Last month we dug into Roblox’s business model and financials, but did not get into much depth on their user numbers. And those are worth looking at because they paint a very interesting story and raise important questions.
A few graphs from the company’s S-1 really captured our attention. We have posted them here. Unfortunately, the quality of the graphics in that document are not great, we have enhanced the labels a bit to make them somewhat readable.
First, users by age group. In our previous post, we noted that one of the company’s goals is to attract an older audience. This is an important element, because if they can accomplish this it speaks to the company’s longevity. Roblox is very clearly not a one hit wonder, but it is fair to question what happens if their current audience ages out and the next younger cohort finds some other platform to follow. These numbers make it fairly clear this is not happening. Over the past two years, Roblox’s Daily Active Users (DAUs) have grown by 62% annually, the over 13 audience has grown 66% almost doubling since 2019. So their older audience is growing faster than the younger audience, and both are growing healthily. Hours engaged tells a similar story.
The next graph shows DAUs by geography. This matters because until recently the company was fairly heavily reliant on a small number of markets – notably the US & Canada and the UK. Here the story is clear (both figuratively and literally as the type in the original version of this graph are illegible). They seem to be growing nicely in most markets. Our one caveat would be “Asia Pacific” which is largely East Asia. This matters because China, Japan and Korea are huge centers of gravity for gaming, with those countries players and creators defining so many trends in gaming. Roblox is just not established in these markets yet, but there are some encouraging signs.
We say that because Roblox has signed a distribution agreement with China’s Tencent. It is hard to overstate how influential Tencent is in gaming today, not only in China but globally. They have investment stakes or control of some of the biggest games in the world including Supercell’s (maker of perennial app store chart topper Clash of Clans), Riot (maker of League of Legend, the biggest esports title) and many, many others. So it is reasonable to hope that Tencent can help Roblox make real inroads among China’s gamers.
Separate from that, Roblox has some data to bolster their hopes in Asia and elsewhere. The chart below shows user retention by cohort. Basically, this chart users are increasingly loyal with newer players demonstrating a much higher likelihood of remaining users than in the past. The data in East Asia looks a little lumpy, but that is to be expected when some of the earlier cohorts are likely very small. All of these charts look very strong, with the caveat that they are all missing the vertical axis, so we have no way to gauge how strong these numbers really are.
Finally, going back to financials, the biggest question for Roblox’s future can be seen in its user monetization metrics. Over the past two years the company’s growth has been phenomenal. Bookings (their preferred measure of the amount users pay into the platform) have grown 76% a year, users have grown 65%, and hours spent on the platform have grown 77%. That being said, average all those out, into the catchy acronym ABPDAU (average bookings per DAU), which is essentially dollars per user, which has grown only 7%. We see this as a 50% glass problem. Monetization has clearly lagged user growth which is concerning. On the other hand, it also could represent a big opportunity to see massive leverage in the model. ABPDAU has been fairly lumpy, not growing consistently every quarter, but the trend over the past year shows steady improvement (mostly). It is reasonable to argue that the company has focused on growth, in order to position itself better for some future date when it can turn its focus to monetization. This is exactly the playbook many other social platforms have taken, so it is not a wild theory.
Roblox has built something impressive and have some solid strategic angles to follow to really improve its (already great) financials.