Roblox, the online platform that blends gaming, social media, and remote user-generated content creation, was one of the big winners early in the COVID pandemic as millions sought to bond virtually.
Its revenue doubled in 2020, with millions flocking to its platform to create games in the virtual universe. Now, the company is looking to attract more users on its quest to reach one billion daily users, a multiple of today’s 70 million, and become profitable after years of deep losses.
In charting that path, it’s begun working closely with brands like Nike and Ralph Lauren with an eye to eventually allow shopping directly on its metaverse platform. Kids 13 and under long made up Roblox’s core audience and still represent roughly 43% of the user base. But with the 17 to 24 cohort now its fastest-growing age demographic, moves such as retail brand collaborations will become ever-more important to drawing in older enthusiasts, Roblox CEO and cofounder David Baszucki tells Fortune.
Founded in 2004, Roblox is still seeing daily users grow, albeit at a more moderate pace post-pandemic. Yet costs are rising faster than revenue. In 2022, Roblox had a mammoth net loss of $934 million on revenue of around $2 billion, a money-losing trend that continued this year as it invested heavily in research and development, including AI, and enhancing its user safety infrastructure.
Though Roblox’s stock recently rallied after its most recent financial results suggested progress on cost controls and user growth, its shares remain about 40% below their 2021 IPO levels amid pressure to grow beyond its base cohort of youths and worries that meta verse interest has become tepid relative to its past hype. Baszucki bristles at the suggestion that interest in the metaverse has peaked, saying it’s less about the term’s prevalence and more about its ability to foster what people are innately programmed to do: bond. “The mission has been to connect a billion people daily with optimism and civility. And that has been consistent whether there’s excitement around that specific term or not,” Baszucki says. Now, he must figure out a way to make a profit on that basic human inclination.
This interview was edited and condensed for clarity.
You frequently mention that you want “civility” in Roblox’s online offering. Is that a realistic goal?
Within a month of launching Roblox, when there were just four of us in the office, we saw the vision of how civility could be a wonderful part of our mission. We built a civility and safety moderation system within a month of being live, with the four of us cofounders as moderators. At the Roblox developer conference in September, one of my predictions was that we would publish a generalized score of civility of users on our platform and that as people come to Roblox, they can see it go up and down. (The company declined to give a timeline for rolling out that metric.)
During the pandemic, the use of Roblox went through the roof. How has Roblox fared as people return to more in-person interactions?
When people couldn’t get together, Roblox provided a way for them to be together. We see a lot of behavior where people use it as a place to hang out or communicate. We’ve grown all our metrics relative to that peak time, so the foundation of the social communication platform has shown it has the strength to grow following the pandemic.
So how do you get to one billion daily users, one-seventh of humanity?
One way is to grow the range of ages on our platform. The second is getting where we are around the world to where we are now in the U.S. Japan is growing 100% year-over-year, and Brazil is growing around 30% to 40%. The third vector is seeing people use Roblox more frequently for spontaneous connection on top of the half-hour to one-hour type gameplay. Another of my big predictions is that in the next five years, we will have a musician perform live on Roblox to over a million people spontaneously.
Let’s talk about the potential for Roblox in the metaverse through partnerships with brands like Ralph Lauren. Are we going to see a lot more of this type of marketing?
Traditionally, we’ve seen advertising for brands in newspapers. More recently, we’ve seen banners and video ads and then more native and immersive ads. Now, there is a level of immersiveness, like for Vans, where we can put on some of the merch and skateboard around together and see what’s for sale.
So, how far can retail partnerships go?
Just as we may shop on a website or we may shop in a physical mall, there is the opportunity for you and me to go shopping in a third virtual stop.
What kinds of brands lend themselves most to this?
We saw early innovation in brands like Gucci, which was selling items for $3,000 through Roblox. But we should expect a wide range. I wouldn’t rule out automotive, I wouldn’t rule out consumer electronics, I wouldn’t rule out movies, and of course, I wouldn’t rule out fashion and beauty.
This story was originally featured on Fortune.com
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