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    Roblox Corp (RBLX)

    Q3 2024 Summary

    Published Jan 15, 2025, 6:52 PM UTC
    Initial Price$37.11July 1, 2024
    Final Price$43.53October 1, 2024
    Price Change$6.42
    % Change+17.30%

    What went well

    • Strong Bookings Growth and Monetization Improvements: In Q3 2024, Roblox reported 34% bookings growth year-over-year, with the non-console business growing 28%. Monetization per daily active user increased by 6%, and payer conversion rose from 1.2% to 1.3%, indicating improved monetization and user engagement across all platforms, geographies, ages, and genders. , , ,
    • Expansion into Console Platforms and Cross-Platform Accessibility: The launch on PlayStation effectively doubled the number of console players, expanding the console market and creating new economic opportunities for creators. Content is accessible across devices, enhancing user engagement and positioning Roblox to capture a larger share of the gaming market.
    • Innovative Monetization Strategies and AI Integration: Roblox is implementing dynamic pricing, which has shown that reducing prices can increase overall revenue for developers. They are launching paid access experiences where developers can earn 70% of revenues at certain price points. Additionally, investments in AI aim to improve content creation and user engagement, supporting the goal of achieving 10% of the gaming software market. , , ,

    What went wrong

    • Management is cautious about endorsing higher long-term growth rates despite strong Q3 results, indicating potential concerns about sustaining current growth levels.
    • The exceptional growth in bookings and monetization was significantly driven by the launch on PlayStation, which is a one-time event, and management expects console growth to flatten, potentially leading to slower growth in upcoming quarters.
    • The company does not have a clear plan to directly monetize their AI foundational models, which may result in missed revenue opportunities from AI advancements.

    Q&A Summary

    1. Bookings Growth and Guidance
      Q: Why not raise long-term growth guidance despite strong bookings growth?
      A: Roblox reported a 34% increase in bookings in Q3, well ahead of their longer-term target. Non-console business grew 28%, also exceeding expectations. While management is pleased with these results, they prefer to see more time and consistency before adjusting their long-term growth projections.

    2. Monetization Improvements
      Q: What drove the monetization growth this quarter?
      A: Improvements were seen across all platforms, geographies, ages, and genders. Bookings per daily active user grew 6% year-over-year, and bookings per payer grew 4%. Console contributed to monetization growth but was not the sole driver due to its relatively small size in the business.

    3. Paid Access Experiences
      Q: How will paid access experiences impact developers and revenue?
      A: Roblox plans to launch paid access experiences in December, allowing developers to earn 70% on experiences priced at $49.99. This initiative leverages the company's efficient infrastructure and could tap into the segment of the gaming market that favors fixed pricing over freemium models.

    4. Console Growth Impact
      Q: What is driving the success on consoles?
      A: The recent launch on PlayStation effectively doubled the number of players on consoles. This expansion exposes existing content to a larger audience and enhances the economic potential for creators. While console growth was significant in Q3, management expects it to normalize and grow alongside other platforms in 2025.

    5. Advertising Initiatives
      Q: What is the progress on advertising and its future impact on bookings?
      A: Roblox is expanding its advertising offerings with sponsored tiles on the home page, search advertising, video ads, and a partnership with Shopify. These initiatives are expected to complement the existing economy, with brands and ads providing incremental growth over time. They are not yet factored into the 2025 bookings outlook.

    6. Payer Conversion Increase
      Q: Can payer conversion rates continue to rise?
      A: The company saw a significant increase in payers, reaching the highest levels in its history. Improved search and discovery algorithms and dynamic pricing strategies are contributing to higher payer conversion. Management believes there is room for further growth in conversion rates over time.

    7. AI Initiatives and Monetization
      Q: How will AI technologies contribute to revenue?
      A: Roblox is developing foundational AI models to enhance the creation process for users and developers. These AI tools aim to increase the quality and innovation of 3D experiences, leading to improved retention and engagement. While the AI tools may be provided for free, they are expected to drive monetization indirectly by enhancing the platform's value.

    8. Experience Diversity and Genre Expansion
      Q: What is being done to diversify top experiences and genres?
      A: The platform's experience distribution is becoming wider and flatter, with new entrants rapidly ascending to the Top 25. Roblox is encouraging a broader range of genres, such as sports and RPGs, to attract a wider audience and support continued growth.

    9. Dynamic Pricing Benefits
      Q: How is dynamic pricing benefiting developers?
      A: Experiments with dynamic pricing showed that reducing prices can drive overall revenue for developers. The price optimizer indicates it's not a zero-sum game, and individual developers can optimize prices independently. This strategy also encourages greater participation in the economy.

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