How game developers have built a $ 30 billion platform

Ethan Gawronski was about 10 years old when he discovered Roblox. He got into his games, especially to socialize with other children.

Now 20, Gawronski has his own Roblox game that he works full time with his girlfriend, Elle Deppe. The couple, who met in the app, earned over $ 49,000 in the last month of 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 I thought we could do that,” said Deppe, who is also 20, in a recent interview.

Bad Business is among millions of games created by users on Roblox, children’s entertainment will go public on Wednesday, after being valued at $ 29.5 billion in January. The company has built one of the highest-grossing apps for Apple and Google devices, turning young users into game makers without forcing them to learn complicated coding. The company rewards developers by sharing 30% of virtual procurement revenue.

Roblox said in the latest update to its prospectus that it paid developers $ 328.7 million last year, up nearly 200% from 2019. This far exceeded the company’s sales growth of 82% last year, when recorded total revenues of $ 923.9 million.

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

Roblox tells potential shareholders to feel comfortable with its strong payments. In its presentation to investors last week, the company said it intends to distribute even more to creators to boost premium content and fund larger teams of engineers, designers, artists and producers.

“What was once a hobby has become a job for an individual and is now becoming more and more the basis 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 classes at Grand Valley State University, where he changed courses several times. Deppe completed his two-year associate degree in Portland, Oregon, and decided it was enough. I’ve been living together since last year in an apartment in Grand Rapids, Michigan.

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

“The purpose of the acceleration program for us was to build something profitable enough to move together,” Gawronski said, adding that monthly revenues had risen by about 30 percent since September. “It was a bit of a gamble, but it worked.”

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

Roblox was a huge beneficiary of the Covid-19 stops, which forced the children to leave the classroom and move away from their friends. With no school to attend and canceled anniversary parties, the children turned to Roblox, where they could socialize virtually, surfing theme parks, attending concerts and playing action games, while staying 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 in the application doubled to 30.6 billion.

This unexpected and unprecedented growth has created some challenges around its developer community. The company has had to contend with an influx of spammers and crooks who are gone to take advantage of some of the millions of children who are ready and willing to spend their parents’ money on Robux.

The pop-up windows in the game attract users with the promise of free Robux if 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 unknowingly install a malicious plugin 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,” Roblox said in its prospectus. The company said it is investing to ensure that external parties cannot access users’ data and to prevent phishing, spam and malware as much as possible.

Roblox’s second biggest expense, behind developer fees, is infrastructure, privacy and security. These costs rose 69% last year to $ 264.2 million.

Alexander Hicks, the developer of the role-playing game Robloxian High School, said he noticed an increase in spam at the beginning of the pandemic when there was an increase in new users. But he said the company took action quickly enough to restore order.

Hicks has a deep economic interest in Roblox keeping its site 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 team up to fight monsters. Hicks started the company in 2018 after leaving Carleton University in Canada and moving to Silicon Valley. He was already earning $ 50,000 a month from the high school game and was ready to reinvest his profits to build a business.

It wasn’t all up and right. An ambitious player with no real business experience, Hicks hired about 15 people, none over the age of 22. His company’s initial efforts to double the success of Robloxian High School failed, and RedManta burned cash so quickly that it had to lay off many of its first employees.

“We committed to our ability, so when the game started to not work as well, we could see a future where we didn’t have money in the bank to continue financing it,” Hicks said. “This experience gave us the prediction on how to scale without taking too much risk.”

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

RedManta now has 10 people, spread across the US and Canada, adding features to both games, while also working on the next prototype.

“The goal is to expand so that we have more games and more teams that stay diversified, so if one game sees its popularity decline, we are safe with others,” he said.

Roblox could soon offer developers another way to diversify: in-game ads.

To date, almost all of Roblox’s revenue comes from virtual goods. More recently, the company has launched a premium subscription service so that users can receive a certain amount of Robux each month.

But Roblox began to deal with branded content, allowing companies such as Warner Bros., Netflix and Marvel to market their products through virtual experiences. Pop band Why Don’t We hosted an exclusive Roblox launch party over the 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 allow game developers to display ads in their games, using 3D panels and posters.

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

Bloxbiz is still testing the technology and has not yet started making money. A key challenge is to allow brands to reach many users, while targeting the types of games they want to reach and avoid those they don’t. For example, they may want to stay out of violent games or focus more on those that involve food.

Drozdov said that Bloxbiz will share the revenue with the developers and is aimed mostly at those who have popular games, but does not earn enough money through Robux to do their job full time.

“Roblox wants them to make money, but many of them are still not at a time when their livelihood is,” Drozdov said. “We were interested in how we could speed this up and create a new money-making option for Roblox game developers.”

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