How game developers built a $ 30 billion platform

Ethan Gawronski was about ten years old when he discovered Roblox. He dives into his games, mostly to hang out with other kids.

At the age of 20, Gawronski now has his own Roblox game with which he works full time with his girlfriend, Elle Deppe. The couple, who met on the app, earned more than $ 49,000 last month from their action game Bad Business by selling outfits and weapons that players can use to make their characters look cooler and perform better.

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

Bad Business is one of the millions of games created by the user by Roblox, and the children’s entertainment will be launched on Wednesday after being valued at $ 29.5 billion in January. The company built one of the best apps for Apple and Google devices by turning young 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 says in the latest update of its prospectus that it paid $ 328.7 million to developers last year, almost 200% higher than in 2019. This far exceeded the company’s sales growth of 82% last year when it raised 923.9 million recorded in total revenue.

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

Roblox tells prospective shareholders to be comfortable with its hefty payouts. In its investor presentation last week, the company said it plans to shell out creators even more to encourage higher quality content and fund larger teams of engineers, designers, artists and manufacturers.

“What used to be a hobby has become a job for an individual and is now increasingly becoming the basis for large, incredibly creative studios emerging on our platform,” said Rob Basx CEO David Baszucki in Founded in 2004.

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

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

“The goal of the accelerator program for us was to build something that was profitable enough to be able to move in together,” Gawronski said, adding that monthly revenue has risen by about 30% since September. “It was a bit of a gamble, but it worked out.”

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

Roblox was a big beneficiary of the closures of Covid-19, which forced children out of the classroom and away from their friends. Because no school was attended and birthday parties were canceled, children turned to Roblox, where they could virtually visit, navigate theme parks, attend concerts and play action games while also keeping in touch using the popular text chat feature.

Daily active users increased by 85% in 2020 to 32.6 million. The number of hours players spent on the app more than doubled to 30.6 billion.

That unexpected and unprecedented growth has posed some challenges around the developer community. The company has faced an influx of spammers and scammers who want to take advantage of the millions of children who are ready and willing to spend their parents money on Robux.

In-game pop-ups entice users with the promise of free Robux when they complete a survey, only to lead them to other sites where there is no Robux and more spam. In some cases, Roblox developers unknowingly install a malicious plugin from the game development studio that infects their own game.

“Because of the popularity of our platform, we believe we are an attractive target for these types of attacks,” Roblox said in its prospectus. The company said it is investing to make sure outsiders do not have access to user data and to prevent phishing, spam and malware as much as possible.

Roblox’s second biggest expense, behind development fees, is infrastructure, privacy and security. This cost increased by 69% last year to $ 264.2 million.

Alexander Hicks, developer of the role-playing game Robloxian High School, said he noticed an increase in junk mail early in the pandemic when there was an increase in new users. But he said the company acted fairly quickly to restore order.

Hicks has a deep economic interest in Roblox in keeping its website clean and prosperous. In 2020, its gaming studio, RedManta, doubled its website revenue 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 dropping out of Carleton University in Canada and moving to Silicon Valley. He already earns $ 50,000 a month from the high school game and was ready to reinvest his profits to build a business.

It was not all right. As an ambitious player with no real experience, Hicks employed about 15 people, none older than 22. His company’s initial attempts to duplicate the success of Robloxian High School failed, and RedManta burned cash so quickly that he had to resign. many of its early employees.

“I was appointed in our capacity, and when the game didn’t start to go so well, I could see a future where we would not have money in the bank to fund it,” Hicks said. “That experience gave us the foresight on how to scale without taking too much risk.”

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

RedManta now has ten people, spread across the US and Canada, who are adding features to both games while also working on the next prototype.

“The goal is to scale up so that we have multiple games and that multiple teams need to stay diversified. If one popularity sees that popularity decline, we are safe with others,” he said.

Roblox may soon give developers another way to diversify: in-game ads.

So far, almost all of Roblox’s revenue comes from virtual items. More recently, the company has built in a premium subscription service so users can get a certain amount of Robux every month.

But Roblox has started launching branded content so companies like Warner Bros., Netflix and Marvel can market their products through virtual experiences. Pop group Why Don’t We held an exclusive launch party at Roblox this weekend for their new album.

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

Drozdov said some developers did it on their own and placed static ads in their games. But there was no advertising network to connect businesses with hundreds or thousands of Roblox titles in an automated way, even though in-game advertising is a fast-growing business in mobile, console and computer games.

Bloxbiz is still testing the technology and has not yet started making money. One major challenge is to allow brands to reach many users while targeting the types of games they want to reach and avoiding those they do not want. For example, they want to stay out of the violent games or focus more on food involved.

Drozdov said Bloxbiz will share the revenue with developers and mostly go to those who have popular games but do not earn enough money through Robux to make it full time.

“Roblox wants them to make money, but a lot of them are still not at a point where it’s their livelihood,” Drozdov said. “We were interested in how we could accelerate it and create a new monetization option for Roblox game developers.”

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