Roblox could improve by offering a wider range of UA opportunities, given they often end up losing the vast majority of marketing spend to YouTube (albeit free advertising for Roblox, too). While user acquisition (UA) on the platform is quite cheap, game teams quickly reach a ceiling of being able to reach new players given the limitations of Roblox’s advertising solutions. One developer estimated that the cost associated with getting a game the necessary traction was about half of the total cost of launching a game and increasing due to heightened competition. Considering that there are over 30 million experiences on Roblox (and a marketplace strategy for the platform), advertising becomes a critical part of any game’s success. There are 1,000 or so games displayed on the Roblox Discover page at any given time.
Roblox developers pay competitive wages to their programmers given the high demand, while artists and audio designers are paid slightly less.
As a result, personnel is the only cost of development that most Roblox developers I spoke to think about. This is in large part how Roblox justifies its 72% share of the revenue made in a game. Furthermore, developers do not need to write native code to reach users across hardware platforms (i.e. Infrastructure costs are extremely low on Roblox as hosting and platform fees are free and provided by Roblox. With the recent leak, however, I was able to break down the unit economics of game development on Roblox and analyze why Roblox studios might make sense as venture-backable startups. While the studio heads I spoke to were incredibly generous in sharing their perspective, they were understandably hesitant to share the exact details of their business and key metrics for their games on Roblox. Over the last few weeks I interviewed several Roblox studios to understand their costs and get a sense of how they define success for their business. This is the first time we’ve had this clear of a picture as to what the top Roblox developers are making so I was eager to dive in. After all, the small teams that create these experiences are in stark contrast to the hundred-person studios launching AAA mobile games and the total addressable market appears to be limited to a fraction of Roblox’s revenue. With the sudden emergence of VC-backed companies building games on Roblox, I’ve been wanting to better understand the unit economics to see if they can deliver venture scale returns.
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