How Roblox Is Betting Big on the Metaverse

How Roblox Is Betting Big on the Metaverse

Roblox has been around since 2006, and since then has managed to grow into one of the world’s most popular games, with over 30 million monthly active users and 1.7 million creators building their own worlds in its proprietary game engine, which the company believes will soon help bring about the birth of something else entirely new: the metaverse. It’s likely that you haven’t heard of Roblox, but chances are your children have – it’s the most popular kids game ever, more popular than Minecraft according to founder David Baszucki.

The Rise of Mobile Games

With emerging markets like China, Brazil and India swelling to billion-strong smartphone populations, developers are flocking to mobile devices. Just take a look at Apple’s App Store or Google Play: Mobile game revenues have ballooned 7x in less than a decade. Some industry experts predict mobile games will be more lucrative than console games by 2020. With such rapid growth, it’s hard not to wonder why so many developers are embracing mobile gaming. To understand that, we need only look at its meteoric rise in popularity: It turns out children love playing games on their smartphones—much more than adults do. And as we all know, children play a big role in determining what’s popular among their peers. That makes Roblox an interesting bet. The company is betting big on virtual reality (VR) and augmented reality (AR), which together make up a nascent technology called the metaverse. The idea is that VR/AR headsets could allow people to enter immersive online worlds where they can interact with each other via avatars. Roblox isn’t alone in placing its chips on VR/AR; other companies including Facebook, Microsoft and Sony are also betting big on AR/VR. But Roblox has something those others don’t: A massive base of young users who already spend hours every day inside its digital playgrounds. If you think about it, there’s no better way to get kids interested in VR/AR than through a fun game they already enjoy. In fact, when Roblox announced plans for its own headset last year, more than half of the 10 million monthly active users were under 18 years old. So if you’re looking for a stock that could benefit from VR/AR adoption, consider investing in one of today’s most popular games: Roblox.

 

The Birth of RobloX

A team of three entrepreneurial gamers wanted to create a platform that connected a generation of kids all over world. The result was a game called Roblox, an online virtual community that blends aspects of Minecraft, Legos and early computer games like SimCity. The business model revolves around sales of user-generated content—the building blocks for players to create their own environments in virtual space. This business model has fueled some impressive growth figures since its founding in 2006: Revenues hit $30 million last year, with 90 percent of sales coming from mobile gaming. And perhaps even more impressively, 80 percent of Roblox’s users are under 18 years old and 65 percent are between 13 and 17 years old. While these young entrepreneurs aren’t making millions just yet, they’re still betting big on future revenue streams. In fact, they’ve already laid out plans to invest heavily in augmented reality technology down the road. So what does it take to build a multi-billion dollar metaverse? We spoke with David Baszucki, CEO of Roblox Corporation, about how he built his company into one of today’s hottest startups.

 

The Underlying Business Strategy

When many of us think of virtual reality (VR), we imagine a future that looks like The Matrix—densely packed cities where people in VR glasses teleport from room to room and talk with their friends, who also appear in VR. But IRL, most business execs are thinking about ways to use it for more practical applications: like connecting doctors around a patient during surgery, or teachers and students during a lesson. It’s only within recent years that computer chips have become small enough, fast enough, and cheap enough to power immersive experiences that don’t make users feel nauseous. That has led to companies betting big on VR. Facebook bought Oculus Rift for $2 billion in 2014; Google made a similar bet when it acquired Magic Leap last year. And those two acquisitions pale in comparison to Chinese tech giant Tencent’s purchase of a majority stake in Seattle-based game company Roblox for $30 billion last month. The deal is one of China’s largest cross-border transactions ever, but what is even more notable is how far behind China is compared to other markets when it comes to making investments into VR businesses. While there are some promising startups such as Beijing-based Deepoon and Shanghai-based Baofeng Mojing, they still lag behind Western counterparts in terms of innovation. This raises an important question: What does it take to be a successful VR entrepreneur? Are there any common traits among them? Do they share anything else beyond being born after 1980?

 

The Future – Building the Metaverse

The metaverse has long been a dream in science fiction, and something like it seems poised to be an integral part of our future. But what is it? Basically, it’s a massive, persistent virtual universe inhabited by people from around the world. This is possible thanks to AR and VR—augmented reality and virtual reality. Augmented reality uses glasses or headsets that superimpose digital objects onto your view of real-world surroundings; virtual reality completely replaces your view with a computer-generated environment. Either way, you can travel anywhere at any time, interact with others and explore as much as you want—the only limits are those imposed by computers themselves. It’s easy to see why so many companies have decided to bet big on augmented and virtual reality: It’s going to change everything about how we live, work and play. At least that’s what they hope. And one company in particular stands out: Roblox Corporation. Founded in 2004, Roblox lets users create their own games and experiences within a 3D environment. Today, more than 64 million people use its platform each month to create their own games and experiences, which they can then share with friends or publish for everyone to enjoy. As impressive as that sounds, it pales in comparison to Roblox’s ultimate goal: To become the ultimate place where imagination becomes reality. How does it plan on doing that? By building a whole new dimension known as The Next Reality (or The Next Reality Platform). Here’s how it works: First off, let’s talk about all of the amazing things you’ll be able to do once The Next Reality goes live. You’ll be able to fly through space, shoot lasers from your eyes and even build your own planets. You’ll also be able to meet up with friends in virtual reality and explore together using avatars that look just like you. Once you’ve got some cool outfits picked out, there will also be plenty of places for you to go shopping. And don’t worry if you’re not into roleplaying: In addition to creating characters who look just like us, there will also be robots who function as personal assistants and help us manage our lives while we’re busy exploring The Next Reality! Of course, all of these incredible features wouldn’t mean anything without great content—and that’s exactly what Roblox plans on delivering when The Next Reality goes live next year!

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