The Best Sign That Roblox Is Getting Better Is That It’s Losing Money
Plus, a short conversation with Bloomberg's Cecilia D'Anastasio about what this means for the future of Roblox.
A few weeks back, there were some notable headlines about Roblox:
CNBC: “Roblox shares plummet 18% as child safety measures weigh on bookings”
Investopedia: “Roblox Slashes Its Outlook as Users Grow Slower Than Expected. The Stock Is Plummeting”
Bloomberg: “Roblox Shares Fall Most in Four Years on Slowing User Growth”
For Roblox? Ouch. For everyone else? Potentially, some good news.
One of the platforms we regularly interrogate here is Roblox, and one of the questions that regularly comes up about Roblox is whether it’s safe to let your kids play on it.
The answer to that question is, like many gray areas in parenting, “no, but..?
My personal worry is that for whatever meaningful changes have come to Roblox, the changes necessary to push the needle on safety requires sacrificing capitalistic ascent. It requires bleeding money and users alike. It means the number can’t go up, because such changes would, by definition, introduce friction that would stand in the way of it.
Such financial pain was inevitable and necessary.
Some context, per CNBC:
“Roblox shares plummeted 18% on Friday after the company reported first-quarter earnings as its new child safety measures weighed on bookings. […] In a letter to shareholders, the gaming company wrote that its new age-check feature “restricted on-platform communication for non-age checked users, diluted communication for age-checked users, and slowed new user acquisition,” causing greater-than-expected headwinds.”
And what this means relative to what was expected, per Bloomberg:
“The video-game company’s 132 million daily active users fell short of analysts’ estimates of 143.8 million. While that’s a 35% increase year-over-year, it marks the second consecutive decline compared with the previous quarter. Bookings came in at $1.7 billion, compared with Wall Street’s expectations of $1.73 billion.”
Roblox has, also according to Bloomberg, “projected another quarter of user declines.”
It’s worth remembering this is a company that still has 132 million daily active users. It dwarfs the most popular games on any other platform. It is, for some, their world, and while Roblox will not dominate forever, there’s nothing suggesting it’s going away.
I’ve documented the changes Roblox has made over the past few years, including overhauling its parenting controls (good) and introducing age requirements for features like chat (messy but well-meaning). But Roblox has found itself in a tight spot, where it’s on the verge of being regulated while also being sued by several states, because it prioritized growth over everything else. It wanted the most users possible.
Which isn’t to say Roblox didn’t think about safety at all—we’re talking priorities.
Roblox, despite its hundreds of millions of users and vice grip on youth attention, also isn’t profitable. It remains in the red, because revenue is different than profit. There are creators publishing games on Roblox making money, but to date, Roblox continues to invest more in building and scaling its platform than it does making money off of it.
A similar playbook has played out with companies like Facebook and Amazon: burn an extraordinary amount of money, year after year, while capturing a huge amount of attention. Later, you’ll find a way to make a gazillion dollars. Roblox is popular and has attention, but it does not yet have a gazillion dollars. Maybe it eventually will!
The question for me, though, is whether Roblox is willing to keep enduring more tension in growth in service of containing to lock down the platform even more.
One of the best reporters on the Roblox beat is Bloomberg’s Cecilia D’Anastasio. Yes, she’s the one responsible for the “Roblox’s Pedophile Problem” story that arguably helped kick off much of the increased scrutiny Roblox is under. I’d asked D’Anastasio to answer a few questions about this latest news and they were so good I figured I might as well just include everything she said below. You’ll get more out of it that way.
So, is this an existential crisis for Roblox?
Stop listening to me. Onto D’Anastasio:
Do you anticipate Roblox to keep adding, as you phrased it in your piece, additional “friction” to the platform in response to ongoing lawsuits and potential regulation, despite the recent financial news?
Cecilia D’Anastasio: Safety has become central to Roblox’s public messaging. So while I suspect that many of the most high-friction changes have already been implemented—like restrictions on chat and age-verification—I absolutely think the company will continue to roll out new updates and tweaks.
Experts say safety is a moving target. Not only do predators trade tricks on how to evade moderation on darknet fora, but also, kids are always finding new ways to exploit systems and do bad stuff, like harass people or gamble. Roblox’s big challenge is both making sure users don’t find ways to circumvent its current safety measures while also keeping up with unpredictable new threats.
But yes, we saw a trade-off there when Roblox shares took a hit recently. I often hear parents express discomfort over Roblox because of what they read in the news. Roblox is making a long-term bet that enough parents will feel comfortable letting their children play in its online sandbox that it will eventually outweigh any short-term financial hits.
Does Roblox face an existential crisis of sorts? The platform is not yet profitable, but as the result of the path it chose to encourage exponential user growth, it’s being forced to make user growth more difficult.
D’Anastasio: A lot of companies aren’t profitable. I don’t think most people close to Roblox would say it’s facing an existential crisis. Overall, Roblox is growing its revenue, bookings, user base and cultural footprint. It’s certainly done a lot better than other game companies.
Roblox’s CFO warned that last year’s growth—especially with hit games Grow A Garden and Steal A Brainrot—might be hard to replicate this year with safety changes adding friction to sign-ups, etc. But when it comes to finances, Roblox has shown some signs that it’s trying to find more ways to monetize its user base, like by skimming a percentage of revenue off game developers’ ad deals on the platform.
Countless tech companies have grown their user bases for years before figuring out how to sustainably make money. We’ll see how well Roblox balances that against retaining game developers’ trust.
Roblox, like many modern social platforms, chased user growth and decided to enact privacy and safety measures after a growing public backlash. What might Roblox have looked like if it’d built these features in tandem with growth?
D’Anastasio: I wish I could tell you. This is such a common occurrence that pointing it out would feel mundane if not for the countless people who say they’ve been harmed from a failure to implement certain safety protocols. I remember even playing Valorant in beta and realizing that Riot Games didn’t implement some of the anti-harassment features they’d already honed for more than a decade on League of Legends. Safety is so often an afterthought.
Roblox says that it’s always been designed with safety and civility in mind. I think the standards for what that looks like have changed as more and more governments are paying attention. But kids who grew up on the platform have always been calling this out. For years, vigilantes have publicly demanded the removal of Roblox games like Bathroom Simulator or “condos” where avatars simulate sex.
Their idea of a safe Roblox has been clear in their minds for more than a decade. And if you ask them what they envision, it’s pretty simple: no sex games, no racist role-plays, no predators posing as kids. But I’m sure a lot of product designers at Roblox would say it’s not so easy to actually design these features in a way that doesn’t restrict creative expression or user growth.
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Also:
Roblox use is way, way down in the house. When the kids do have tablet time, they are spending it watching videos. My six-year-old is into Minecraft again.
Movies based on Roblox properties were inevitable, but it’s hard for me to imagine many of them actually get made. Call me when I can buy a ticket.
A few weeks ago, I did not know what “condo games” were, and much like bathroom simulators, it’s utterly bizarre they lasted on the platform this long.
In all but the stupidest versions of reality, the news that Roblox is improving user safety would *increase* their share value, not decrease it. Steady responsible growth was the name of the (pension) game that made the boomer generation so financially stable and dare I say affluent. Instead, we have wallstreetbets bros and line-go-up monkes firmly in control of our financial system. I hate it here.
I finally allowed my kid to play Roblox because she wanted to play a specific game that allowed us to set up our own instance where we were the only players. (Yes, it was 99 Nights in the Forest.) This past weekend, when we were entering for our weekly session, her account was flagged as suspicious and in order to unlock it, I had to allow the camera on my laptop to film me looking around and then had to solve the literal worst captcha I’ve ever experienced, which glitched out several times, forcing me to re-attempt like ten times. If it weren’t for how much she values this daddy-daughter time, I would’ve given up.
I bring this up to point out that the security measures are becoming as invasive as the risks, albeit in different ways. Granted, I’d rather send a video of myself to an identification service than let her chat with anonymous people online. But still, it had originally asked HER to turn on the camera, and if I hadn’t been there, that’s what she would’ve done. And to be clear, this wasn’t done for her safety, but for the platform’s, to prove she’s not a bot.
Just wanted to share.