What are the biggest players in Metaverse industry — part 3

Like a month ago, we introduced couple of companies who have potential to develop their own version of metaverse, such as Meta, Nvidia & Epic. And there is another contender we can’t miss which is Roblox.

What is Roblox?

Roblox is one of the most popular gaming platforms among teenagers and their major players are below-14-years-old teens (> 50%). Roblox was launched in 2006 and went public in 2020. Now it’s estimated over $43 billion with 43 million DAUs (daily active users). From statistic data, we can see the growth rate of DAU in North America & Europe have declined, but keep gaining the traction in Asia and other developing countries. Compared to Fortnite’s MAU number (80 million), Roblox is its 3 times (200 million).

From above data, we can see there are more and more users participating in Roblox platform and spending tons of time on it. It is partially because the pandemic just locked everyone at home and parents just loose more control on kid’s virtual game time. And also, just like playing Fortnite, teenagers could just fool around with their friend in the digital world or make new friends via Roblox. According to Roblox survey, the majority of respondents say they like to play their favorite games (79%), try out new games (64%), and also have conversations (62%), emphasizing the importance of social interactions as part of their experience on the platform.

Roblox two-sided market

We’ve understood the reason why Roblox’s users are surging, now let me elaborate more about how it operates.

Generally speaking, Roblox is a gaming platform that doesn’t produce their own games but provides tools for users to create their games. In Roblox, it provides a Lego-like module and developers can build their game piece by piece in the system from the scratch so they don’t necessarily need to equip with coding skills. With 9.5 million developers now, Roblox provides 40 million user-generated games and has paid 328 million US dollar to the developers.

Therefore, Roblox also serves two-sided market — players and developers. This concept we’ve discussed before: more developers create good games in the system and it attracts more users to participate in. More users join the ecosystem and more developers would like to create games here. Then it becomes a positive loop.

Roblox’s economy

As we said before, having own economy is one of conditions to construct a metaverse. Roblox is a potential contender to build its own metaverse, so it’s not strange that it has one. Robux is the digital currency that you can earn from Roblox or use it to purchase something in Roblox.

Developers can sell the games (Roblox said it’s “experience”) to the players and also can resell the creation such as items, cosmetics or accessories to players in exchange for Robux. However, developers can only withdraw 100,000 Robux in one go and exchange it for $350 which means if you only have 99,999 Robux, you can’t cash out.

Roblox’s issues

1. Exploit teen developer: some critics condemned that Roblox has exploited teen developer for so long because the revenue distribution is not that fair. First, Roblox will take 30% away per transaction. And secondly the threshold for cashing out is too high (100,000 Robux). Most developers are unable to earn enough Robux to cash out.

2. Unfriendly for new developer: it is too difficult for a beginner developer to reach a great amount of users unless the developer pay to advertise his/her product. There are only top 200 experiences will be displayed and a few experiences with high user growth rate have chance to be shown in homepage.

3. Content censorship: As a platform operator, it is necessary to encounter content moderation issue. Especially for a teenager-centered platform, Roblox has a team of 1,600 moderators to monitor if there is inappropriate content.

4. Cap of growth: Experiences in Roblox are more bite-sized than games created by Nintendo, Xbox or traditional game producers. It’s much easier to attracter new young users, but it’s such a problem to retain the existing users. With age increasing, more and more players turn to other platforms. How to make those users stay and grow with platform is the most important issue Roblox needs to deal with.

Roblox’s Opportunity

Totally embracing the Web 3.0, Roblox definitely would have lots of potential. Here I just jot down some ideas:

1. NFT accessories: we’ve discussed NFT before, but actually now NFT has countless applications instead of just a collectible. One of the most attractive applications is issuing NFT accessories that users can intrinsically own them and can take them to any virtual places.

2. Improved interoperability: Roblox gradually improve their interoperability level to make the experiences more like real life. Roblox acquired a startup called loom.ai to improve the facial expression reflection by detecting users’ real facial expression. Also, Roblox would like to release the video chat function soon so players can talk to each other instead of typing.

3. Higher compatibility: Roblox agree to let game creators to use third party tools to develop the experiences and plug that into Roblox. That just make Roblox more flexible and open and can attract more game developers to join the Roblox ecosystem.

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Jimmy Hsu

Jimmy Hsu

Marketer who likes to understand the world better by reading.