Roblox (RBLX) goes public with a bet on the metaverse

Gaming company Roblox went public on Wednesday and closed its first trading session with an eye-popping $ 38 billion market capitalization.

It is natural to imagine why a company that loses money and manufactures video games for an audience mainly made up of children and teenagers attracted such a high rating. (Although its impressive growth during the gaming explosion fueled by the pandemic in 2020 certainly helped.)

That’s where the metaverse comes in. It is a concept that has been launched in science fiction for decades. The metaverse is difficult to understand, unless you’re a big geek, so let’s use the most accessible example of pop culture. Imagine if the virtual world portrayed in the novel and in the movie “Ready Player One” really existed. This is what Roblox is trying to build.

The real long-term goal for Roblox is to build a metaverse where millions (or billions!) Can come together to participate in games, meetings, collaborative work and even Roblox’s own virtual economy powered by its currency called Robux.

Examine the company’s prospectus and the comments of its CEO and investors, and you will have a clearer picture of Roblox’s big vision. Roblox is not just making a game that swallows his hard-earned money to buy virtual items. The company is closer to a futuristic Facebook than, say, a Zynga.

See how Roblox described this vision in its prospectus:

In short, Roblox wants to give the building blocks a metaverse to its users, who in turn will create the digital world as they wish. And as the economy in the metaverse continues to grow and develop, Roblox will receive a slice of each transaction.

Roblox is not alone in exploring the metaverse concept.

Epic Games, the company behind the popular shooter Fortnite, has its own eyes on creating a metaverse. He has already been involved in experiences outside of his main shooting game by hosting a Travis Scott show and the premiere of a clip from the latest Star Wars movie in the Fortnite world, for example. (Roblox also performed a virtual concert, with Lil Nas X.) Microsoft is also involved in the metaverse, thanks to the purchase of Minecraft developer Mojang for $ 2.5 billion in 2014.

So, where does Roblox go from here?

It will not be easy. The company has the games part of the metaverse very well blocked. It’s playing with live events. But the next challenge will be to convince people outside the Roblox child and adolescent demographic to join Roblox for new types of experiences.

Part of that challenge comes from the limitations of current technology. The biggest fans of the metaverse are waiting for augmented reality (AR) and virtual reality (VR) technology to improve enough to provide a real sense of presence when you jump into the digital world. But today’s headphones are too clumsy to be used for long periods of time. Their screens are not sharp enough to provide lifelike, pixel-free images. And most make you look like a member of Daft Punk. Good luck walking down the street like that.

Still, almost all Big Tech companies are injecting money into AR and VR with the belief that it will start a new wave of computing and perhaps one day, eliminate the need to carry a smartphone in favor of computer glasses.

Facebook has been the most open about its AR plans and plans to launch its first pair of AR glasses later this year. CEO Mark Zuckerberg is especially optimistic about the technology. He bought the new Oculus VR in 2014 for $ 2 billion and has been working with this technology ever since. In a podcast interview with The Information earlier this week, Zuckerberg expanded his plans to AR and VR, detailing a world where we can “teleport” anywhere virtually and socialize at a distance, while maintaining a sense of presence.

Microsoft has its own AR headset, called HoloLens, which is used primarily for business applications today. In addition, at a price of more than $ 3,000, it is not affordable for the average person. Apple has been much more secretive about its headphone plans, but many reliable reports point to 2022 as the year it will launch its first device.

But there is also a risk for companies like Roblox. If Facebook or Apple controls the dominant AR and VR platforms, companies like Roblox will still be forced to play by a competitor’s rules and continue to pay a portion of all sales generated in the app to someone else.

Roblox is probably fine with that. Its focus is on its base of more than 31 million people who use Roblox every day, who create the world in which others play. Millions of them are developers who create and sell experiences within Roblox. And these developers make a living exclusively by building for the Roblox world.

Neil Rimer, co-founder of Index Ventures (which owns more than 10% of Roblox shares) and a board member of Roblox, told CNBC in an interview on Wednesday that the energy around the metaverse will come from these users, not from the company .

“No company can build a metaverse,” said Rimer. “It has to be a community. The metaverse will exist when it reflects the world in some way, when there is so much variety that on any given day you can decide to do what you want, just like in the real world.”

–Ari Levy from CNBC contributed to this report.