How Game Developers Built a $ 30 Billion Platform

Ethan Gawronski was about 10 years old when he discovered Roblox. He delved into the games, especially to interact with other children.

Now, at the age of 20, Gawronski has his own Roblox game that he works on full-time with his girlfriend, Elle Deppe. The couple, who met through the app, made over $ 49,000 last month from their action game, Bad Business, selling outfits and weapons that players can use to make their characters look cooler and perform better.

“In private developer communities there were people making stupid amounts of money and we thought we could do that,” Deppe, who is also 20, said in a recent interview.

Bad Business is one of millions of user-created games on Roblox, the kids’ entertainment that goes public on Wednesday after being valued at $ 29.5 billion in January. The company has built one of the most profitable apps for Apple and Google devices by converting youthful users into game creators without forcing them to learn complicated coding. The company rewards developers by sharing 30% of the revenue from virtual purchases.

Roblox said in the latest update to its prospectus that it paid developers $ 328.7 million last year, nearly 200% more than in 2019. That was much better than the company’s 82% revenue growth last year, when it raised $ 923. 9 million in total revenues.

More than 1,250 developers made at least $ 10,000 in Robux digital currency, which can be converted into cash. More than 300 made $ 100,000 or more.

Roblox tells potential shareholders to feel comfortable with its hefty payouts. In its investor presentation last week, the company said it plans to spend even more money on creators to drive higher-quality content and fund larger teams of engineers, designers, artists and producers.

“What used to be a hobby has become a job for an individual, and is now increasingly becoming the foundation for large, incredibly creative studios appearing on our platform,” said CEO David Baszucki, who founded Roblox in 2004.

Gawronski dropped out of college last semester after taking two years of courses at Grand Valley State University, where he changed major several times. Deppe completed her two-year associate degree in Portland, Oregon, and decided that was enough. They’ve been living together in an apartment in Grand Rapids, Michigan since last year.

The couple first met in person in 2017 at a Roblox developer conference. They soon began working together and were invited to an accelerator program at Roblox two years later, on the company’s campus in San Mateo, California. That’s where they started building Bad Business.

“The goal of the accelerator program was for us to build something profitable enough to move into together,” said Gawronski, adding that monthly revenues have increased by about 30% since September. “It was a gamble, but it worked.”

Gawronski and Deppe updated the game roughly every week with new weapons, maps, and other features. Along the way, they were able to add another full-time employee and eight contractors.

Roblox benefited immensely from Covid-19’s abandonments, which forced children out of class and away from their friends. With no school and birthday parties canceled, kids turned to Roblox, where they can virtually socialize, navigate theme parks, attend concerts and play action games, while also staying connected with the popular text chat feature.

Daily active users are up 85% in 2020 to 32.6 million. The number of hours that players have spent on the app has more than doubled to 30.6 billion.

That unexpected and unprecedented growth has created a number of challenges for the developer community. The company has faced an influx of spammers and scammers looking to take advantage of some of the millions of children who are willing and willing to spend their parents’ money on Robux.

In-game popups lure users with the promise of free Robux when they complete a survey, only to redirect them to other sites where there is no Robux and even more spam. In some cases, Roblox developers unwittingly install a malicious plug-in from the game development studio, infecting their own game.

“Due to the popularity of our platform, we believe we are an attractive target for this type of attack,” said Roblox in its prospectus. The company said it is investing to ensure that third parties do not have access to user data and to avoid phishing, spamming and malware as much as possible.

The second largest outlay of Roblox, after developer fees, is infrastructure, privacy, and security. Those costs are up 69% last year to $ 264.2 million.

Alexander Hicks, developer of the Robloxian High School role-playing game, said he noticed more spam early in the pandemic when there was a wave of new users. But he said the company took action quite quickly to restore order.

Hicks has a great economic interest in Roblox keeping its site clean and prosperous. In 2020, his game studio, RedManta, doubled sales on the site to $ 2 million.

In addition to Robloxian High School, RedManta is the developer of World // Zero, where children work together to fight monsters. Hicks started the company in 2018 after leaving Carleton University in Canada and moving to Silicon Valley. He was already making $ 50,000 a month on the high school game and was ready to reinvest his profits to build a business.

It hasn’t all been up and to the right. An ambitious gamer with no real business experience, Hicks hired about 15 people, none of them over 22. His company’s initial attempts to duplicate the success of Robloxian High School failed and RedManta burned through the money so quickly he had to fire. many of its early employees.

“I had hired in our capacity, so as the game started to deteriorate, I saw a future where we wouldn’t have any money in the bank to keep funding it,” said Hicks. “That experience gave us foresight as to how we could scale up without taking too great a risk.”

Hicks’ business grew last year due to both Roblox’s pandemic growth and the success of its second game, which has 1.2 million monthly active users, according to the website. He also closed the Silicon Valley office due to shelter orders and at least temporarily moved to Los Angeles, where he rents a house with friends.

RedManta now has 10 people across the US and Canada adding features to both games while working on the next prototype at the same time.

“The goal is to scale up so we have multiple games and multiple teams to stay diverse, so if one game sees its popularity drop, we’re safe with others,” he said.

Roblox may soon provide developers with another way to diversify: in-game advertising.

So far, almost all of Roblox’s revenue has come from virtual items. More recently, the company rolled out a premium subscription service so users could get a certain amount of Robux every month.

But Roblox has started with branded content, allowing companies like Warner Bros., Netflix and Marvel to market their products through virtual experiences. The pop band Why Don’t We held an exclusive launch party on Roblox this weekend for their new album.

Sam Drozdov, a former product designer at Facebook, sees a potentially greater untapped opportunity to advertise. In January, he launched Bloxbiz to enable game developers to display ads in their games using 3D billboards and posters.

Drozdov said some developers have only done this by placing static ads in their games. But there hasn’t been an ad network to connect businesses with hundreds or thousands of Roblox titles in an automated way, even though in-game advertising is a fast-growing mobile, console and computer games company.

Bloxbiz is still testing the technology and has not started making money yet. A major challenge is that brands can reach many users while focusing on the types of games they want to achieve and avoid the types of games they don’t want to achieve. For example, they want to stay away from violent games or focus more on games that involve food.

Drozdov said that Bloxbiz will share the revenue with developers and mainly go after those who have popular games but are not making enough money with Robux to make it their full-time job.

“Roblox wants them to make money, but many of them are not yet at the point where they can make a living,” said Drozdov. “We were interested in how we can accelerate that and create a new monetization option for Roblox game developers.”

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