Is Roblox the Original Metaverse?

Debuting as a simple online gaming platform in 2006, Roblox has morphed into a multiplayer digital world, attracting more than 70 million active users daily. If not the first metaverse (some argue Doom was there first), Roblox  was certainly an early player, long before Minecraft launched or Facebook changed its name to Meta.

In 2021, the year the company went public, Craig Donato, then-chief business officer for Roblox, noted that the game’s real power lay with its players: how anyone could create, build, and sell designs to others inside the experience. While Roblox attracts brands from Gucci to Vans, selling digital versions of their kit to users, in-world creators also made out well, on track to collectively earn $500 million in 2021, Donato told Signal360’s John Battelle.

“The economy enables this bottoms-up phenomenon to happen in an integrated way,” says Donato. “It’s very much a meritocracy in terms of who produces great stuff. It’s fundamental to who we are.”

You can hear more from this 2021 interview with Signal360’s John Battelle in the video below or read our lightly-edited transcript.

Transcript:

John Battelle
I’d like to welcome to this Signal Conversation, Craig Donato, the Chief Business Officer of Roblox. Good to have you, Craig. Let me tell everybody a little bit about you before we jump in. Craig oversees the company’s brand partnerships, its care and safety, which is a big topic of conversation on social platforms these days, and developer relations, which is a huge part of how Roblox has grown so quickly. Prior to Roblox, Craig led business development and monetization at Nextdoor, another very large platform. He’s also CEO and co founder of Oodle. Oodle is a local community marketplace. It was acquired by QVC back in 2012. And Craig I think it was at Oodles that you and I initially met or it might have even been before that we are OG’s in this space. I want to start with kind of a level set. I think it’s possible that some folks that are watching may have heard of Roblox but they don’t really know what it is. So say you’re you go to a dinner party and you’re seated next to someone who’s never heard of them. Never heard of Roblox rather well, can you can you know, how do you answer that question? What is Roblox and what do people do there?

Craig Donato
Roblox is a digital place where millions of people go to hang out and share adventures with their friends. They do those in millions of worlds, we call them experiences, where they can snowboard down a mountain, they could deejay their own beach party, or do things as inane as work at a pizza restaurant. So it’s just a place for they, where they go hang out, have fun. I like to think of it as a medium of shared experience in a place where people go and do things with each other. As you mentioned, one of the unique characteristics of it this medium is that it’s built by our community for our community. So there’s all those millions of experiences that are out there are built by people in our community, typically, young adults.

If you were to do a cursory scan of the headlines, it seems like Roblox is built by and for young people. Is that a focus of the company? Or is it a, sort of a byproduct of the environment as initially built?

We initially built the company, it was very much focused on kids and young adults. We’ve really seen those demographic shift over time, we’ve essentially grown up with this generation. To give you a sense, we probably have a little over half of the kids and young adults under 16, in the US and Canada on our platform. We are approaching those same levels of penetration for young adults in different countries in Europe, Latin America, Asia. But those demographics, as I mentioned, are shifting. So for the first time in the in the last couple months, we have as many people over 13 is under 13. And our fastest growing age segments are 13 to 17, and 17 to 24. We’re really seeing kind of the use of the platform, its age range expand. But I’d say our core segments are still kids anywhere between nine and 15 years old.

That is an audience, or a group of people who are hard to reach in traditional media channels. Do you have any statistics that you share about engagement? How much time do people spend on the platform a week, a day a month?

Right now, just an aggregate people are spending about 100 million hours a day on Roblox and as I mentioned, we’re pretty well penetrated in terms of the younger demographics and typical usage is about somewhere between two and two and a half hours a day.

That certainly competes for example with television usage. As you describe it as a place for people to hang out, create experiences, have experiences together. It sounds very much to me like a lot of the hype coming out of places like Facebook. Matter of fact as we have this conversation it’s entirely possible Facebook may be about to announce a name change in 25 minutes from right now this is kind of the fun of having a live stream. There’s been a lot of speculation that name change will frame the company in the terminology that Mark Zuckerberg has been quite fond of which is the metaverse, a sort of digital space where people have unique experiences that are enhanced by the the reality of digital technologies and networking. What do you think of that concept of the metaverse? And do you consider Roblox, a metaverse company?

We do consider ourselves a metaverse platform. I can share a little bit more about what that means to us. We really think of defining it in three different ways. The first is the nature of the experiences that you would expect to see or encounter in the metaverse and those are really defined in two ways. One is that they’re highly immersive, and that their 3D experiences where your mind’s eye is transported into the experience. So it really feels like I’m in another place. I’m not sitting in this chair. I am on a mountain skiing down something. The second is that it’s fundamentally social in nature. This is about people doing things in a synchronous fashion with other people. It’s a social medium, as well as an immersive medium. And I think a lot of people, when they talk about the metaverse, and they think about science fiction, they think about VR. And until that happens, that’s kind of gating the adoption of the metaverse. We really don’t see that, about half of our usage is actually on phones, and they’re interacting in these deep 3D experiences, and they’re very much losing their mind’s eye into the experience. So we really see that there is already a level of immersion that is that is effective for kind of producing this kind of experience. We think a lot of the evolution and a lot of the work that we need to do is really innovation on the social side, how do human beings interact in these spaces in ways that are respectful and work well and productive and fun. So that’s kind of the nature of the experiences themselves.

The second aspect of the metaverse platform to us is that when you are in it, there’s this incredible vast world, a universes of worlds that are always changing and updating. If you’re familiar with the book. “Ready Player One” is kind of this place that you can basically do anything and kind of bounce from one to the other. For us, what that implies, is that it’s a community driven phenomenon. You can’t have millions of experiences being built by a few studios, right? So we’re very much a bottoms up phenomenon. We have over 8 million people building experiences gear on our platforms, every month. Lastly, there needs to be a social fabric that unites all the different worlds in this universe. The dimensions of that fabric are things like a common identity. I established who I am in the metaverse, and that stays the same as I pop from place to place. A common social graph, I moved from experience to experience with my friends. A common economy, so a currency, being able to buy things, sell things pay people. And lastly, a common societal fabric Rules of Order, right? This isn’t the Wild West, but there needs to be ways to moderate and control behavior. This we’re essentially building the construct for an online society. Those are all the elements, at least from our perspective of a true metaverse platform. And that is absolutely what we are aspirationally building.

It’s very ambitious, but you have already many years of experience. This is not a new company. Roblox has been around, if I’m recalling correctly, it’s 2006 or 2007 when the first version that led to what Roblox is today launched, which is about the same time that Facebook launched, which I’m just now realizing. How do you frame the distinction between the sort of vision that’s been laid out by Mark Zuckerberg and Roblox? I mean, I guess it would be completely normal to be a bit concerned when you know, the 800-pound gorilla decides that it likes what you guys are doing?

Yeah, I’d say our visions for the experience, the stuff that I just outlined are probably pretty similar to what they’ve outlined. I would say there’s probably a couple different noticeable differences, actually. So one is we are very much a bottoms up phenomenon. We’re all about community building. Perhaps they may get there. A lot of what I see in terms of what they’re doing with VR looks more like traditional gaming, where it’s built by big studios. That’s not to say that there’s one right way. When we’re building video content, there’s two very different ways that people experience it. There’s a bottoms up, which is YouTube, and then there’s traditional video on platforms like Netflix. Both exist, they’re just different ways of consuming main video, and that may be what we see here. Many different metaverse, platforms, where the creator community the style of creation is slightly different. So I don’t think they’re mutually exclusive. I don’t believe there’s going to be one metaverse platform, we think there’s going to be several.

I’d say also I think Facebook, I think, has bet a lot on VR. And I think that’s great. We certainly have a very large corpus of VR enabled content. But, we very much believe in meeting users where they are now. And we really focus on making sure that our experiences are playable on phones and mobile devices. I think those are areas of distinction. Lastly, I would say that we alluded to this earlier in our focus has always been on kids and I was initially on kids. I think that really served us well, in that I think the metaverse is very much a phenomena that is really of a new generation. So when we look at kids, our belief having watched them in the metaverse is that they see reality differently than we do. We think of ourselves as the colonists, and them as the true metaverse natives in that we have someone old like myself, I see that there’s this digital world and this physical world, and they’re very distinct. I don’t hold them together in my head. Yet we see kids seamlessly having one leg in each world always, they’re always online, and they’re always offline, and they don’t see them as distinct. They’re one integrated reality. So when I’m yelling at my son, you know, he’s in his room on his gaming PC, and, and we’re saying, “Why aren’t you outside playing with your friends?” He’s like, he doesn’t even understand the question. “I am playing with my friends.” So much of their social life right now is happening in the real world, but it’s also happening in the digital world. So I think one of the advantages that we do have is that we’ve really grown up around this generation and are growing with them. And I think that’s really served us well.

I mentioned before that the core of the folks who engage on Roblox, they’re very hard group for marketers to reach, for brands to reach. I know that they’re very eager to figure out how to do it on your platform, and you have many ways for that to occur. Can you, you know, tell us what those ways are? And maybe some tips for marketers about how to enter this metaverse in a way that’s respectful of it and adds value.

We’ve been working with them some major brands for the last year and a half experimenting with different ways to engage our community. I’d say it’s kind of evolved into three buckets. It’s somewhat been a natural progression. First off the we’ve seen brands produce gear that people can dress up with their avatar. Every person on Roblox has a unique avatar, a unique look. They can buy things and trade things and dress it up in different ways. We see about a given a 50% of the people on Roblox changing their avatar, so it’s just like you dress up for the day. We’ve worked with brands like the NFL on the Super Bowl, where people could dress up like their favorite player. We work with brands like Marvel, and been really effective in terms of driving tens of millions of downloads of things for people to dress up on their avatar. Obviously that’s impactful for a brand, number one, because I’m choosing to put that brand on my avatar, which absolutely represents my aspirational identity. Secondly, I’m walking around the metaverse and all my friends see what I’m wearing. Right? So that’s been pretty impactful. Recently we did an activation with Gucci where they did released a bunch of gear on our platform, and it was kind of cool. We actually saw in the secondary market, the virtual Gucci handbag was actually selling for more than the actual Gucci handbag so it’s kind of cool. That’s gear.

The second thing that we’ve seen is pop up experiences. So short lived experiences are platform, typically around a promotional event. So again, Gucci made that transition. They did something around their big fashion show in Florence. So rather than just having it be experienced by a small number of people that could go to Florence they built a virtual version of that in Roblox and it was very successful. Similarly, we’ve worked with entertainment companies. In the recent movie, “In The Heights” they produced an experience on Roblox for the movie where they taught people virtually how to do some of the dances in the movie and we actually got to produce the world’s largest flashmob in Roblox, which is kind of cool. There’s lots of experiences that are ephemeral experiences.

Then lastly, we’ve seen brands that have experimented with both gear and these pop up experiences, start to think about how do we create a persistent in the metaverse. This is where it really tips and it almost becomes a very new form of social media. How do I want to engage this audience on an ongoing basis, and it takes a relatively big commitment. For example, we recently launched an experience with Vans where they created a virtual skate park in Roblox. Just like in social media, you wouldn’t launch Instagram, launch a couple of photos and then back off for a month, right. You need to constantly be updating it, adding new experiences releasing new gear in the game. They’ve really committed to do that and are having a lot of success.

What I would say just in terms of advice to brands, one would be, don’t try to tackle it all, slowly build the chops, whether it be gear and ephemeral experiences, but don’t just jump in and try to go all the way to the endgame and creating a persistent ongoing presence without kind of figuring this stuff out. Second, obviously, as be authentic, be who you are. Vans didn’t come in and just put in a shoe store, they thought about what is the true essence of our brand. And the essence of the brand was it comes from the roots as a skateboarding company, and they really wanted to represent that and enable people to experience the real roots of their brand.

I think that that kind of gets into this thing, where, you know, this is all about creating experiences and ways for people to engage with your brand that are really unconstrained from the real world physics, you can make anything happen. What could you do? How would you want someone to experience your brand?

You touched on the concept of commerce, the Gucci bag example. I’m curious how it’s integrated into the platform. I was reading up on Roblox and one story said that Roblox turns kids into Apple-cheeked capitalists. There’s been a number of pieces where you’ve announced hundreds of millions of dollars that have been funneled to creators. Can you give us a sense of the economy of Roblox and maybe how brands interact with that?

Sure. We’re on track to have our creators earn about a half a billion dollars this year. So it’s growing quite quickly. I would say, just in response to the comment, that as a bottoms up phenomenon, as a thing, where every experience and piece of gear on Roblox is built by someone in our community, the way that all works, the way that all integrates together is through our economy. Anyone can build something, they can build a piece of gear and sell it in our marketplace, they can build an experience, and in that experience, sell things. That’s how the economy works, and then they actually can we have a currency called Robux, which people can buy and then spend in the experiences. People will make that money, they’ll use it to hire other people on Roblox. It used to be years ago, that we had creators that were individuals, now they’re teams of people, 20 to 30 people working together producing these things. The economy is really what enables this bottoms up phenomenon to happen in a really integrated way. It’s very much a meritocracy, in terms of who produces great stuff. It’s really fundamental to who we are.

In terms of brands, I think you can mix these things, but we really see brands kind of approaching this with two ideas in mind. Number one is, probably this is the minority, this is a place for us to make money. I think the majority are viewing it more as a way to engage and promote things like how do I actually figure out how to get this, this audience really thinking about my brand, engaged in my brand. So while Gucci did sell some things, limited run items, they also gave some things away. So trying to figure out that right mix for your brand. I think, again, it’s not everyone needs to do one or the other, you can do a mix. But I think it’s important to think about working here as both an opportunity to promote your brand as well as to earn and make money.

In a related topic, this is just came to mind, I would argue that probably the two most discussed phenomenon in tech right now are metaverses and crypto. We’ve just been talking about this currency that you have Robox. Are there are there any plans to connect that to a sort of Web3 crypto experience and take advantage Have some of the energy that’s going into that space now?

I think those are things that we possibly can consider down the road, as well as using NFTs for the gear. All that stuff really becomes important when you’ve got multiple metaverse platforms, and the focus is enabling interoperability between the two of them. I think that’s probably a chapter that’s a little further down the road. Right now it’s about figuring out how to get all the different pieces in a metaverse stack really working efficiently, increasing immersion, increasing the range of the experiences on the platform is more more immediate term focus. I think we’ll get there. But that’s really not the shorthand.

Your answer touched on portability. And you mentioned earlier there probably going to be multiple versions and multiple approaches to the metaverse. One of the things that we’ve noticed over the course of the development, the digital revolution, if you will, is it started as an open platform and became kind of siloed. And you’re in Facebook, but everything you do there is not going to in any way, impact or translate or, or be able to be ported to say Twitter or Roblox other than maybe some name authentication, stuff like that. How do you see the metaverse evolving? And do you see it evolving such that people can easily move from one place to another?

So first off I think what we’re talking about here with the metaverse is a very substantial jump forward in terms of how human beings interact. I think, there’s been a lot of innovation in social in the internet today. But when we think about back to Web1.0, and we’re both old enough to remember that, to have access to the world’s information on your phone, we never could have really wrapped our head around that. And when we looked at some of the Web1.0 stuff that was being done, it was a literal representations of a phone book, and the Yellow Pages, and it really wasn’t that imaginative in terms of accessing it. Now look what’s happened, right in terms of leaving house without a map or being able to call anyone anywhere.

I think we’re about to see a fundamental transformation in terms of how human beings interact. Just like I can access the world’s information, in the future, I’m going to be able to do anything with anyone, anywhere at any point in time. I think there’s going to be massive sea change in terms of how human beings function. It’s not just have fun and play games. It’s going to be how we’re going to be working together, how we’re going to be learning how we’re going to be doing all sorts of things. So a very large portion of our life will be happening in the metaverse. That’s a very long winded answer to say, if that’s true, then I really believe that, and there will be multiple metaverse platforms that they’re going to need to interoperate.

So we very much believe, at this point, there’s just so much to be built in terms of really enabling this thing to happen that there’s gonna be a lot of function on integrating the vertical stack versus making the different platforms interoperate. But we will absolutely see that.

It’s an exciting world. It’s exciting company. And by the way, Craig, congratulations. Roblox had a very successful IPO earlier this year. So you’re up and running as a public company, and you have many worlds to conquer. So thank you so much for spending some time with us here at P&G Signal 360.

It was my pleasure. Thank you.