An Inside Look at Roblox, the Gaming Universe That’s Exploded to 164,000,000+ Users

Spero Ventures
Sep 24, 2020 · 8 min read
Image courtesy of Roblox

Craig Donato is the Chief Business Officer at Roblox, a gaming platform where more than 150 million kids and teens come to play with their friends in immersive, user-created 3D worlds. Spero Ventures was honored to welcome Craig as an interviewee on The Factor, hosted by Sonny Mayugba. Enjoy these highlights from the interview, and check out the full video here!

One of the unique things about Roblox is that you don’t do much marketing. You’re reaping the benefits of real, powerful network effects. How do you do that?

You’re lucky if you have one network effect, and at Roblox we’re fortunate enough to have two.

One is the social network effect. People come to Roblox to play with their friends, right? So, as more kids start coming out to play on Roblox, more of their friends join, too, because they want to hang out and play with their friends. Of course, there are things we do to make it easy to find your friends and to connect with them, but that initial desire to connect is a huge factor in our growth.

The second network effect is a classic marketplace network effect. It’s about the creators. Creators produce content, and the more content they produce, the bigger their audience. The bigger those audiences become, the more content creators join. Really machining that loop has been a huge part of what we do. So now, we have millions of people developing content, and more than 20 million experiences published on our platform every year. It’s a massive loop.

So, both those things, going on together, have enabled Roblox to take off in a big way over the last three or four years.

Image courtesy of Roblox

You’re the Chief Business Officer; what does that mean?

So, I’m primarily responsible for managing our three communities.

  • Our first community is our players: making sure they’re safe, that we moderate, and that there’s good customer support on the world.

In addition to those things, I manage brand partnerships and business development.

Image courtesy of Roblox

Let’s talk about Roblox’s story. You’ve been around 15 years, and many of your fans might not even know that.

Our founder, Dave, first created Roblox as an educational software company that enabled kids to model physics experiments. Then, he found that after they did the experiments, they would use his platform and its tools to create cars and crash them into each other, or build houses. Seeing that makes you realize, wow, there’s something here.

So, Dave had his vision for what Roblox is — and it’s pretty much the same as what he thought 15 years ago. He’s just been absolutely relentless about that vision. He’s someone with a super high degree of integrity; he’s always like,”I’m going to do the right thing,” and “that’s what I want to build.”

As a former CEO myself, I know it’s not easy to stick with something for that long. I give him a tremendous amount of credit to have that level of conviction. He’s been incredibly patient, our investors have been incredibly patient, and now, it’s been amazing to see these last few years.

How do you monetize Roblox?

It’s actually simple. We basically have our own currency, Robux, that kids can buy. And then we let the developers — the people who are building the games — sell things in their games. And that’s pretty much it. We take a cut.

Now again, there’s this notion of loops and systems. We’ve created the right kind of reinforcement loop, so, if people are too aggressive in charging too much, there are plenty of other games to play, so people won’t play the overpriced ones.

At the same time, when they come up with innovative ways to monetize and charge in their game, that gets copied and morphed and modded. So, the system itself is getting more efficient over time, which is great to see. But it’s all about setting up proper feedback loops, and making sure that the system monitors itself. Taken as a whole, the developers in our community will make well over $250,000,000 this year. Some of these young developers are making millions of dollars a year on their games.

Image courtesy of Roblox

Taken as a whole, the developers in our community will make well over $250,000,000 this year. Some of these young developers are making millions of dollars a year on their games.

Wow. So, they’re actual creators, like all the influencers on YouTube or any other platform.

Absolutely. years ago. At first, the typical use case was one kid — you know, a teen or somebody in college. Now, they’re developing studios; they’re meeting in our online forums, and they’re forming teams. Some teams have kids in different countries who’ve never physically met. And then they’re building more and more complex creations.

So, we’re seeing evolution in terms of the sophistication of them working together. In response, we’re building a lot of tools, like Studio and Team Create, to enable larger teams to work together dynamically on our platforms.

You have a lot of experience in building strategic partnerships, probably both monetary and non-monetary, or value exchange. Talk to me about the different types of strategic partnerships that Roblox has undertaken.

Way back when I started, we had a very small advertising business, and it didn’t make a lot of sense. It wasn’t growing that quickly; we weren’t really sure that was consistent with our brand overall. So, we shut it down and decided to take a different track.

We surveyed our users, thinking, “What brands do they love the most?” And we decided, you know what, rather than the ad agency, let’s go talk to the CMOs of those companies and think about how we can engage them.

So we did something with the NFL around the Superbowl, where the kids got to wear their uniforms. With WrestleMania, they get to become their favorite characters. We did something with Marvel and Disney, in terms of Avengers gear and stuff. So, it was super fun for the brand and great for our users.

Image courtesy of Roblox

What’s been happening since the pandemic?

So, certainly, we’ve seen new people coming onto the platform, because we’re a place where people hang out with their friends. So, we enable them to stay socially connected while they remain physically apart.

We have a feature called Private Servers, where if you’re in an experience, you can say, “I only want to play this with my friends.” That feature has really taken off. We’ve also seen it used for people hanging out at recess with their friends, virtual birthday parties, and other thing that aren’t just going there to play, but just actually just to hang out. Those use cases have really expanded during COVID.

With so many young kids on your platform, you must have constant battles with predators. How do you suss out bullies, predators, or psychos?

Oh gosh, yeah — we do a lot to prevent, detect, and report bad actors. First, we employ thousands of moderators. Second, we have automated technology; we’re tracking everything everyone’s doing and running it through all sorts of machine learning algorithms. And we’re always adapting those filters, innovating that technology. We have self moderation tools as well, including parental controls and all those sorts of things.

On top of that, we also work with governments, in terms of advocating for child safety, and we’re active members of around a dozen child safety organizations. Over 15 years, we’ve gotten better and better, and it’s always a huge, mammoth effort on our part. But it’s central to who we are.

Image courtesy of Roblox

What is Roblox’s role in the future of our kids, and the world?

When we think about this, we work with a lot of child psychology experts. Often, they talk about how the amount of unstructured play in kids’ lives has been steadily declining for decades. I see it, too: when I was growing up, I’d come home from school, get on my bike without a helmet, and disappear with my friends. I played pickup football, I’d build a fort until the streetlights came on, and then I’d come home. We were out there using our imagination, freely. That’s not my kids — my kids have a ton of adult-directed after-school activities and hours of homework.

If there’s a “secret” of Roblox, it’s that Roblox is a venue for unstructured play.

If there’s a “secret” of Roblox, it’s that Roblox is a venue for unstructured play. We’re essentially like a medium of shared experience to go hang out with friends and have adventures. I think a lot of it is about that — it’s recreating some of the stuff that my generation had, the things we loved about our past. But it’s a new, Back-to-the-Future version of that.

Ultimately, it’s like what the Internet did to information — instant access to everything everywhere — that’s what we’re doing with social connections. In this metaverse, I can connect and do things with anyone, anywhere, anytime. And it’s very interesting.

Of course, that’s going to have both positives and negatives. We did a survey recently, and it was about bullying. We asked, “When you encounter a bully on Roblox, who do you talk to?”

Number one on the list was the Roblox staff, which is fine with us. Parents were somewhere around 17the on the list, unsurprisingly. But what’s interesting is that number two on the list was the bully! Because on Roblox, I’m able to confront the bully; I’m not going to be physically harmed. I have the experience of bullying, but the rules are different. And of course, we have our code of conduct, and we enforce civility as much as we can. We actually just released a game that teaches safety and civility while kids are playing it. But bottom line, this is the beginning of a very different world, a different kind of socialization, and no one knows exactly what it’s going to look like.

Thank you for reading! For the full one-hour interview with Craig Donato, including his history with Oodle and Nextdoor, watch this video:

Spero Ventures is an early-stage VC firm that believes purpose fuels growth and invests accordingly. To learn more, visit us at spero.vc.

Spero Ventures

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