1) Understanding the Roblox investment case $RBLX

2) Roblox likes to describe themselves with the following characteristics (taken from the S-1). Understanding each of these is the quickest way to understand the case.

3) Roblox is Uniquely tailored at helping beginner developers. It should be seen as a step below Unity or Unreal. But above Minecraft.

4) Roblox has a very young audience. About 75% of American children ages 9 through 12 play Roblox regularly with friends, according to the company. Yet despite having such a young audience, they still managed to bring in 1.2B of bookings for the first nine months of 2020.

5) Roblox earns money when users purchase virtual currency on the platform. Users can then spend this currency in games to pay for items or buy stylings directly from the roblox company. Roblox tries to push a subscription based model by offering purchase discounts.

6) The games vary wildly in complexity and monetization. Many games push sales of virtual items aggressively from the moment you enter the game. While others are entirely void of virtual item sales.

7) Roblox developers are given quite a bit of freedom in regards to what they want to sell in game. But they are required to use Roblox payment system only, and robux is the only accepted currency.

8) The revenue sharing model is very opaque for Roblox developers, and the cut Roblox takes is massive compared to Unity or Epic. There is an initial 30% cut which is in line with Apple, Steam or Google. But Robux also has to be exchanged for $.

9) Roblox has upped their exchange rate to $350 from $250 in 2017 for 100000 Robux. To buy 100k of Robux a user would have to spend about $1000 if buying the Value pack. This adds up to another 65% cut (at best) but in reality this cut might be much higher.

10) Add the two cuts together and for every $1 a user spends on a Roblox game, the developer only earns around $0.15-$0.24

11) Why would anyone take such a seemingly poor deal, when Unity and Epic are almost free to use? There are numerous reasons for this:

1. Roblox offers access to a very large community of gamers. The biggest Roblox games earn hundred of thousands of dollars.

12) 2. Cloud hosting and seamless multiplayer experiences. Both can be difficult features and cumbersome to integrate for new developers. Roblox gives you these features out of the box.

13) 3. Ease of Use. Roblox is considered very easy to develop games with and get started with. Even for people with no prior coding experience. All you need is basic computer skills.

14) 4. Low User Scquisition costs. The social connections players create on Roblox make it easier for developers to leverage network effects and achieve viral growth.
5. Integrated monetization and payments solution
6. Platform wide customer support and moderation for all ages

Will be interesting to see where $RBLX trades on the first day of the IPO. Will it be valued like a game company that trades around 7-10 p/s. Or will it be valued like a SaaS company and trade around 40 p/s. Probably somewhere in the middle.