One thing the article doesn't touch on is that Roblox has yet to tap into the China market, where 25% of the world's gaming revenue reside.
Roblox is the biggest game in the world, but is unprofitable
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Re: Roblox is the biggest game in the world, but is unprofitable
#72> When a user buys $30 in Robux, the platform’s virtual currency, Roblox recognizes $30 in bookings. An average of $3 of that $30 is spent on a “consumable” (i.e., a single-user or otherwise perishable good), and so Roblox recognizes that $3 as revenue right away. The remaining $27 is spent on “durable” goods such as an avatar. As an avatar can and often will be used over time, Roblox recognizes this revenue over the average lifetime of a Roblox user
I'm not sure if I'm understanding this point correctly. From my understanding, wouldn't roblox consider their revenue in a given month to be 1/9th of this months purchases + 1/27th of last month's purchases + ...
If so, why would their revenue recognition make them unprofitable? Every month they only realize 1/9th of revenue from that month, but that would be offset by the other 8/9ths of revenue coming from the last 27 months. Wouldn't it just make their recognized revenue a frontloaded rolling average?
Re: Roblox is the biggest game in the world, but is unprofitable
#73Earlier quoted context omitted.
Roblox is dilution-maxxing, stock based comp is up 10x since EOY 2020 whereas revenue is only up 3x. SBC is also ~ 1/3 of revenue. It's pretty cool to get shareholders to pay your employees so you can be called "operating cash flow positive" as if their comp isn't an expense.
IDK about the stock but I’ve interviewed there and their cash comp is legit FU money. Am I misunderstanding you?
I'm referring to companies financial statements where these numbers are reported. It doesn't mean the cash comp isn't high or that a specific job offer won't have a lot of cash comp.
What it does mean is that, in aggregate, Roblox has issued $1B in new shares to employees in the last 12 months, diluting shareholders by 4% or so. This is the most significant factor making the company cash-flow positive while remaining not profitable. It's essentially the same as investors putting more money into the business constantly.
Re: Roblox is the biggest game in the world, but is unprofitable
#74Earlier quoted context omitted.
Roblox is dilution-maxxing, stock based comp is up 10x since EOY 2020 whereas revenue is only up 3x. SBC is also ~ 1/3 of revenue. It's pretty cool to get shareholders to pay your employees so you can be called "operating cash flow positive" as if their comp isn't an expense.
IDK about the stock but I’ve interviewed there and their cash comp is legit FU money. Am I misunderstanding you?
I'm a pretty senior IC at Roblox, and my new hire offer was 40% cash / 60% RSUs. It's now closer to 33/67 with refresher grants.
Roblox pays very competitively (see levels.fyi). The apparent strategy is to try to hire lots of long-tenured L6+ Googlers (seriously, it's crazy how many former Googlers I work with).
Re: Roblox is the biggest game in the world, but is unprofitable
#75Earlier quoted context omitted.
John Malone at TCI? (I learned about it from HN here a couple days ago: https://news.ycombinator.com/item?id=41263855 )
wow, that is correct. I read this in a book over 10 years ago, and now 2 articles about the same trick within the same week.
Cable Cowboy, I'm guessing. Great book!
Re: Roblox is the biggest game in the world, but is unprofitable
#76This feels like reading finance fan fiction (which it kind of is, given the author's profession?) and uses a lot of text to reach the part that lays out the actual problem: the average operating costs based on daily active users are $18 per user per quarter, and the average amount made is only $13. so either operating costs need to come down, charges need to go up, or they need (more, stable) external revenue (e.g. a…
You’re right. What else? Roblox games absolutely utterly suck. Little else matters.
50+ million daily active users pretty much instantly invalidates that claim (hell, even a million daily actives would have, AAA games dream of these numbers =)
It's not for you and me, we just see a garbage "game", but holy shit is there a large demographic that loves what Roblox gives them.
Re: Roblox is the biggest game in the world, but is unprofitable
#77Earlier quoted context omitted.
Why is that true of games but not other businesses?
Almost all games have an inherently limited lifespan. How many games released 20 years ago are still selling well today? Games aren't like other software where you can keep enhancing the product and keep getting new sales. Thus games developers have to focus more on maximizing short term revenue rather than building a sustainable business around particular products. There are a handful of counterexamples like Madden…
That's really not the case. Check the wiki page for the top games in 2005. Many of these games are still around in an upgraded form.
Re: Roblox is the biggest game in the world, but is unprofitable
#78> Unlike other social platforms, Roblox’s revenue is nearly all via user spending rather than advertising. As such, Roblox pays 25% of its revenue to Apple and Google (30% of transactions on those platforms) whereas Facebook, Snap, et al pay effectively 0. Note that Facebook, which has structurally lower costs to service users than Roblox and is far more mature, has an operating margin of roughly 40% — if the company…
I'm a full-time developer of Roblox games. It's wild that Apple or Google make as much from my games as I do. Obviously it still works out well enough since I'm not abandoning the platform, but strange anyway.
why is it wild? Microsoft keeps 30% of xbox store sales. Apple, Google, MS, etc. play a massive part in attracting users to the platform.
Re: Roblox is the biggest game in the world, but is unprofitable
#79Earlier quoted context omitted.
Roblox is dilution-maxxing, stock based comp is up 10x since EOY 2020 whereas revenue is only up 3x. SBC is also ~ 1/3 of revenue. It's pretty cool to get shareholders to pay your employees so you can be called "operating cash flow positive" as if their comp isn't an expense.
IDK about the stock but I’ve interviewed there and their cash comp is legit FU money. Am I misunderstanding you?
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Re: Roblox is the biggest game in the world, but is unprofitable
#80> When a user buys $30 in Robux, the platform’s virtual currency, Roblox recognizes $30 in bookings. An average of $3 of that $30 is spent on a “consumable” (i.e., a single-user or otherwise perishable good), and so Roblox recognizes that $3 as revenue right away. The remaining $27 is spent on “durable” goods such as an avatar. As an avatar can and often will be used over time, Roblox recognizes this revenue over the…
It could be their active user count is increasing very fast and that is eating the rolling revenues via infra costs, customer acquisition costs, perhaps they are subventing that growth in other ways like discounts to get players into the paying segments etc.