Roblox (RBLX) Developer Conference 2024

Roblox hosted their developer conference late last week. Everything hinges on how they develop the platform, so it’s prescient that I cover it.

Here’s what I found interesting and some notes.

Paying Creators

Smaller creators are growing quicker than the bigger creators. Top 10 creators averaged $30M per year, up 5.0x since 2019, vs the top 1,000 creators who averaged $753K per year, up 6.2x since 2019:

The conference highlighted a key insight: the growth in earnings for smaller creators is leading to greater diversity and more experimental game development on Roblox. This trend is pivotal for the platform’s future. If larger creators were growing disproportionately faster, it could stifle innovation within the Roblox developer community. Instead, the expansion of the top 1,000 creators is fostering a wider variety of games, use cases, and experiences. This environment encourages developers to take more risks and explore novel concepts, ultimately benefiting the entire Roblox ecosystem.

Here’s what else caught my eye:

Roblox is focusing on accelerating three areas in order to reach 1 billion Daily Active Users (DAUs):

Bringing People Together

So for our next steppingstone on our way together to 1 billion daily active users, we believe 10% of all gaming content worldwide will flow through the Roblox ecosystem. And we’ll do it with our partners. We’ll do it with all of you. We’ll do it with Apple, Google, Microsoft, Sony, Meta and Tencent. And we believe we’ll hit this 10% of the global gaming market at about 300 million daily active users.

David Baszucki, CEO

A few things:

• David is keeping and reiterating bigger goal of 1 billion DAUs.
• A tangible Total Addressable Market (TAM) of 3 billion.
• Does Roblox think they can really dominate the market with 33% market share, 1billion out of 3 billion users? I think so.

In Q2 of this year, there were 25 experiences on Roblox with over 1 million daily active players or DAU, that’s mind boggling. This puts these experiences on par or better, things we’re very familiar with, Sonic Dash, Marvel Contest of Champions.

Some of the titles though, are bigger than things you would not imagine.

We have experiences on Roblox, bigger than Angry Birds, bigger than Among Us, bigger than Elden Reach (sic) [ Elden Ring ], bigger than Overwatch, some of the experiences on our platform have more daily actives than any one of these.

While this is amazing, these games are flash-in-the-pan types that never stay long in the minds of gamers. The next goal that I have for Roblox is to outpace AAA rated games like Call Of Duty.

The fact that Roblox experiences are rivaling these major titles also speaks to the potential for even greater growth ahead. As more developers flock to the platform and existing creators continue to refine their craft, we can expect to see even more high-quality, engaging experiences emerging on Roblox. This flywheel effect, combined with Roblox’s expanding global reach, positions the platform for sustained growth in the coming years.

Furthermore, surpassing traditional gaming benchmarks suggests that Roblox is transcending its roots as a “kids’ platform” and gaining traction with older demographics. As the platform matures and offers a wider variety of high-quality experiences, it could increasingly appeal to a broader swath of gamers, expanding its total addressable market.

Here’s how they plan to bring even more people together:

1. Roblox Party: This upcoming feature, set to release next month, will allow friends 9 and older to group up and easily join experiences together. Later this year, Roblox plans to enable voice and text chat for friends within a Party, both inside and outside of experiences. This is a significant step in making it easier for friends to connect and play together on the platform.
2. Party Application Programming Interface (API): Developers will have access to an API to expand the Party experience. This will allow them to do things like teleporting Party members to the same starting point, dropping them into a private lobby, or organizing them into teams. This API gives developers the tools to enhance the social experience in their games.
3. Roblox Communities: The existing Roblox Groups feature is being rebranded to Roblox Communities and expanded with new community-building tools. A key addition is “Forums”, dedicated spaces for users to share feedback and discuss gameplay, set to launch later this year.
4. Voice Chat Expansion: Roblox has been working on expanding voice chat globally while maintaining safety and civility. Voice is now available in over 32 countries worldwide, with over 3 million users engaging in voice chat every day (doubled from last year).
5. Increasing Social Interactions: The presentation highlighted the scale of social connections on Roblox, with 579 million friendships formed every month (translating to 10,000 friendships per minute), 36 million daily active users communicating through text or voice chat, and users spending 1.5 billion hours with friends on the platform monthly.

This is great for on-platform users, but what about bringing in off-platform users?

We are starting to think about off-platform users finding content as well as on-platform users. To support this, we are announcing today a Creator Affiliate Program that is going to reward you for new users you bring to Roblox.

During the beta phase, some developers can earn up to 50% of a user’s purchases. This program provides developers a new revenue stream and aligns their success with Roblox’s growth by incentivizing user acquisition.

Scale

Removing friction is key as gaming becomes higher and higher quality and more embedded in the new worldwide culture. Roblox is doing that:

We’ve increased streaming adoption, which speeds up join times, reduce crashes. We’ve really been focusing on getting to the point where Roblox never crashes.

This is essential though. It’s a standard that must be reached.

Another standard that Roblox is reaching for:

So I want to share now a little hint of an overall vision that is driving our creator engine and user teams on our platform efforts. We know this is one thing we need to do.

We are going to make it possible for you to host a high-performance, 100-player open world, sports or battle royale type game on Roblox, have it run great on 2-giga RAM devices anywhere in the world at good frame rate. We’re going to do it.

This is exciting. The very thing that holds back so many others, platform dependency, is what will help separate Roblox. IOS, Xbox, PS, and many others are able to interact.

Build Your Business

A couple other things I thought were cool:

. . . we did some research recently, and the Roblox economy has generated 18,000 full-time job equivalents in the U.S. over the past 7 years.

Note: these 18,000 are not working for Roblox but in the Roblox economy. That’s just about the coolest thing I could think of a company doing: supporting the livelihoods of its creators. Such a win-win ecosystem is thriving very well.

If that wasn’t enough:

Early next year, we’re going to allow creators to sell physical merchandise directly from within your experiences, and we plan to integrate with various e-commerce platforms. We’re thrilled to announce our first partnership today with Shopify.

Creators will be able to sell physical merchandise in-game.

The last big kick is an increase in revenue share:

You’ll be able to price your paid-access experience in real currency value, and we’re going to support a higher rev share for paid-access games. Experiences selling at $9.99 will receive a 50% revenue share. Experiences selling at $29.99, will receive a 60% revenue share. And yes, if your experience is priced at $49.99, the rev share is going to be 70%. This will all be paid in real fiat currency. We’re going to start rolling this out for users on desktop this year.

As I said earlier:

Putting their developers first is a great strategy. It’s a win-win for everyone. The entire engine is built on the dual role that users and developers play. Each user a developer, each developer a user. By shortcircuting the traditional “middleman” of a platform, Roblox has created a platform that is more efficient and more profitable.

Revenue

Just an overall snapshot, but I think Roblox is doing just fine with their top line. I expect to see a continuing growth in DAUs, which means a growing revenue stream:

On the next earnings update I’ll dive into segments and key growth stats with a little more granularity.

Net Income

Net income looks terrible, but that’s ok for a new company that’s setting up shop. What I find interesting is the uptick since Q1’24. Net income growth is positive (although NI is still negative):

Roblox is spending quite a bit and issuing stock, but it’s still the early days for such a grand vision. I’ll get into the NI line items a little more detail at the next earnings update.

Conclusion

I think the bottom is in. We’ll see. Roblox is an amazing company doing amazing things judging by their own user numbers. When this becomes a profitable investment is hard to say, but IMO the probability of Roblox becoming a wonderful company are solid, while the profitability is forthcoming. I’m a happy shareholder.

You can watch the keynote here: Opening Keynotes | RDC 2024 (youtube.com)