Ready Player One
Source: Warner Bros.
Gaming company Roblox went public Wednesday and ended its first trading session with an eye-popping $38 billion market cap.
It’s natural to wonder why a money-losing company that makes video games for an audience of mostly children and teens attracted such a lofty valuation. (Although its impressive growth throughout the pandemic-fueled gaming boom in 2020 surely helped.)
That’s where the metaverse comes in. It’s a concept that’s been thrown around in science-fiction for decades. The metaverse is difficult to understand unless you’re a huge geek, so let’s use the most accessible pop culture example. Imagine if the virtual world depicted in the novel and movie “Ready Player One” actually existed. That’s what Roblox is trying to build.
The real long-term goal for Roblox is to build a metaverse where millions (or billions!) can gather to take part in games, meetings, collaborative work and even Roblox’s own virtual economy fueled by its currency called Robux.
Welcome to Bloxburg
Look over the company’s prospectus and comments from its CEO and investors, and you get a clearer picture of Roblox’s grand vision. Roblox isn’t just making a game that slurps up your hard-earned dollars for virtual items. The company is closer to a futuristic Facebook than, say, a Zynga.
Here’s how Roblox described that vision in its prospectus:
We built Roblox from the start as a single platform, single name, single focus company that would someday support billions of users. The ultimate “product specification” was always to model reality, based on the belief that the more accurately we could simulate the real world, the more utility we could provide. Looking forward, we intend to maintain this focus as a single platform company, even as we expand the ways in which we enable people around the world to play, learn, and work together.
In short, Roblox wants to give the building blocks for a metaverse to its users, who will in turn create the digital world as they see fit. And as an economy in the metaverse continues to grow and develop, Roblox will get a slice of each transaction.
Roblox isn’t alone in exploring the metaverse concept.
Epic Games, the company behind the popular shooting game Fortnite, has its own sights set on creating a metaverse. It’s already dabbled with experiences outside its core shooting game by hosting a Travis Scott concert and the premiere of a clip from the last Star Wars movie within the Fortnite world, for example. (Roblox held a virtual concert too, featuring Lil Nas X.) Microsoft is involved in the metaverse as well, thanks to its purchase of Minecraft developer Mojang for $2.5 billion in 2014.
So, where does Roblox go from here?
It’s not going to be easy. The company has the gaming part of the metaverse locked down pretty well. It’s dabbling in live events. But the next challenge will be to convince people outside Roblox’s core demographic of kids and teens to come into Roblox for new kinds of experiences.
Part of that challenge comes from limitations with today’s technology. The biggest believers in the metaverse are holding out for augmented reality (AR) and virtual reality (VR) tech to improve enough to provide a true sense of presence when you jump into the a digital world. But today’s headsets are too clunky to wear for extended periods of time. Their screens aren’t sharp enough to provide realistic, pixel-free images. And most make you look like a member of Daft Punk. Good luck walking down the street like that.
Microsoft’s HoloLens 2.
Andrew Evers | CNBC
Still, almost every Big Tech company is pumping money into AR and VR with the belief that it’ll usher in a new wave of computing, and maybe, one day, eliminate the need to carry around a smartphone in favor of computerized glasses.
Facebook has been the most open about its plans in AR, and it plans to release its first pair of AR glasses later this year. CEO Mark Zuckerberg is especially bullish on the technology. He bought the VR start-up Oculus back in 2014 for $2 billion and has been building on that technology ever since. In a podcast interview with The Information earlier this week, Zuckerberg expanded on his plans for AR and VR, detailing a world where we can “teleport” anywhere virtually and socialize over a distance while still maintaining a sense of presence.
Microsoft has its own AR headset called the HoloLens, which is mostly used for business applications these days. Plus, at a price of over $3,000, it’s not accessible to the average person. Apple has been much more secretive about its headset plans, but many credible reports point to 2022 as the year it’ll launch its first device.
But there’s a risk for companies like Roblox there too. If Facebook or Apple controls the dominant AR and VR platforms, then companies like Roblox will still be forced to play by a competitor’s rules and continue paying a cut of all sales generated in the app to someone else.
Roblox is probably fine with that though. Its focus is on its base of more than 31 million people who use Roblox each day who create the world others play in. Millions of them are developers who build and sell experiences within Roblox. And those developers make their living exclusively building for the world of Roblox.
Neil Rimer, co-founder of Index Ventures (which owns more than 10% of Roblox shares) and a Roblox board member, told CNBC in an interview Wednesday that the energy around the metaverse will come from those users, not the company.
“No single company can build a metaverse,” Rimer said. “It has to be a community. The metaverse will exist when it reflects the world in some sense, when there’s so much variety that on any given day you can decide to do whatever you want to do, just like in the real world.”
–CNBC’s Ari Levy contributed to this report.