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Roblox's $45 Billion IPO Values User-Created Game Platform Higher Than EA (arstechnica.com) 57

Posted by BeauHD from the how-it-ranks dept.
An anonymous reader quotes a report from Ars Technica: Yesterday, Roblox made good on its plans to go public, with employees and previous investors selling hundreds of millions of shares in a direct listing on the New York Stock Exchange. In a private funding round in January, those shares were worth $45. When the market closed Wednesday, they were selling at $69.50, a price that valued Roblox Corp. as a whole at $45.3 billion (as of this writing, Roblox Corp.'s stock price peaked at $77.30 and currently sits at $72.72 in Thursday morning trading).

How did this company, whose single title has become a game platform unto itself, become worth more than major game publishers like Electronic Arts and Take-Two? To help answer that question, we put together this deep dive into the numbers that are powering the Roblox revolution. They paint a picture of a company with an extremely young and incredibly engaged user base that has ballooned during the 2020 pandemic lockdowns. But Roblox is also a company that is struggling to convert its huge and growing annual revenues into profitability. Here are the valuations of Roblox and how it compares to the other gaming companies:

Roblox
- Jan. 2017: $500 million
- July 2018: $2.3 billion
- Feb. 2020: $3.9 billion
- Jan. 2021: $29.5 billion
- March 10, 2021: $45.3 billion

Other gaming companies (current valuations)
- Ubisoft: $9.58 billion
- Take-Two: $19.43 billion
- Electronic Arts: $38.09 billion
- Roblox: $45.3 billion
- Activision: $72.23 billion
- Tencent: $843.86 billion

Visit Ars' article for the full deep dive into the numbers, which are sourced from SEC documents and Roblox's own website.
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Roblox's $45 Billion IPO Values User-Created Game Platform Higher Than EA More

Roblox's $45 Billion IPO Values User-Created Game Platform Higher Than EA

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  • For now (Score:1)

    by Anonymous Coward

    Day 1 of IPOs are notoriously over-priced. The value frequently falls thereafter for a number of reasons such as lockouts expiring. Also, we're about 20 years from the first dot-bomb. There are a lot of investors now with no living memory of that, so we've got lots of stuff like $TSLA and the whole $GME, $AMC thing which you might say is a different creature. Underneath though, it's all irrational exuberance. It's just a matter of time for things to return to fair value.

  • Bubbles, bubbles everywhere (Score:4, Insightful)

    by esperto ( 3521901 ) on Thursday March 11, 2021 @05:38PM (#61149226)

    I know this game is a hit and kids are breaking their parents credit cards with it, but this is way, WAY overvalued.

    • Extra Credits on YouTube has a nice vid (Score:5, Informative)

      by rsilvergun ( 571051 ) on Thursday March 11, 2021 @05:48PM (#61149274)
      and there's 2 big takeaways from it:

      1. Roblox isn't profitable, even during the pandemic.

      2. Their user base is likely to collapse once the pandemic is over and kids can go out and play more.

      #2 is called out in their SEC filing as a risk.

      Extra Credits is a gaming industry focused channel, so their concern was what kind of evil things Roblox would do to their base to become profitable enough to keep the stock guys happy.

      As it stands they don't do all the evil loot boxy stuff that EA does. They don't really break anyone's wallet (which is probably a good reason they're not profitable, along with the 1600 mods they employee to keep things nice and safe).

      The problem is since they target 7-12 year olds they're gonna have a hard time doing the more evil stuff. Parents are likely to notice it quickly. And, well, the pandemic'll be winding down in about 6 months tops. They might go after an older audience, but as Extra Credits noted once of the things the 7-12 year olds like is the lack of "big kids" spoiling their fun. If you're a little kid and you go play COD assuming your parents don't yank you off it the first time (or the 90th time) they hear the N word you're probably also getting your butt kicked by older, more experienced players.

      So yeah, they're massively over valued, and it's probably all going to end in tears. But you never know. Isn't it fun that our entire economy is like a casino now?

      • So yeah, they're massively over valued, and it's probably all going to end in tears. But you never know. Isn't it fun that our entire economy is like a casino now?

        To be honest, I thought Roblox was already dead or dying. My older kid was into it a few years ago. I've not seen my (3 years) younger kid even bother with it so I figured it had gone the way of Club Penguin. In fact, for all the investors out there, Club Penguin is the perfect example of how these things can come and go in an instant. Even Minecraft was overvalued at $4 billion and you can see MS struggling to justify that expenditure by converting it into a money cow.

        And you're spot on about the age thing

        • Re: (Score:2)

          by G00F ( 241765 )

          I got a wider gambit of kids, as I see some growing out of it, I got a new one who can't read starting it.

          But yea, their youtube stuff is now lacking roblox content. (still a lot of minecraft)

          • Re: (Score:1)

            by Anonymous Coward

            the word you're looking for is "gamut", not "gambit", unless your kids are a risk you're taking

        • Even Minecraft was overvalued at $4 billion and you can see MS struggling to justify that expenditure by converting it into a money cow.

          I have to wonder if there's a MC2 in the works that is more of a platform from the ground up.

          For what it's worth MC has been a big hit with not only my kids, but also my friends and I over the pandemic. By running a dedicated server on a spare nettop I had laying around, my friends and I have been able to play together even when we keep different schedules.

      • Re:Extra Credits on YouTube has a nice vid (Score:4, Interesting)

        by phantomfive ( 622387 ) on Thursday March 11, 2021 @07:58PM (#61149780) Journal

        They are presenting themselves as a "game platform" for others to build on top of. This company is really old btw, founded in 2004, they finally made it. They've been trying to do the game platform thing since the beginning.

        Hardly anyone has picked up their platform since then, but Roblox finally blew up with little kids, and the founders were smart enough to take an exit and cash out.

        Contrast this with MachineZone (who built their technology platform on Erlang, interestingly). They had a game that became popular, but instead of taking an exit, they tried to pivot to being a "game platform." Since then, the valuation dropped like a rock.

      • > The problem is since they target 7-12 ear olds...

        Fascinating. I activated parental controls on my daughters iPad, and she could no longer use Roblox. Why? The app is rated "12+", so apparently is inappropriate for young children. But all her friends play, so I know it's marketed to young children. This is inappropriate.

    • I know this game is a hit and kids are breaking their parents credit cards with it, but this is way, WAY overvalued.

      I think it's because of what Epic did with the sweet, sweet Fortnight money.

    • âoeIn the short run, the market is a voting machine but in the long run, it is a weighing machine.â

      Everyone wants to fuck the new girl. As with Bitcoin, there's a lot of hoping for the bigger idiot going on with shit like this. The bag holders shall be legion.

  • Very simple why roblox is successful... (Score:4, Interesting)

    by blahplusplus ( 757119 ) on Thursday March 11, 2021 @05:39PM (#61149234)

    ... roblox got in on the early internet and noticed there was no space that kids to just make their own games and play and do goofy shit together and made it easy for kids to make their own games within a game engine and tried to make it as easy possible. Instead of making super high def AAA MMORPG's, they made ugly game with bad graphcis for kids to fart around in. Like a big toybox and virtual playground.

    Kids are creative and the CEO of roblox tuned into the fact kids will create their own fun if you give them the tools and make them easy enough to use.

    Things us older gamers hoped AAA games would continue to have in the future until the mmo and drm apocalypse.

    We older gamers wanted kids to have easier verisons of things like GTKRadiant to use to mod their big budget games:

    http://icculus.org/gtkradiant/ [icculus.org]

    That didn't happen in the AAA space, so other companies stepped in with low budget alternatives.

    • Um... they're not successful (Score:4, Insightful)

      by rsilvergun ( 571051 ) on Thursday March 11, 2021 @05:52PM (#61149292)
      they're not profitable. They have a lot of users but they're not profitable. The have a lot of users because their monetization model isn't evil and they have a metric ass ton of mods (1600) who keep the space safe for 7-12 year olds (and more importantly their parents)

      What makes this so crazy is that we're valuing a company at $45 billion who has no clear path to profitability. Something is very, very wrong there. It's probably a combination of small time investors and hedge funds getting screwed and the big investors who plan to screw them. Also we've put *way* too much money at the top and we bail the top out every time so that this kind of high risk gambling isn't high risk for the ones doing the gambling.

      I mean, if you take a gambling addict and agree to fund his addiction on the off chance that every now and then he's got a good run...

      • they're not profitable. They have a lot of users but they're not profitable.

        You don't seem to grasp that no one is after immediate profitability, getting a bunch of users or market using your product in one place is hard enough and talented people with tonnes of cash to throw at the problem think there is something of value there. Whether there actually is will be determined by the next decade or two, but the thing is to say the CEO isn't successful is nonsense, if you cashed out and got peoples money you are successful in that sense.

        • and I addressed those points in another comment, but to do it here:

          1. The reason they have so many users is COVID lockdowns. When kids can go out and play again they're likely to bleed users. They called this risk out themselves in their SEC filing.

          2. The reason they're not profitable is that their core audience is 7-12 year olds, and it takes a *lot* of mods to keep them safe and make parents comfortable (1600) and those mods can't just be cheap offshore employees since they need to understand nuanc

      • IPO's are rarely fairly valued.

        Someone non-investors may not realize is that with Government interest rates below inflation there are trillions of dollars out there chasing anything with a possible return. Many of these are straight up gambles. Although I'm a fan of Tesla their stock value is outrageously priced. They are worth more than every other automaker combined. Even if you assume they can outsell every other automaker combined and take over the entire solar and energy storage market they are still

      • I cannot find the link, but I remember that right before Google bought youtube, Mark Cuban criticized youtube with the exact same argument. Youtube was hemorrhaging cash because of the bandwidth it was using before it put it up for sale, and Cuban thought it was doomed and would be a foolish purchase.

        Ah, I found it. I did not remember it exactly, but still it is worth reading.

        https://www.cnet.com/news/mark... [cnet.com]

        • So the real question is, how do we determine whether Robox is more like Youtube, or more like Pets.com?

        • specifically for the cost of bandwidth to drop, which it did.

          Roblox's only "path" is to increase monetization on their users. They can't cut costs, because it's expensive as hell to have all those mods. If you pay your mods poorly you get crappy mods and your platform collapses. If you try to use cheap offshore labor they won't be able to effectively moderate because they won't be able to tell the difference between a borderline comment and one that crosses the line, and they won't know all the slang. I

      • Re: (Score:1)

        by mr5oh ( 1050964 )
        Wait, what do they do to keep kids safe? As a parent of a kid that likes to play roblox I'd say they do the absolute bare minimum to get by. If you are a parent of a young child you probably ought to be keeping an eye on them with Roblox. There are routinely users with obscene names (meant to be obscene) or adult names on there, adult groups on there. my son plays with a kid in his class (both of them are in the third grade), if you visit the other kids profile it has a banner for a furry group, fairly cert

    • That didn't happen in the AAA space, so other companies stepped in with low budget alternatives.

      Roblox Cyberpunk 2077 just works according to my 13 year old.

      • Roblox Cyberpunk 2077 just works according to my 13 year old.

        Tell your 13 year old. Level editors and modding were standard features before the mmo and steam drm apocalypse.

        GTKRadiant, editor for quake engine based games from 20 years ago:

        http://icculus.org/gtkradiant/... [icculus.org]

        Doom editing:

        https://www.doomworld.com/foru... [doomworld.com]

        The whole situation has been getting worse, let him in the irdeto and denuvo are coming for our games.

        (denuvo didn't exist until 2014, and the trend has been getting worse, from mmo's in 97, to steam in 2004, to origin and uplay in the 2010's).

        https://ol [reddit.com]

    • How is Roblox "the early internet"? 2004 is several years newer than than my slashdot account, and 35 years after the first RFCs.

      • Re:Very simple why roblox is successful... (Score:4, Insightful)

        by blahplusplus ( 757119 ) on Thursday March 11, 2021 @11:06PM (#61150152)

        How is Roblox "the early internet"? 2004 is several years newer than than my slashdot account, and 35 years after the first RFCs.

        Early in terms of back ended client server videogames, not in terms of when the internet first appeared in universities and the military establishment. Internet was still on 28.8k and 56K baud modems in 98/99 as early broadband was getting off the ground.

    • Sounds like a lot of bad parents, millions of them. ANyone who lets their kids play this sort of crap is a lazy bad parent.

  • Saying Tencent is a 'gaming company' is kind of like saying Microsoft is a 'gaming company'.

    • Saying Tencent is a 'gaming company' is kind of like saying Microsoft is a 'gaming company'.

      Most gaming companies haven't been gaming companies since we lost ownership of games 20 years ago with the rise of mmo's and drm, in game stores and microtransactions means game software is just a vehicle for exploitation in the modern gaming environment.

    • Yeah. Tencent is a media conglomerate and games are just one small part of what they do.

  • I mean, having seen what EA is publishing, is it wrong that Roblox is valued higher than it? Sure, revenue wise somehow EA keeps pulling in cash for some reason, but in terms of value to society. That has to be Roblox. Or Joe's Knock-off Snake and Space Invaders Emporium.

    • EA could easily double their value if they decided to trot some of their old IP that they own, but is stashed in their vaults somewhere:

      1: If they made an Ultima game (not a MMO, but a game series), all the old school, 8-bit gamers would be beating down their door for copies. It doesn't even have to be just a remastered copy of U1/U2... but a reboot, similar to the redone FFVII. This would be an instant hit, and because of the history, it wouldn't need the best graphics.

      2: Wing Commander would get immed

      • They trotted out C&C - they had free to play versions, and recently did the whole "remastered C&C on Steam thing". It was clearly very successful since you didn't even notice.

  • .... then can win in-app Grimes prizes.

  • ... that they think can separate a lot of fools from their money.

    Such valuations are literally lies turned into delusions.

  • How ? (Score:3)

    by AlexHilbertRyan ( 7255798 ) on Friday March 12, 2021 @03:53AM (#61150554)
    How can a company be worth billions when it barely makes millions. Imagine selling a corner shop seling ice creams and bubble gum for 100M. Complete madness, no wonder america is dying.
  • Its amazing here and ars how almost nobody says this is bullshit for a bad product instead of just worshipping the almighty dollar. America sell yoru arse for a dollar is always good.
  • Tencent: $843.86 billion? Really? Like in real money? Read people. And also... why are comments so bad on slashdot now? Is there anyone on the site actually working validating any sources, numbers and comments? wow.

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