Gaming company Roblox went public Wednesday and ended its first trading session with an eye-popping $38 billion market cap.
It’s natural to wonder why a money-losing company that makes video games for an audience of mostly children and teens attracted such a lofty valuation. (Although its impressive growth throughout the pandemic-fueled gaming boom in 2020 surely helped.)
That’s where the metaverse comes in. It’s a concept that’s been thrown around in science-fiction for decades. The metaverse is difficult to understand unless you’re a huge geek, so let’s use the most accessible pop culture example. Imagine if the virtual world depicted in the novel and movie “Ready Player One” actually existed. That’s what Roblox is trying to build.
The real long-term goal for Roblox is to build a metaverse where millions (or billions!) can gather to take part in games, meetings, collaborative work and even Roblox’s own virtual economy fueled by its currency called Robux.
Look over the company’s prospectus and comments from its CEO and investors, and you get a clearer picture of Roblox’s grand vision. Roblox isn’t just making a game that slurps up your hard-earned dollars for virtual items. The company is closer to a futuristic Facebook than, say, a Zynga.
So, where does Roblox go from here?
It’s not going to be easy. The company has the gaming part of the metaverse locked down pretty well. It’s dabbling in live events. But the next challenge will be to convince people outside Roblox’s core demographic of kids and teens to come into Roblox for new kinds of experiences.
Part of that challenge comes from limitations with today’s technology. The biggest believers in the metaverse are holding out for augmented reality (AR) and virtual reality (VR) tech to improve enough to provide a true sense of presence when you jump into the a digital world. But today’s headsets are too clunky to wear for extended periods of time. Their screens aren’t sharp enough to provide realistic, pixel-free images. And most make you look like a member of Daft Punk. Good luck walking down the street like that.
But there’s a risk for companies like Roblox there too. If Facebook or Apple controls the dominant AR and VR platforms, then companies like Roblox will still be forced to play by a competitor’s rules and continue paying a cut of all sales generated in the app to someone else.
Roblox is probably fine with that though. Its focus is on its base of more than 31 million people who use Roblox each day who create the world others play in. Millions of them are developers who build and sell experiences within Roblox. And those developers make their living exclusively building for the world of Roblox.