It’s almost been a year since Roblox went public, and this week, the company’s explosive growth took a turn that should raise a few eyebrows and prompt pause when it comes to the metaverse.
The company’s stock hit a 52-week high in November when shares topped $141. While the stock price has declined in recent months, as of this writing shares are trading around $55. After trading around $73 in the after-hours, shares took a dive yesterday morning when Roblox revealed fourth quarter and full-year earnings for 2021 that fell below expectations.
While revenue spiked 108% versus 2020 to $1.9 billion and hours engaged charted a 35% year-over-year gain, the company reported a loss of $491 million for the year, up from $253 million in 2020.
Roblox also leans into “bookings,” which it defines as “revenue plus the change in deferred revenue during the period and other non-cash adjustments.” That’s all the Robux virtual currency that parents and grandparents are buying for kids that might be redeemed later. And, while bookings increased 45% last year to $2.7 billion, the company says that average bookings per daily active user (ABPDAU) fell nearly 23% in January, the first month in the new earnings year.
“With nearly 55 million daily active users, Roblox is increasingly an integral part of people’s lives,” says Roblox CEO David Baszucki. “As we look ahead to 2022, we will continue to develop our technology to enable deeper forms of communication, immersion, and expression on our platform.”
According to the company’s Chief Financial Officer, Michael Guthrie, the Roblox cash burn is tied to investments in tech for the long term.
“The foundation we put in place that allows us to invest in our business while continuing to generate strong cash flow is one of the most unique aspects of our business,” Michael Guthrie says. “Our 2021 results demonstrate that the investments we were able to make in our technology and developer community are generating strong returns, and we will continue leaning into the business as we focus on the large, long-term growth opportunity ahead of us.”
For Roblox, growth is coming via external licensing and entertainment content from major toy companies, including Hasbro (Roblox-branded NERF blasters), Jazwares (action figures and playsets), WowWee (Twilight Daycare dolls), and others.
But a major issue that Roblox needs to tackle internally is the abuse of its platform as more companies begin playing within its sandbox, similar to how YouTube has been playing “whack-a-mole” for years to strike down unsavory content aimed at kids on its platform.
A new report from Vice this week details some of the ways that hackers and other unscrupulous individuals are scamming kids within the Roblox platform. Then, on Wednesday, BBC News called Roblox “The children’s game with a sex problem.” Additionally, the adult content has reportedly been paired with imagery related to a certain fascist group that was defeated in Germany during World War II.
Additionally, as companies such as Roblox placed increased emphasis (and dollar signs) on daily users and the time spent “engaging” on screens, the mental health effects — especially on kids — is a growing concern that comes just months after the Academy of Pediatrics, American Academy of Child and Adolescent Psychiatry, and the Children’s Hospital Association declared “a national emergency” regarding the wellbeing of kids.
At the end of the day, the so-called “metaverse” and the concept of user-generated content living within a virtual world and being bought and sold using virtual currency is nothing new. Second Life launched in 2003 and is still going strong with a platform that essentially serves as the blueprint for what Roblox is doing now.
Unfortunately, the best parts of Roblox can quickly be tarnished by bad actors. It’s a virtual world that runs the real risk of mirroring the most nefarious elements of the real world … and it might not be as valuable as some once thought.
For more on Roblox and the metaverse, check out our exclusive feature in the February 2022 issue of the Toy Book, available digitally, Saturday, Feb. 19, 2022.
