Video Game Maker Roblox Files for IPO With 115 Million Monthly Active Users

By Bruce Harpham | Friday, 16 October 2020 | Business, Tech, Finance

With the global pandemic showing no signs of ending soon, video game companies are booming. Roblox, a California-based video game firm, is the latest firm to capitalize on the booming industry. On October 12, the company filed paperwork with the US Securities and Exchange Commission (SEC), signaling interest in going public in the future.

Funding, Revenue, and Millions of New Users — Key Facts

Roblox’s filing with the SEC is confidential. That said, industry watchers have identified a few key facts about the company’s business model.

• Total funding. So far, Crunchbase reports that the company has raised over $300 million from investors, including Tencent Holdings, which invested in early 2020.
• Estimated Revenue. According to Sensor Tower estimates, the company’s 2019 revenue was $435 million, compared to $45 million in 2017.
• Growing Throughout the Pandemic. The company has grown during the 2020 pandemic, with usage increasing by 40% in the spring lockdown, according to the Business of Apps.
• User Growth. In 2018, the company had 80 million users. By 2020, the company has reached the 150 million user milestone. By comparison, Blizzard Activision, a competing game maker, had 400 million users in Q2 2020 results.
• Compatible Platforms. Roblox games are available on Xbox One, Android, and virtual reality devices (i.e., Oculus Rift and HTC Vive).
• Reliance on Third-Party Developers. Unlike other game makers like Blizzard, Roblox relies on partnerships with developers and pays them accordingly. Developer earnings have been forecast to reach $250 million by the end of 2020, a significant increase over the $110 million Roblox paid in 2019. Retaining and growing its large developer community will be a critical factor in its long-term success.

Based on the early 2020 investment round, Roblox is valued at $3.9 billion. That figure is high enough to put the company into unicorn status - reserved for startups worth more than $1 billion. If the company successfully adds millions of new users, it might become even more valuable.

Who Else Has Already Invested in Roblox?

Major investors had taken investments in the company long before the company actively pursued an initial public offering (IPO). According to Crunchbase, Roblox has received investments from Tencent Holdings, Andreessen Horowitz, Index Ventures, and Greylock. The company’s first outside investor dates back to 2005 with an initial investment of $560,000.

Free Users vs. Customers and the Company’s Future

Like other technology companies, Roblox has given free user accounts to aid its growth. The Roblox app itself is free to use. However, users can pay for a premium membership costs between $4.99 to $19.99. The premium plan gives users access to virtual currency, Robux, and the chance to sell and trade items in the game.

More information is needed about the average revenue per user before investors can assess the company’s prospects. At this point, it is unclear how many of Roblox’s users are paying customers. Unlike Zynda Games, which includes advertising (14% of Q2 2020 revenues derived from advertising), Roblox’s model doesn’t appear to emphasize advertising revenue. Therefore, merely adding more free users to the platform is less attractive.

However, the product is designed to encourage users to use Robux to buy in-game items. Besides, third party developers are incentivized to create premium experiences and items requiring Robux. When a developer earns Robux, they can exchange that virtual currency for real-world dollars.

Child-Friendly Games: A Main Point of Differentiation

Roblox’s success proves that games do not have to rely on mature content like violence and sexuality to succeed. The company’s best-known child-friendly games include Theme Park Tycoon 2, Jailbreak, Welcome to Bloxburg!, and Work at a Pizza Place.

There are some nuances to the company’s child-friendly reputation. Since Roblox operates as a platform for other developers, it is more than possible that mature content may appear in some cases. Fortunately, Roblox has parental control features to identify content suitable for all ages.

Despite these controls, there have been controversies about the mistreatment of children using the platform. The BBC reports a case where a child user was encouraged to send explicit photos through a third-party service while playing a Roblox game. If the company focuses on young users, further investment in controls and monitoring may be needed to keep users safe.

About the Author

Bruce Harpham

Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.