TKS x Jo Redfern: Roblox Q3 2023 Earnings Notes
Focus on Broad Audiences, but still Plenty for Kids!
Long-time followers of this newsletter will know that it basically started life as a need-to-know round-up of headlines for kids media execs from the quarterly Netflix earnings reports. From there it has expanded to looking at the kids media distribution space more broadly, as relevant data piled up and information held in privilege expired. So far, we’ve mainly kept to streaming. I try to be pretty disciplined about staying in my lane and writing only about the things I really know about.
Of course, having worked at a multi-silo media company, I have some knowledge of numerous different businesses. Any inclination I might have to opine on these adjacent areas tends to be salved by the awareness that the issues these businesses face are as big and complex as they are in streaming and my understanding is far less. There is advisable humility in knowing what you don’t know, with full respect and appreciation shown to those who know more.
In the context of kids media, a platform I work in often but would not ever profess to be an authority on is Roblox. This might also be because I have a friend who I’d deem far more immersed in the platform, for many more years, than myself.
Jo Redfern’s LinkedIn posts about kids media at large, very often Roblox, are one of my go-to sources for both information and context on how young audiences are consuming and engaging with content today. She often posts after Roblox earnings and this time around I grabbed the chance to see if she’d write up a longer form note as a Kids StreamerSphere special. To my delight, despite being an exceptionally busy lady, she said yes! So here are her key takeaways from Roblox earnings results Q3 2023.
Roblox Earnings Q3 2023: Kids Media Key Takeaways
Roblox is a behemoth gaming platform like no other. Often cited as the “YouTube of games,” its growth and success among users lies in its highly social nature and user-generated content. TV execs and brand owners should see Roblox not as a gaming platform, but as a multi-faceted space that blends entertainment, creativity, and social interaction and that occupies an increasingly large proportion of kids’ online time. According to a report from Qustodio, in 2022 kids spent more time per day on Roblox than on any other app, clocking up almost three hours (expect this to grow further), making it more popular than TikTok.
The Numbers
On the face of it Roblox appear an unstoppable business with financials from their Q3 earnings report looking overwhelmingly favorable. And they’re big numbers alright:
· Revenue was up 38% year-on-year to $713.2 million
· Bookings of $839.5 million showed a 20% increase (“bookings” equates to sales of their virtual currency, Robux)
· Net loss down to $277.2 million, which is a smaller-than-expected loss
That last figure is key. Many people don’t realize that Roblox still make a net loss. They haven’t yet reached profitability. This is a fact that has unnerved analysts in previous quarters and there was a concern that Roblox didn’t seem to be getting a handle on operating costs.
Many Wall Street analysts had a “sell,” or at least a “hold,” rating on the stock. In one interview about Roblox’s Q2 earnings, it was suggested that the platform’s leadership take a leaf out of Amazon CEO Andy Jassy’s playbook and focus on cost-cutting and profitability. It seems the message landed, and in this Q3 earnings report, much was made of moderation of Roblox’s spending growth, including on personnel costs.
Looking at the volume of people using the platform, again the growth is impressive—almost scarily so. Roblox grew their daily active user base to a whopping 70.2 million. This means that there are more people on Roblox daily than there are people in most countries in the world. Mind-boggling.
Roblox have gone on a bit of a journey with their target user segment. The en masse presence of kids on the platform is undeniable. Seriously. Even Roblox admit it. Kids essentially made the platform, but they are, as we all know, tricky to monetize, particularly in a digital environment where there are specific laws precluding it (those restrictions ease at 17+). More recently they have been trying to distance themselves from that kid-centric association by fanfaring other audience segments. All motivated by the ever-elusive profitability.
For the past few quarters the spotlight has been on the 17–24 age group, which was noticeably absent from much mention in this earnings. What they DID focus on was the growth in both volumes and time spent across all age groups, which again shows that Roblox are under pressure to bring in ad dollars across their entire 13+ demographic and want advertisers to take note.
The number of 13–16-year-olds increased 22%, 17–24-year-olds increased 27%, and 25+ increased 25% year-over-year.
Hours “engaged” on the platform also grew across all age groups by a total of 20% reaching 16 billion hours, or a little over 1.8 million years. That’s 1.8 million YEARS’ worth of combined time spent on Roblox, in just one quarter.
One thing to point out is that there is limited data revealed about users under 13, and given the platform’s focus on profit, it’s clear that those that cannot be monetized don’t feature highly in Roblox’s core plans (save for their Community Fund, more of which is mentioned later in this newsletter).
But kids are the reason Roblox are a success, and still make up a significant proportion of their user base, so earnings call aside, embracing Roblox is a compelling way for brand and IP owners to explore new forms of interactive and community-driven content that resonates with their younger audiences.
Other Roblox Headwinds
Safety and civility—plenty of eagle-eyed watchers are looking for Roblox to slip up where kids are concerned. The risks are real, and they haven’t been immune to controversy. 2023 has seen lawsuits accusing the platform of enabling child sexual exploitation and claiming that Roblox allowed users to spend its virtual currency on third-party gambling sites. Two mothers filed a class action complaint that they were unaware their children were gambling in this way and had lost thousands of dollars. They allege that because Roblox allows these sites to operate with their proprietary currency, there is a violation of the Racketeer Influenced and Corrupt Organizations Act.
Kids Content Highlights
Blippi on Roblox is a significant move. When Moonbug Entertainment jump on board with one of their preschool IPs, then it’s far past time for kids media professionals to take the platform seriously. Blippi’s Playground launched in October and typifies the kind of experience that kids love on the platform as they get to explore Blippi’s world, complete quests to earn tokens, dress up their avatar with exclusive Blippi items, and customize their own playground.
There is also a growing trend of premiering long-form content on the platform, particularly from Netflix. Sonic Prime Season 2 launched concurrently on YouTube and Roblox over the Summer. This trend hit another level with Spin Master’s Unicorn Academy. The first episode of the show premiered on Roblox in Gamefam’s hugely popular game Twilight Daycare (along with a YouTube window) weeks in advance of its series launch on streaming.
What’s Next?
Last month Roblox confirmed that they are investing an additional $15 million into their Roblox Community Fund, which supports educational programming on the platform. This assists creators of experiences teaching everything from math to emotional well-being strategies. Education is underleveraged on Roblox as a whole; the potential to game-ify learning has huge potential. The trick in edutainment is not to let the EDU get in the way of the TAINMENT, otherwise kids will switch over or switch off. The Community Fund should be a big incentive to creators that want to explore innovative ways to engage kids in learning, either inside the classroom or at home, and I’m excited to see what might come of it.