Roblox is going public after a blockbuster year. Here’s how and why it paid out more than $250 million to its largely teenage developer community last year.

Brookhaven Roblox

Summary List Placement

For kids stuck at home in the pandemic, Roblox isn’t quite as good as playing soccer with your friends at lunchtime — but it might just be the next best thing.

Roblox is a hit with the youngest generation, with the company recently boasting that it counts over half of all Americans under the age of 16 as users. Indeed, the platform has exploded from 17.6 million daily active users in 2019 to 31.1 million as of September 2020. Amid all of that growth, the company’s valuation has soared from $4 billion in early 2020 to $30 billion in early 2021 as it raised $520 million in fresh funding.

Next up, Roblox is going public in a long-awaited direct listing, slated to be held on Wednesday. 

Unlike “Minecraft” or “Fortnite,” Roblox isn’t exactly a game, but rather a platform where players can jump from one user-generated experience to the next. Each and every game is free to play, but most offer premium features or benefits in exchange for Robux, an in-game currency that can be purchased for real money. Roblox rewards its community of independent developers by paying them based on the Robux spent in their games.

There are 40 million games on Roblox, but the most popular can see in the vicinity of 500,000 concurrent players during peak times.

In November 2020, the pet simulation game “Adopt Me!” became the first game in the platform’s history to reach a total of 20 billion visits, and has 406,000 concurrent players at the time of writing. “Brookhaven,” a role-playing game, has amassed 477,000 concurrent players at the time of writing.

And the Robux spent on these games has made some of the game’s largely-teenage community of developers into millionaires. In July, the time of its last update, Roblox said it was on track to pay out as much as $250 million to those developers in 2020 alone.

To put it in perspective, it’s more than a game.

“It’s also a free market that works remarkably well,” CEO David Baszucki told Insider.

Roblox CEO David Baszucki

Here’s how Roblox works, why it’s so popular with both developers and gamers, and what comes next.

How it works

The appeal of building games in Roblox, for younger developers in particular, is turning something fun into an unexpected potential source of revenue. Developers get a 24% commission on all the Robux spent in their game, which can add up quickly, particularly for popular titles. 

One young Roblox developer told the Guardian: “It never feels like a job, which of course is the best part. I enjoy building and do so in my free time, and I’m simply rewarded when it comes to doing what I love.”

James McQuivey, VP and principal analyst with Forrester, told Insider that games like Roblox just attract a younger generation through their ability to play games endlessly. 

“It’s like the ‘Minecraft’ phenomenon, there’s just something about being a certain age that makes you much more willing to spend endless hours experimenting with stuff, playing somebody else’s game, making a game yourself,” McQuivey said.

The company provides software called Roblox Studio free of charge, allowing users to write their games in Lua, a scripting language named in the top 5 easiest languages for a kid to learn. Roblox Studio itself comes with a built-in, user-friendly text editor that makes it easy for less-experienced developers to code a dynamic video game.

Indeed, Roblox makes game creation easy for young developers in a variety of other ways, too. Roblox developers don’t have to worry about setting up servers, user logins or chat functionality, or a payments system: The platform takes care of all of that. Most games built in Roblox Studio will work on any device on which the Roblox app itself is available, which includes PCs, smartphones, and the Xbox One game console.

McQuivey said that this sort of low and no-code game development is the future of the industry. He predicts that within five years people will be able to customize games with even greater ease.

“I think you’ll see games where the players can modify the game as they’re playing it by saying, like, ‘Make it nighttime, change that monster to three inches tall instead of 30 feet tall,'” McQuivey said. “And that’ll be a whole new world of gaming. Roblox is basically laying down the foundation for that kind of thing.”

How Roblox developers make money

The opportunity for Roblox developers has only increased as the platform has grown. In 2017, Roblox said that it would pay out $30 million to developers — only three years before that figure jumped to $250 million in 2020.

That growth comes as more kids stay inside during the pandemic, with an attendant leap in screen time. 

“At a time like this, where people are housebound, being able to escape into the digital world and have these kinds of fun, imaginative experiences with a friend, is very, very relevant,” Craig Donato, Roblox’s chief business officer, recently told the New York Times.

Some games have microtransactions where you can trade real money for Robux. Players will use them to get anything from cosmetic updates to exclusive in-game items and power-ups, depending on the game. For example, in “Adopt Me!” you can purchase “gamepasses” which give the player rare pets, potions, and pet accessories. In Brookhaven, users can use Robux to buy passes that include vehicle upgrades or premium music.

Roblox Adopt Me!

Roblox has also shown signs of expanding beyond Robux as a way to help developers make money: In February 2020 it launched a way for developers to get paid based on the time that subscribers to the Roblox premium subscription spend in their game.

The young developers behind the scenes

While it’s not known exactly how much prominent creators make — the company keeps that information private —  we do know some success stories — including young adults apparently making enough to cover their college tuition from Roblox revenue.

That includes Alex Balfanz, a 20-year-old Duke University student who recently told CNBC that his popular Roblox role-playing game “Jailbreak” had been played almost 3 billion times with seven-figure earnings. Balfanz claims that after only a few months, he was able to afford all four years of his college tuition at Duke.

jailbreak_1920x1080

Andrew Bereza, an 18-year-old from New Jersey, made enough from “Miner’s Haven” — a so-called tycoon-style game — to cover the entirety of his undergraduate degree at the University of Washington. 

There’s also 24-year-old Alex Hicks, who began creating his own games in 2010 after starting on Roblox when he was 13 years old. Hicks told Insider that after his game, “Robloxian High School,” broke $100,000 in sales in a single month, he decided to start his own game production studio called RedManta, with a small staff of full-time developers. 

Ultimately, Roblox’s immense growth during the pandemic indicates a thriving ecosystem, and a strong foundation ahead of its direct listing, McQuivey said. It stands to benefit in the so-called creator economy, helping young creators build video games in much the same way that YouTube and TikTok support thriving ecosystems of video creators.

“If it were to become so common, a set of tools, that everybody knew how to use it, that would be fascinating, and I think Roblox is really the only game development tool that’s in position to do that, much like YouTube,” he said. “That would be a fascinating outcome. They’re not there yet. And they don’t need to be to have a meaningful IPO, but there’s potential for that kind of cultural phenomenon yet to emerge. “

SEE ALSO: Developers were annoyed at a random website that inaccurately pulled from their GitHub profiles — and say it’s a recurring frustration

SEE ALSO: The 10 most popular programming languages, according to Microsoft-owned GitHub

SEE ALSO: Top 10 programming languages companies are hiring for in 2021, according to coding bootcamp Coding Dojo

Join the conversation about this story »

NOW WATCH: Why thoroughbred horse semen is the world’s most expensive liquid

Related posts