes to serving ads on the app, the fact that it is predominantly used by kids, is an extra challenge. All Roblox ads will be labeled as “immersive ads” and children under the age of 13 will not be able to interact with them.

6. It is definitely not competing in a void. In the word of Cowen analyst Doug Creutz: “Current tech incumbents and content owners are very aware of the potential power of the metaverse, and therefore Roblox is likely to face extremely determined competition.”

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So it definitely has some challenges to conquer before it could even begin to think about dominating the market. But then again, so do the others and that includes the Big tech players. Still, I would keep an eye on where Roblox is heading, if I were you.

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