How Roblox built a $30 billion company on kid-friendly gaming

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Roblox just became Wall Street’s hottest new tech stock — but your kid was probably a fan already.

The Silicon Valley company behind a massive world of social video games went public Wednesday after a year of explosive growth.

Roblox shares started trading at $64.50 apiece, giving it a market value of roughly $36 billion, according to CNBC — up from the $29.5 billion price tag it snagged in a private fundraising round in January.

Dozens of rookie investors on Reddit and other social media sites were talking about the stock Wednesday, suggesting it could be embraced by the army of retail traders that’s boosted the share prices of GameStop and other companies.

Roblox trudged a long and winding road to its direct listing on the New York Stock Exchange, but it got a massive boost from the coronavirus lockdowns that shut gamers in their homes last year with little else to do.

Roblox runs a sprawling platform where people can both build their own immersive video games and play the games created by others. Users can interact with friends through their virtual avatars and spend digital currency known as Robux, which can be converted into real dollars.

Roblox traces its roots back to 1989, when founders David Baszucki and Erik Cassel created a digital lab called Interactive Physics that allowed students to simulate car crashes or build destructible houses.

Baszucki sold the company behind Interactive Physics before he and Cassel started Roblox in 2004 before launching the game’s first iteration two years later. The current version is free to play on computers, iPhones, Android smartphones and Microsoft’s Xbox gaming console.

Roblox was reportedly slow to get off the ground, but its popularity exploded last year amid the COVID-19 pandemic. The company ended 2020 with nearly 33 million daily active users, up 85 percent from the prior year, and the number of hours gamers spent on the platform more than doubled to about 31 billion, according to its IPO prospectus.

Roblox is especially popular with children — it told The Verge last July that more than half of all American kids under 16 were playing. “The success of our business model is contingent upon our ability to provide a safe online environment for children to experience,” the prospectus says.

The platform has also proven lucrative for a handful of dedicated Roblox developers and creators, who sell access to their games and virtual avatar accessories in exchange for Robux.

More than 1,250 developers and creators earned at least $10,000 in Robux last year, and over 300 of them made $100,000 or more, according to the prospectus.

Baszucki views Roblox as a piece of the “metaverse,” a science fiction term referring to a seamless digital world where people can work, learn and socialize in addition to playing games.

Roblox has started expanding its footprint in that world by hosting virtual events such as a concert by rapper Lil Nas X and a Christmas party for its own staff, according to the BBC.

“The Metaverse is arguably as big a shift in online communication as the telephone or the internet,” Baszucki wrote in Wired in January. “Within the next few decades its applications will exceed our wildest imaginations.”

With Post wires

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