roblox-business-model

Roblox Business Model: Monetizing The Metaverse

Roblox is an online gaming platform where users can create avatars and explore various gaming experiences. Each experience will be monetized based on how its developer has structured the game. For instance, free games allow users to spend the platform’s currency, called Robux, to get specific enhancements or purchase items like clothing accessories for the avatars, simulated gestures from the Roblox Avatar Marketplace. Therefore, Roblox makes money by earning a commission on each transaction and through its internal ad network.

Origin Story

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Source: Roblox Financial Prospectus

In 1989 David Baszucki and Erik Cassel programmed a 2D simulated physics lab called Interactive Physics. This experience would be the foundation of what would later become Roblox.

Roblox nowadays is a platform where over thirty million people connect, play, and explore the various 3D digital world, entirely user-generated (built by independent developers). Indeed, by 2020 Roblox counts almost seven million active developers.

Roblox has over the years championed a new virtual reality category; they called “human co-experience,” a form of social interaction that combines gaming, entertainment, social media, and even toys.

This category also called metaverse is a virtual universe made of 3D virtual spaces.

This metaverse might have just become viable from an infrastructure standpoint as cloud computing, coupled with a high bandwidth internet and powerful portable devices, make it possible to build, access, and experience those virtual worlds.

Roblox platform consists of three main parts:

  • Roblox Client: the consumer-facing application that enables users the exploration of 3D digital worlds.
  • Roblox Studio: the toolbox allowing developers to build, publish, and operating 3D experiences.
  • And the Roblox Cloud: the underlying infrastructure powering both Roblox Client and Roblox Studio.

Value model

Roblox value model is built around a virtual world made primarily of 3D experiences, entirely user-generated. Therefore, on the one hand, Roblox has to inspire users to join and continuously access those virtual realities.

On the other hand, Roblox also has to attract independent developers and creatives to keep building, publishing. And running their virtual experiences.

So that users will be prompted to use the Roblox currency, the Robux, developers will build viable businesses on top of those virtual realities, and Roblox as a virtual ecosystem earns a small percentage on each transaction.

Mission and vision and core values

Roblox’s mission is to “build a human co-experience platform that enables shared experiences among billions of users.”

Roblox long-term vision is to recreate a “metaverse platform supporting a broader range of positive educational and social experiences.”

As such Roblox focuses its efforts in a few directions such as:

  • Fostering the community of users around the shared virtual worlds.
  • Supporting developers on the platform in creating, building, and operating those virtual worlds.
  • Working to make that virtual environment civil, safe, and secure to users.

Therefore one crucial aspect as the platform scales is to, on the one hand, keep developers motivated and, on the other hand, making sure that the quality of those virtual experiences remains high.

Thus, Roblox five core values are structured around these needs and they are:

  • Respect the Community.
  • Take the Long View.
  • Get Stuff Done.
  • Self-Organize. 
  • Own It. 

Value propositions and key stakeholders

As a two-sided platform, with its entirely user-generated content there are two core players:

  • Developers/Creatives building, publishing, and operating virtual experiences via Roblox.
  • Users experiencing the Roblox multiverse.

Value proposition to users

Users can create their avatars to explore the different virtual worlds through Roblox and engage with other users. Therefore, in terms of value propositions, the more users will have a variety of virtual experiences, an engaged community, and several ways to personalize their own virtual reality the more those will become interesting for more users.

Value proposition to Developers and Creators

Since the virtual content on the platform is entirely user-generated, developers and creators are the platform’s most valuable users. In fact, they help the platform development in several ways:

  • Building virtual experiences.
  • Building avatars and avatar items.
  • Building tools and 3D models for other developers.

These elements are the foundation of the success of the platform in the past and for future growth.

So how does Roblox incentivizes developers to create experience and creators to design avatars? Roblox focuses on developers’ and creators’ two core metrics: earnings and user engagement within the virtual experiences.

In short, as long as developers and creators will be able to earn from their work, and they will have an engaged community supporting them, the more the platform will develop.

The more developers build experiences on top of Roblox, the more it will become advanced for other developers as those joining will leverage on the toolbox built by experienced developers on the platform. At the same time, experienced developers will monetize their experience by selling their tools and models to other developers.

In that respect, Roblox monetization is built on top of two marketplaces, one for users (to buy enhancements within experiences and avatars) and for developers (to buy tools and models developed by others).

Key Business Model Highlights

  • Roblox is a virtual reality platform, getting monetized primarily via its currency, the Robux, used to enhance virtual experiences, to buy avatars and other accessories.
  • Roblox platform’s content is entirely user-generated, as such developers are incentivised to build new virtual experiences, tools, to enrich the platform.
  • Roblox builds upon the concept of “human co-experience,” a form of social interaction that combines gaming, entertainment, social media, and even toys. This goes toward the concept of metaverse.
  • Roblox distribution is primarily based on mobile platforms like Apple App Store and Google Play Store.
  • Its revenues come primarily from the users buying Robux on the platform, developers’ purchases of tools, and the purchase of tools.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"