As I do every day, this morning I made myself a coffee and sat down to trawl my Feedly feed looking for interesting things happening in the world. Usually, it’s a long list of crypto news, NFT scandals and metaverse conversations, all nestled among news pieces about new videogames. One article leapt out at me right away concerning the recent stock drop for Roblox.
On 19th November 2021 Roblox stock hit an all-time high for its short life on the markets, it sat around $134.72. At this point in the company’s history things were beginning to heat up. ‘Metaverse’, technology’s latest and greatest buzzword was being thrown around with Roblox firmly rooted in the centre as gaming’s most popular take on the futuristic concept.
CEO David Baszucki has firmly held the view that Roblox was always a metaverse project, even if the name hadn’t reached mainstream levels. When talking to Bloomberg in November, Baszucki states “We don’t usually think of ourselves as a videogame company. That said, there are millions of creators who make amazing games and experiences on the platform.” When asked how far away the metaverse is, he follows up with “we’re actually in the middle of it right now. There are over 200 million people on Roblox every month. They have an identity, they have an avatar. They do stuff together”.
Whenever an article about the metaverse surfaces, Roblox is guaranteed to feature, and it’s easy to see why. Over the past few months, Roblox has hosted experiences from some of the most famous brands; Nike, Gucci, Vans, and more recently, Nickelodeon. Roblox isn’t shy about partnering with various entertainment giants, whether they’re musicians like Twenty-One Pilots and Lil Was X or awards shows such as Fashion Awards or the Grammy awards.
However, over recent months the once favourable Roblox stock is seeing some struggle on the market. On 14th March 2022, the stock dropped to just $36.68, and while it has climbed a little to hover around the $50 mark in recent days, it’s still a fair way from only a few months ago. So, why is this metaverse aspiring platform starting to struggle? Well, there are several reasons.
Covid Stock
When the Roblox stock started to really pick up steam, society was reaching the tip of the downswing in Covid cases and lockdowns. The period we all spent at home with our kids was coming to an end. During those numerous lockdowns, Roblox had become a daily interaction for many children as they reached out to their friends and family, to play games together or just hang out in lieu of being able to do it in ‘real life’.
At the height of Covid-19, parents and teachers swarmed Roblox as a way to not only keep their children occupied but also educated. Lessons were conducted within Roblox experiences in an attempt to bring some normalcy to the routines of children.
Now, many (many) months since the outbreak of Covid-19, children are back in school; they can play sports together again, they’re lined up in classrooms ready to take their seats; and while Roblox still demands their attention in their free time, the days of always being online to escape a bleak reality have ended.
While children and adults are still pouring millions of hours into Roblox, it’s clear that investors began looking for a way out as soon as the market placed less importance on the platform. Then, a few months past Roblox was hit with repeated instances of controversy, surely shifting the investors’ focus once more.
Child Exploitation and Child Safety
On 4th April 2022, British communications regulator Ofcom published a report on children’s interactions online. In the report, Ofcom goes into detail about how children use their time in our constantly online world. Surveying groups of parents and children alike, Ofcom found that 18% of children aged 4-5 play games online. This stat grows to 38% for kids aged 5-7, then 69% for the 8-11 year bracket. While we can’t see a breakdown of how many of these children are playing Roblox, the above ‘200 million players’ figure gives us a confident idea that there are more than a few.
Over recent months Roblox has come under scrutiny for its lacklustre attempts at safeguarding children on the platform. There are hundreds of thousands of experiences on the Roblox platform; in 2021, 107,737 experiences reached 10k or more visits. Much like Apple’s App Store or the Steam store for PC, it’s increasingly difficult to police the individual games and the entirety of the content. This is why Roblox has sadly suffered from creators making school shooter simulations or areas which solicit sexual content destined for older users, without being properly age-gated.
There is also very little in the way of chat moderation for young users. Each experience within Roblox features a chat box allowing free communication, but of course, without a mod in every chat, it opens up the possibility that any child could be exposed to harassment, bullying or inappropriate content.
These issues recently hit the headlines after YouTube creators ‘People Make Games’ uncovered a large number of children were being put at risk within Roblox experiences or were being exploited when these children were creating their own games, items for sale, or experiences. Roblox has forever marketed itself as a safe place for children to use their creativity and develop games, but the report from ‘People Make Games’, further summed up by Eurogamer, shows that many kids aren’t being reimbursed for working on games or fly under the radar of workplace legislations.
Metaverse Scepticism and Fatigue
Roblox is highlighting, for better or worse, the pitfalls of the supposed metaverse. We’ve written extensively at gmw3 on the topic of the metaverse; it’s something that, when handled correctly, can be enticing and exciting. But for the metaverse to exist, certain aspects of technology need to come together and build a cohesive vision.
When we break down exactly how Roblox positions itself as a metaverse property, we can see certain stumbling blocks emerge. I’ve already touched on the lack of safety protocols for Roblox, but this highlights a growing problem across all metaverse platforms – without a centralised ‘leader’ overseeing platforms, aspects such as child safety, online bullying and black market sales will become rife. We must pose the question, how can we, as users, stay safe when there is nobody to answer to?
Speaking of decentralisation, Roblox is, and always will be, overseen by the Roblox Corporation. Investors looking to Roblox to lead the way into the metaverse must, by now, be seeing that there are limits to this idea. After all, Nickelodeon, Nike and Vans would have all been subject to scrutiny from those at the top of the chain, revealing that while Roblox can be seen as metaverse-aspiring, it’s still a walled garden in which the caretakers rule the roost.
The Metaverse Shift
So, where have these investors moved to? Well, without being able to dig too deeply due to the availability of reports, it’s clear that many brands are moving full-steam into the metaverse big four, Sandbox, Cryptovoxels, Somnium Space and Decentraland on their own, or by buying up LAND parcels. LAND purchasing is rising rapidly; in 2021 LAND sales topped out at $500 million and are scheduled to double throughout 2022.
This rapid shift from Roblox to the big four metaverse projects becomes more meaningful to investors given the value of these LAND parcels and the ease with which they could be sold on. Ultimately, Roblox only offers monetisation through the item sales – bags, clothes and other wearables – where the Roblox Corporation usually takes a 30% cut from the revenue. Whereas somewhere like Decentraland offers more incentive for investors to create and monetise their LAND through sales of NFTs and non-intrusive advertising.
Let’s look at Decentraland as our key example of investment growth. Plot number X-73 x Y38 is a relatively small and unassuming parcel of LAND. The closest district is called District X; when explored there are a few small buildings on neighbouring plots, it’s just South of Vegas City. When the LAND was put up for sale initially it sold for the equivalent of $134.16 in 2017. On 3rd January 2022, this exact plot of LAND resold (due to it being an NFT) for $17,499.97. And this isn’t even near any of the big money areas, like the fashion district.
Another example would be ATARI in Sandbox, who in earlier years purchased a huge swathe of LAND for 2020 prices, which would have reached a maximum $70k floor price. They however sold 360 parcels to Republic Realm for around $4.3 million in November 2021. Investors will see this and make the jump, because experiences in Roblox, such as NIKELAND, cannot be resold or repurposed.
Is it all Downhill?
With all of this discussed, Roblox isn’t going anywhere, of course. It still has power in drawing users to the platform through its constant partnerships with big brands and its easy to play engine which runs on practically all hardware. And, it’s still a leading player in constructing what a metaverse property could look like.
But there’s no doubting a strong shift from investors who once saw Roblox as a safe bet. It’s the same confidence that many parents give to the platform when letting their kids log in, it’s not misguided, but everything has changed over the past year, through social changes and investigations which hurt the mission statement of the Roblox Corporation. It is worth noting that since the People Make Games YouTube video aired, Roblox has announced a commitment to safety and protecting creators.
On top of this, while Roblox and the media as a whole, see the metaverse potential, it could be seen as lacking in comparison. The lack of decentralisation, ownership of more digital goods and the freedom of building and construction, could eventually hurt the brand as more competitors enter the fray.