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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Can Roblox Age-Up?

As a public company, Roblox has pressure from the public markets to optimize for earnings calls and top/bottom line growth

Roblox Will Not Age-Up

While Roblox has always been associated with a younger audience, the company first announced its intent to expand the platform’s reach and appeal to a wider age range (ages 6 through 60) during their February 2021 investor day (Business Insider). In the following quarter, the company reported that over half of the hours spent in Roblox were by players aged 13 and older, and this has only continued to increase over the past year.

In an effort to continue these efforts, Roblox has been working on digital identity, monetization, and safety products which they unveiled earlier this month at their annual Developer Conference (Pro Game Guides).

While the numbers support that players are continuing to stay on the Roblox platform as they get older and that Roblox is aggressively building products to support the aging population, we do not believe that Roblox will be able to retain the >13 player base because of challenges with developer retention, competition with better gameplay alternatives, below average player social experience, and player safety risks. Therefore, we do not think that Roblox will be able to increase the median age of their player base above the age of 13-15 years old.

Will Roblox be able to retain developers?

Introducing immersive advertisements is Roblox’s most recently announced feature that aspires to put more money into the hands of developers (CNBC). This feature will allow game creators to monetize from designated advertisement placement inside of their experiences in the form of typical signage or portals that teleport players to a branded advertisement experience. While advertising to such a large audience seems like a no-brainer, we are hesitant that this will impact developers outside of the top 1,000 (those currently making >$32k a year).

First, advertisements will not be accessible to kids under 13, cutting the addressable market of eyeballs in half - hence why aging up the platform is such a priority for the company. Second, the amount of spend by advertisers in Roblox will likely be moderate and grow slowly as they test advertising in a new environment. Quantifying success of ad campaigns will likely be limited to impressions or click through rates, as the spending power of those under 18 is limited to Robux and conversion to off-platform purchases will likely be low.

In addition to these ad-related headwinds, the basic economic structure available to developers is not in their favor.

While there are many pieces to the pie on the graphic shared in Roblox’s documentation, “Roblox Share”, “Platform Investment”, and “Platform Hosting and Support” (46.9% combined) are all going to Roblox and are put toward Roblox-paid expenses. Therefore, only about 29 cents of every dollar spent by a gamer is going towards the developer (unless purchases are made outside of the mobile app). This $0.29 is significantly worse than Steam ($0.70-$0.75), Epic ($0.88), GOG ($0.70), Google ($0.70-$0.85), and Apple ($0.70).

While Roblox has an engaged user base of almost 60 million daily active users, for top developers on Roblox, there is a threshold where the risk of publishing on alternative platforms may outweigh the economic upside of remaining on Roblox. If the >13 player base, which is a higher spend age group, begins to trickle away to other gaming alternatives, Roblox is at serious risk of developer stagnation (or flight). Economic incentives for developers will drive their continued success, possible stagnation, or unfortunate decline.

Will aging players choose Roblox games vs alternatives?

It is inarguable that Roblox has far surpassed the reach of any other kids MMO (massively multiplayer online) to date and has demonstrated an unprecedented staying power for the age group. However, looking at some of the other successful platforms - Club Penguin, Wizard 101, and Marvel Super Hero Squad Online - one thing that is consistent across all 3 is their intentional targeting of the <13 age group. Once kids age into the teenage age group, they have a significant increase in optionality of which virtual worlds they would like to spend their time.

As kids aged into the >13 age group, Club Penguin players could choose between more social or more gameplay-focused MMOs and Marvel Super Hero Squad Online players could move to more combat-focused RPGs (Runescape, Maplestory) or if they’re more connected to the IP, choose between Marvel’s broad library of video games. Wizard 101 is still able to maintain a player base because there is no adult game or MMO like it - even the upcoming Hogwarts Legacy will be a single-player, open-world action RPG.

By trying to expand to the >13 demographic, Roblox is putting itself in direct competition with almost every successful AAA and indie developer. In 2021, the 5 most popular genres for players on Roblox were role-playing, action, simulator, platformer, and tycoon (Roblox). Even excluding some of the best indie games (Stardew Valley, Hades, Cuphead), the top AAA studios - Epic with Fortnite and Fall guys, EA with Sims, Rockstar with Grand Theft Auto - offer much higher quality options than what is available on Roblox. This is a precarious competitive landscape for Roblox to willingly enter into.

Is Roblox creating a better player experience?

Functionally, the user journey on the Roblox discovery platform (see above) is most akin to Steam, making the player experience very siloed from experience to experience. There are no Roblox hosted, game-agnostic spaces for players to hang out together, which makes the stickiness of the platform comes from 2 things; 1) access to individual, high-quality games and 2) the ability to easily play games with friends.

This access to a social network is important to note - the <13 age group has little to no access to social networks as these are typically targeted later on in life as a teenager or young adult (Facebook, Instagram, Tik Tok, BeReal). In 2021, approximately 2.5 billion chat messages were sent and 17 million friendships were made on Roblox daily, indicating that the platform functions as the primary social network for the <13 age group (Roblox).

However, as players age, there are other alternatives for people to hang out with their online communities that function better as social networks. For example, playing with friends on Discord can be done regardless of what game distribution platform a game is hosted on (Steam, Epic Games Store, GoG, Apple, Google).

Will Roblox be safe hosting all age groups?

By being openly supportive of all age groups and introducing features to improve the experience for older players, Roblox is introducing a significant amount of risk to its younger player base. For example, Roblox’s new voice chat feature introduces the risk of verbal bullying. While Roblox requires users to verify their age (>13) through a government ID or phone number, the platform still relies on users to report bad actors and puts the responsibility on players to mute others. There are no tools in place to filter any inappropriate words or sounds via audio.

It takes only one bad experience for a teenager to decide not to return to Roblox or for a parent to prevent access. As Raph Koster said back in 2017, “muting and blocking are inadequate forms of moderation and do not take into consideration the impact on third-parties outside of the interaction.” We fully agree.

One bad actor can drive away thousands of players and for a platform so reliant on connectivity between players, any group of players leaving creates holes in social groups and can fracture the player side of the two-sided effects.

Takeaways: As a public company, Roblox has pressure from the public markets to optimize for earnings calls and top/bottom line growth. We believe this can be achieved by remaining focused on kids, increasing monetization per user, and expanding to global markets (vs primarily in the West). This strategy of aging up is certainly centered around the desire to tap into the ad-revenue business model, however this is going to bring increased competition, a host of product safety issues, and a potential crack to their social network effects.

Roblox’s greatest strength is the powerful network effects between developers and players. While it has been in a league of its own in the under 13 age group, Roblox will not be best-in-class on either the gameplay side or the social side for players over 13. While the platform already has low developer revenue share (which may be fixed by the introduction of immersive ads), if players begin to leave to either seek better alternatives or are driven out by bad actors, the ecosystem is at risk of hemorrhaging its higher-spend >13 players and thus developers.