RBLX Investor Day Notes

On Tuesday, Roblox hosted their investor day presentation. It is now available on Youtube:

I will start by admitting I didn’t watch the whole thing–it’s more than 4 hours. Skimming past a lot of the technical development background, the Roblox management team highlighted a lot of growth areas for the platform. If you want just the conclusion: this is a company that has an almost unlimited runway.

If you think of Roblox as a gaming platform, that view is too limited. Roblox is a low code/no code development platform (like Monday). True, Roblox can be used to create games–evidently game studios are now receiving VC funding to build specifically for Roblox. However, Roblox can also be used to create a wide range of other experiences. There is also a social aspect to Roblox as there is a big focus on developing shared experiences for “friends.”

Following are some key areas that jumped out at me–particularly because you wouldn’t think about these areas being revenue streams for a “gaming” platform.

Vocabulary word of the day–verch: = virtual merchandise.

Fashion: Gucci is already developing items specifically for Roblox. Brands are opening up to an “interactive” design experience with their fans and virtual runway shows are likely in the near future. If you tie it into advertising down the list, it’s possible for a brand to have a much more immersive experience with their buyers.

How does this make money now? Well, I admit I feel awfully old, but the world is a strange place. Turns out that people want their avatars to have bling and they are willing to pay for it. Luxury brand items can be produced in very limited numbers and luxury brand verch sells for a lot of Robux.

Music: Lil Nas X, Twenty One Pilots, and many other bands have held virtual concerts on the Roblox platform.

How does this make money? Over $10 million in verch was sold at the Lil Nas X concert event. 37 million people tuned in. Major labels are rapidly developing content strategies around this area.

Education: Roblox is already used in schools to teach programming, which was my son’s first exposure to the platform.

Meanwhile, developers are creating interactive experiences where students can “explore” ancient Rome or Greece, or students can enter online robotics competitions just to give a couple examples.

I’m not sure of the monetization strategy here, but bringing in new users and creating more engagement generally translates to more revenue.

Advertising: Roblox has tens of millions of monthly users, but to date has generated very little revenue from advertising. Some brands like Chipotle and Vans have invested heavily to create experiences, and now a lot of other brands are developing “Roblox strategy” with marketing agencies setting up specifically for the purpose.

Market: Here, Roblox is just talking about verch. They see a world where you can buy anything virtually–houses, cars, pets, artwork. Some of these items can be quite rare or one of a kind pieces only available on the platform. In a way, you can think about the rare items like NFT’s.

One of the technology upgrades which is arriving to Roblox is 3D, layered clothing so avatars can dress more realistically. This is a big bonus for content creators because some of them make their income exclusively from verch, and this opens up a wide range of new avenues for new “products.”

Commerce: Obviously, if a brand is advertising on Roblox, has an online presence on Roblox, has potential customers interacting with verch on Roblox, it would make sense for Roblox to become a platform where consumers can buy real actual items. If Vans has customer buying verch shoes, some of those people would probably want the real shoes. If Lil Nas X sold $10 million of verch, I imagine there is a market for actual concert tour T-shirts.

In short, this is a huge potential growth avenue for Roblox which is in nascent stages.

From the technology side, Roblox used to feature really blocky crappy graphics–like Minecraft. The new generation of experiences look much more realistic, which makes the platform much more suitable for events, branding, shows, etc…

The other aspect where Roblox has developed a good reputation is online safety and security. The platform started for kids under 13, so from the start there has been a lot of both human and AI monitoring of content and interaction. Somehow the platform has managed to maintain a good reputation and online security is one of their core values.

In the 4 hour presentation, there was obviously a lot more, but the overall view is a company run by the founder who has been working on the vision for 16 years. They are very clearly focused on developing the online experience and making sure they are spending money in the right areas. Execution is going to be key because they have almost unlimited growth avenues. Because of the execution risk, I expect a very long and bumpy road, but my inclination is to add to my position either on irrational discounts to the price and/or when future earnings confirm strong performance.