Roblox Corp. Chief Executive David Baszucki won the loyalty of tens of millions of videogamers with a do-it-yourself approach to play that defies the industry’s typical formula for success.
Roblox is slated to make its public market debut March 10 through a direct listing, an unconventional process that enables companies to trade on a stock exchange without raising fresh capital. The San Mateo, Calif.-based company, founded in 2004, pivoted from a traditional public offering last year after
soared beyond expectations in their IPOs.
Roblox’s debut is coming as the coronavirus pandemic has pushed people to spend more money and time on videogames than ever before. Tech valuations surged over the past year—Roblox was privately valued at $29.5 billion in January, a more than sevenfold increase from early 2020—though those stocks have wobbled recently amid a shift in investor sentiment that an improving economy would benefit other sectors.
Instead of relying on Hollywood-like budgets and rock-star talent to produce a handful of blockbuster games annually, Roblox outsources game development to its own players. Those players, mainly teens and preteens, in turn produce their own hits and earn a 70% share of the revenue their works generate.
“We’re kind of like YouTube except our content is games, and our content allows everyone to play together,” Mr. Baszucki said in 2018 during a talk at his alma mater, Stanford University. The 58-year-old himself is a frequent presence on Roblox, using the name “Builderman.”
The approach has gained Roblox some 33 million daily users who can choose among tens of millions of multiplayer games, from obstacle-course challenges and iterations of capture-the-flag to contests based on popular characters such as Peppa Pig and Sonic the Hedgehog. The company provides free tools and instructions that players—even those without coding experience—can use to create games for its platform.
Samuel Jordan of Fort Lauderdale, Fla., took a break from college about a year ago to focus on making games and other digital content for Roblox with a business partner. The 21-year-old, who participated in a company-run accelerator program in summer 2019, said he netted about $600,000 last year from his Roblox creations, up from $30,000 in 2019.
“It’s insane,” Mr. Jordan said, adding that the pandemic likely contributed to the outsize increase. More than 300 of Roblox’s developers earned $100,000 or more last year, the company said.
The health crisis provided significant fuel to Roblox’s business. Revenue grew 82% last year to $923.9 million, while bookings—sales of virtual items on the platform—more than doubled to about $1.9 billion.
Alan and Sinéidin Cooper of London said their two daughters, ages 5 and 10, and 7-year-old son each spent about five hours a week on Roblox before the pandemic. Now that time has doubled as they use the platform to connect with friends. The couple treats their kids to about $40 to $45 worth of Robux a month total.
“It’s a great way for them to socialize,” Mr. Cooper said.
Roblox hasn’t been able to translate user loyalty into profits, as its net loss in 2020 ballooned to $253.3 million from $71 million a year earlier. The company has said it plans to keep investing in the platform, which could be used for long-distance learning, conferences and other group experiences, such as concerts.
SHARE YOUR THOUGHTS
How do you think Roblox will fare on the public market? Join the conversation below.
Like other online hangouts featuring user-generated content, Roblox has had to contend with predators and troublemakers who target children with inappropriate material—a particular concern given that more than half of the platform’s users are younger than 13 years old. The company says it has made significant strides to keep users safe, such as by adding communication filters to eliminate offensive speech.
Backers include major venture-capital firms Andreessen Horowitz, Altos Ventures and Greylock Partners.
a Greylock partner, said the firm invested in Roblox partly because of Mr. Baszucki’s management approach. Whereas other CEOs might have pivoted from a business model after initially modest growth, Mr. Baszucki remained confident in Roblox’s user-generated mission, Mr. Sze said.
“This is like 10 years of walking through the desert with no one believing in you,” he said. “Dave bucked all the odds.”
Mr. Baszucki, who declined to be interviewed for this article, started and later sold a software company specializing in physics simulations before co-founding Roblox with fellow programmer Erik Cassel, who died from cancer in 2013. They started out creating games for the platform, but soon invited other players to make their own. Roblox launched to the public in 2006.
“We quickly realized what they were building was much more interesting and engaging than anything we could ever make,” Mr. Baszucki wrote in a Roblox securities filing. Mr. Baszucki is the company’s largest shareholder and holds 70% of the voting rights. He will forgo any cash and equity compensation for seven years after Roblox goes public, and instead be eligible to earn performance-based stock awards, which he intends to donate toward philanthropic purposes.
Mr. Baszucki was an investor in Friendster, an early competitor to
and he saw Roblox as a combination of a social-networking platform and the online virtual world Second Life, said Matt Dusek, an early Roblox employee who left the company in 2019. “He sees things further out than others around him often do,” Mr. Dusek said.
In the years that followed, Roblox gradually expanded its user base. Mr. Baszucki, as “Builderman,” would greet new players digitally, appearing as one of the platform’s signature blocky avatars and offering tips on how to get started. Popular games inspired players to become developers, who then created more games, attracting more users—a so-called network effect.
Roblox’s user-generated game strategy has won praise from industry leaders.
CEO of “Fortnite” creator Epic Games Inc., has commended the company for helping game players become game creators. “Roblox has done an amazing job of building an ecosystem,” he said in an email.
Though the company has warned that people may spend less time with its games when the pandemic fades, it wants to continue adding to its base of more than 8 million developers. Similar to other videogame publishers, Roblox also is looking to join with more brands such as
on marketing promotions.
Write to Sarah E. Needleman at email@example.com
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8