Roblox Investors: What do you need to pay attention to before investing in Roblox?

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In the last period of time, everyone started speaking about Roblox. According to Roblox, a large share of the US kids are highly engaged with the platform.

Even though Roblox has been founded in 2004, the company is still laying the foundation for building the metaverse. The investments needed to fulfill that vision are going to be substantial and it is one of the reasons why Roblox has had a hard time with generating profits in the previous years.

The share price have been staying stable at around 70 USD/share with a market cap of more than 45B in valuation based on 1.5B in bookings in 2021. Roblox is expensive based on that but what about their narrative? Will they be able to prove that Roblox is worth so much or will Roblox experience a similar pattern to Unity? We forecast that Roblox is a much more solid company than Unity who have managed to create a great business for their community. There is still a lot more work to be done in the future.

In order to achieve even more growth in the future, the company has a couple of jobs to be done. Below, we have showcased some areas that will help disperse the creativity to even more people around the world.

Jobs to be done by Roblox

There is still a long way ahead for Roblox to scale up. We have highlighted here a number of areas where Roblox can achieve growth for their Roblox investors.

1. Retain teenagers

For a very long time, Roblox is and has been perceived as a kids platform (9-12). In order for the company to achieve higher future growth, Roblox needs to focus a lot more on retaining kids. At RDC 2020, the company already announced a series of initiatives to tackle this problem (more realistic avatar, better rendering or allowing more realistic avatars). Roblox is going after Fortnite in look and feel in order to make it more appealing to the up in age audience.

2. Increase the revenue inside the platform

It is clear that this is a major focus for the company. While Roblox is earning a lot of money, it is clear that the company will need to increase its revenue even more. The move towards subscription is a great move which will help monetization on the platform.

Right now, only a small percentage of the users are buying in app purchases but the Roblox Premium subscription effort will ensure stable growth and with time will allow a higher percentage of users to monetize.

While Roblox Premium will be a bigger part of the overall ecosystme, a wider variety of games will make sense to be published as developers don’t need to focus so much on monetization but rather on creating engaging games. The more engaging Roblox games will be created, the more users will stay longer on the platform.

Increasing the revenue is important in order to attract even more developers on the platform.

3. Roblox in China?

Will Roblox be successful in China? Will their partnership with Tencent work? Only time will tell but it is clear that the company is putting a lot of effort into that initiative by hiring a lot of people.

Through a joint venture with Chinese gaming giant Tencent, Roblox made its first entry in China, one of the largest online gaming markets, in 2019. The San Mateo-headquartered company holds a 51% controlling stake in the partnership, while Songhua, a subsidiary of Tencent, owns the remaining shares.

4. Create a business for even more developers

They call themselves a “Roblox Vet” and are usually teenagers with 10+ years of experience with Roblox. Most of them have different skills (scripters, art, game designers, etc) and they have the supreme advantage of understanding the platform because of their previous experience with it.

As more developers will enter the space, the more games will be created. With increased competition from the developers’ side, better games will be produced.

At RDC 2020, Builderman (Roblox CEO) announced that creating a business for the developer community is one of their main priorities. The top 1000 developers need to be able to have a good living just by creating Roblox games.

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5. Attract big companies to focus on Roblox

There are many great gaming companies out there and none of them have ever published a Roblox game. Will they join the party in the future? Until now, the main problem has been the business case as compared to consoles or mobile - the business case was simply too low. That was the case until the Adopt me! Success and their 50+M USD.

The Adopt me! Success has also proven to the community that in order to make great games, you need large teams (30+ people) in order to make the games great. Large games teams is something big companies have (Rovio, Gameloft, Hypercasual developers, Zynga,etc - there are literally a lot of them out there) but they lack common understanding of the Roblox platform.

Will they be able to attract top talent (young Roblox veterans) and incorporate them into their slightly older teams? Probably not in the very near future but this will happen at some point. They will probably do so when all the top 10 games on Roblox will generate more than 50M USD a year.

Large teams are expensive and come with a great risk. It is also hard to manage them :)

6.Advertising revenue from brands

Roblox has a massive young audience. Will they be able to increase revenue by allowing brands to advertise on the platform? Facebook and Google are making huge amounts of money just by advertising and therefore this is a huge potential for Roblox.

Will Roblox do this in the same way as Facebook does it? Probably not because of the great DNA the company has with regards to protecting their users. But there are other ways out there in which they will be able to do it.

7. Games as social media

Most of the people that did not grow up with a digital device in their hands misunderstand the concept of games. They believe that games are for people who are gamers (or worse, they are for kids) but Roblox will change that forever.

Roblox has a high social status value if you are in that ecosystem and this is highly showcased by the power of the avatar (the main thing is that you need to be highly engaged in the Roblox ecosystem in order to get that social status value).

Another interesting thing is that Roblox is used a lot like any other SMS/Messenger platform as that is the place where kids communicate with their friends and where they interact with them on a regular basis.

8. Video content platform

It is clear that it is easier to watch content than playing it. A lot of players are using an equal amount of time on watching Roblox Youtubers play Roblox games as they are playing them. Will Roblox be able to expand their ecosystem by adding a video content platform similar to Youtube? Will they be able to monetize it with ads or find a new way for implementing monetization?

It is important to mention that the importance of monetization is not only for increasing revenue for Roblox but in order to incentivize content creators to create video content on it.

9. Improve other revenue streams

Will Roblox be able to continue their journey with the physical side of business? Will they be able to create a Roblox movie as a hit? Will they be able monetize concerts in the future?

All these are questions that might influence the stock price. If they do it right, they will be able to establish themselves as an entertainment brand and capture a larger market share of the teenager market… And adults, why not?

10. Win everyone (especially adults)

If Roblox wants to get to a Facebook valuation, they will need to win adults. The closest we have to a Metaverse are social media platforms like Facebook or Instagram.

Because of their non-gaming element, they have a wider initial reach as they tap into all people, not only into gamers.

Will the perception of games change in the next decade so that more adults will perceive games as a medium of interaction equivalent to Facebook? There is still a long way there.


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