The Metaverse Has Arrived
The saga of Roblox (RBLX) began in 1989 when founders David Baszucki and Erik Cassel programmed a 2D simulated physics lab called Interactive Physics, which would later go on to influence their approach to constructing the foundations of Roblox.
Students across the world used Interactive Physics to see how two cars would crash, or how they could build destructible houses.
In starting Roblox in 2004, the founding team desired to replicate the inspiration of imagination and creativity we saw in Interactive Physics on a much more extreme scale by ushering in a new category of human interaction that did not exist at the time.
People from around the world come to Roblox every day to connect with friends and together they play, learn, communicate, and explore in 3D digital worlds that are entirely user-generated, built by Roblox’s community of nearly 8 million active developers.
This is a new cyber world which humans are very much a part of.
I call this emerging category “human co-experience,” which is considered to be the new form of social interaction that was envisioned back in 2004.
Roblox’s platform is powered by user-generated content and draws inspiration from gaming, entertainment, social media, and even toys.
Some refer to this world as the “metaverse”, a term often used to describe the concept of persistent, shared, 3D virtual spaces in a virtual universe.
The idea of a metaverse has been written about by science fiction authors now for over 30 years.
With the advent of robust consumer computing devices, cloud computing, and high bandwidth internet connections, the concept of the metaverse is coming to fruition.
The Roblox human co-experience platform consists of the Roblox Client, the Roblox Studio, and the Roblox Cloud.
Roblox Client is the application that allows users to explore 3D digital worlds.
Roblox Studio is the toolset that allows developers and creators to build, publish, and operate 3D experiences and other content accessed with the Roblox Client.
Roblox Cloud includes the services and infrastructure that power human co-experience platform.
The company’s mission is to build a human co-experience platform and now investors can buy the stock betting on the value appreciation and monetization of this metaverse.
The hybrid experience is spurring a wave of new popularity and running through the Roblox numbers, it’s easy to understand why this stock that just went public through a SPAC will certainly explode higher.
The numbers are a classic roadmap of how tech growth numbers should behave and dream to behave.
They combine significant bookings and revenue with strong unit economics, free cash flow generation, and high daily active user (DAU) growth.
What are a few tantalizing growth metrics that whet investor’s appetite?
DAUs on Roblox grew 47%, from 12.0 million DAUs in 2018 to 17.6 million in 2019, and grew 82%, from 17.1 million in the nine months that ended September 30, 2019 to 31.1 million in the nine months the ended September 30, 2020.
Hours engaged on Roblox grew 45%, from 9.4 billion in 2018 to 13.7 billion in 2019, and grew 122%, from 10.0 billion in the nine months that ended September 30, 2019 to 22.2 billion in the nine months that ended September 30, 2020.
Revenue grew 56% from $312.8 million in 2018 to $488.2 million in 2019 and grew 68% from $349.9 million in the nine months that ended September 30, 2019 to $588.7 million in the nine months that ended September 30, 2020.
The latest revenue performance shows 2020 revenue expanding at 82% year over year to almost $1 billion in annual sales and 2021 is slated to be the year where annual revenue hits around the $3 billion mark at year-end.
How is Roblox planning to outperform in 2021?
Platform Extension: Significant investments in high fidelity avatars, more realistic experiences, 3D spatial audio technology, and other social features. These investments should enable Roblox to support human co-experience.
Age Demographic Expansion: As a result of platform extension, developers and creators are now able to build higher quality experiences and content that appeal to an older age demographic.
International Reach: I believe there is significant runway in unsaturated markets in the world for Roblox to grow by the same organic, word-of-mouth user and developer growth that U.S., Canada, and the United Kingdom experienced.
Monetization: I predict that there is significant potential to increase monetization by actively working with developer and creator community to help them improve their monetization methods. Second, Roblox recently introduced a subscription service, Roblox Premium, which will increase conversion of free users to paying users and encourage the retention of paying users. Third, digital marketing could be a monetization tool that could attract many marketing budgets as the platform matures.
Jump on the bandwagon before others find out about this company. We are still in the early innings of Roblox’s trajectory, and this is the ultimate stay-at-home economy buy and hold stock.
