How game developers built a $ 30 billion platform

Ethan Gawronski was about 10 years old when he discovered Roblox. He immersed himself in his games, mainly to socialize with other children.

Now, at 20, Gawronski has his own Roblox game in which he works full time with his girlfriend, Elle Deppe. The couple, who met on the app, won more than $ 49,000 last month from their action game, Bad Business, by selling clothes and weapons that players can use to make their characters look nicer and perform better. .

“In communities of private developers, there were people who were making stupid amounts of money and we thought we could do that,” said Deppe, who is also 20, in a recent interview.

Bad Business is among the millions of user-created games on Roblox, children’s entertainment set to go public on Wednesday after being valued at $ 29.5 billion in January. The company built one of the highest grossing apps for Apple and Google devices, turning young users into game creators, without forcing them to learn complicated coding. The company rewards developers by sharing 30% of the revenue from online purchases.

Roblox said in the last update of its prospectus that it paid developers $ 328.7 million last year, almost 200% more than in 2019. This far surpassed the company’s 82% sales growth last year, when recorded $ 923.9 million in total revenue.

More than 1,250 developers have won at least $ 10,000 in the Robux digital currency, which can be converted into cash. More than 300 won $ 100,000 or more.

Roblox is telling potential shareholders to be comfortable with their substantial payments. In its presentation to investors last week, the company said it plans to spend even more with creators to encourage high-quality content and fund larger teams of engineers, designers, artists and producers.

“What used to be a hobby has become a job for an individual and is now increasingly becoming the basis for the incredibly creative big studios that are emerging on our platform,” said CEO David Baszucki, who founded Roblox in 2004.

Gawronski dropped out of college last semester after taking two years of courses at Grand Valley State University, where he changed courses several times. Deppe finished his two-year associate degree in Portland, Oregon, and decided it was enough. They have lived together since last year in an apartment in Grand Rapids, Michigan.

The couple met in person for the first time in 2017 at a Roblox developer conference. They soon started working together and were invited to an acceleration program at Roblox two years later, on the company’s campus in San Mateo, California. That’s when they started building Bad Business.

“The goal of the acceleration program for us was to build something that was profitable enough for us to live together,” said Gawronski, adding that monthly revenue has increased by about 30% since September. “It was a little risky, but it worked.”

Gawronski and Deppe update the game every week with new weapons, maps and other features. Along the way, they were able to add another full-time employee and eight hires.

Roblox was a major beneficiary of the Covid-19 shutdowns, which forced children to leave the classroom and away from their friends. With no school to attend and canceled birthday parties, children turned to Roblox, where they could virtually socialize, browsing theme parks, participating in shows and playing action games, while keeping in touch using their popular text chat feature. .

Daily active users increased 85% in 2020 to 32.6 million. The number of hours that players spent on the app more than doubled to 30.6 billion.

This unexpected and unprecedented growth has created some challenges around its developer community. The company had to face an influx of spammers and scammers who want to take advantage of some of the millions of children who are ready and willing to spend their parents’ money on Robux.

The game’s pop-ups attract users with the promise of free Robux if they complete a survey, just to redirect them to other sites where there is no Robux and even more spam. In some cases, Roblox developers unknowingly install a malicious plug-in from the game development studio, infecting their own game.

“Due to the popularity of our platform, we believe that we are an attractive target for this type of attack,” Roblox said in his prospectus. The company said it is investing to ensure that third parties cannot access user data and to prevent phishing, spamming and malware as much as possible.

Roblox’s second largest expense, behind developer fees, is infrastructure, privacy and security. These costs jumped 69% last year, to $ 264.2 million.

Alexander Hicks, developer of RPG Robloxian High School, said he noticed an increase in spam at the beginning of the pandemic, when there was an increase in the number of new users. But he said the company acted quickly to restore order.

Hicks has a deep economic interest in Roblox keeping his place clean and prosperous. In 2020, its gaming studio, RedManta, doubled the site’s revenue to $ 2 million.

In addition to Robloxian High School, RedManta is the developer of World // Zero, where children come together to fight monsters. Hicks opened the company in 2018 after leaving Carleton University in Canada and moving to Silicon Valley. He was already earning $ 50,000 a month from high school gambling and was ready to reinvest his profits to build a business.

It was not all right. As an ambitious player with no real business experience, Hicks hired about 15 people, none over 22 years of age. His company’s initial efforts to duplicate Robloxian High School’s success failed and RedManta burned money so quickly that he had to fire many of his first employees.

“I had hired to our capacity, so when the game started to go so badly, I could see a future where we would not have money in the bank to continue financing,” said Hicks. “This experience gave us the vision of how to climb without taking too much risk.”

Hicks’ business prospered last year with the growth driven by the Roblox pandemic and the success of his second game, which has 1.2 million active users per month, according to its website. He also closed the Silicon Valley office because of shelter requests there and moved at least temporarily to Los Angeles, where he rented a house with friends.

RedManta now has 10 people, spread across the US and Canada, adding features to both games while working on the next prototype.

“The goal is to increase the scale to have multiple games and multiple teams to stay diverse, so that if a game sees its popularity drop, we will be safe with others,” he said.

Soon, Roblox will be able to offer developers another way to diversify: in-game ads.

So far, almost all of Roblox’s revenue has come from virtual items. More recently, the company launched a premium subscription service so that users could get a certain amount of Robux every month.

But Roblox began to engage with branded content, allowing companies like Warner Bros., Netflix and Marvel to market their products through virtual experiences. Pop band Why Don’t We held an exclusive launch party at Roblox over the weekend for their new album.

Sam Drozdov, a former Facebook product designer, sees a potentially greater and untapped opportunity for advertising. In January, he launched Bloxbiz to allow game developers to show ads on their games, using billboards and 3D posters.

Drozdov said that some developers did this on their own, placing static ads on their games. But there was no ad network to connect companies with hundreds or thousands of Roblox titles in an automated way, although in-game advertising is a fast-growing business in games for mobile devices, consoles and the computer.

Bloxbiz is still testing the technology and hasn’t started making money yet. One of the main challenges is to allow brands to reach many users, while looking for the types of games they want to target and avoid those they don’t. For example, they may want to stay out of violent games or focus more on those that involve food.

Drozdov said that Bloxbiz will share the revenue with developers and is mainly chasing those who have popular games, but are not making enough money with Robux to have a full-time job.

“Roblox wants them to make money, but many of them have not yet reached a point where they can make a living,” said Drozdov. “We were interested in how we can accelerate this and create a new monetization option for Roblox game developers.”

WATCH: How video game technology is helping Hollywood to become virtual during coronavirus