Why Roblox Beats Meta (Facebook) at the Metaverse

Roblox will beat Facebook at the Metaverse. Here are five main reasons, each of which I will go into more depth later. And a first pass at risks and opportunities.

I don't truly understand all of the nuances, which is why I have been reading Matthew Ball's book^[1].

1. Roblox has a more robust revenue model in terms of the User Experience

Facebook (Meta) delivers privacy-invasive ads and has a model that often relies upon polarization to increase user engagement. My earlier start-up idea Doctrine was to provide an alternative in the political online advertising, so I spent a decent amount of time personally deep-diving into this on a YouTube channel.

Roblox, on the other hand, has been making money based on their Robux currency of in-game purchases. In the fourth quarter of 2022, they released a in-app advertising.

Facebook's advertising model hit a bump when Apple introduced user opt-ins into user behavior tracking.

By having an operating mix of in-game purchases and behaviorally-based brand experiences, Roblox can avoid the extractive and invasive advertising model that, once profitable, is hurting Facebook.

To me, this is an important core "tentpole" to their overall product strategy.

Facebook ads tax the users. These are "interrupt-driven" and detract from the user's intent and the value of the product. In other words, users do not go to Facebook in order to experience their ads.

Roblox's monetization is for the most part value add. These are typically assets or access which require the users to pay to augment their experience. The developers need to properly weigh the impact. For example, some developers overindex on requiring payment of assets or access to enjoy the game. Others have a better glidepath such that users start to purchase to "level-up" an already enjoyable gaming experience.

In other words, the monetization behicle "is" the product. And if this is applied not only for in-game assets but immersive ads, it's a product strategy that is very hard for Facebook to pivot into.

2. Roblox has a more reliable point of entry for new user acquisition

Facebook famously started on college campuses as a quasi hook-up app.

Roblox acquires customers who are still in elementary school.

College students have already begun to turn away from Facebook. That age bracket and demographic can be very fickle and trends-based.

A strong brand for kids can become an intergenerational hold on the market. Look at Sesame Street.

If Roblox can develop a meaningful glidepath as users age from child to parent, they have an endless supply of new users.

3. Roblox has the technical DNA advantage for metaverse applications

The metaverse may or may not depend on VR glasses. The presentation layer is likely to be highly fragmented. However, this is where it appears Facebook's has concentrated its public-facing tech (it may have behind the scenes stuff, to be sure, but shipped products and their enabling technologies tell more about the DNA).

Roblox, however, has motion graphics, multi-player interaction, AI/ML models for detections and (soon) rendering, and all of the performance optmizations to work multi-device and in high-latency geographies.

Yes, Facebook had to deal with speed and performance of a web app in countries with low battery powered phones and poor wireless throughput, as well; but a web app with mostly text and static images is a far cry from the Roblox experience.

This battletested advantage is hard to come by.

4. Roblox's Community Culture and Content is less Corrosive than Facebook's

As Frances Haugen highlighted in her whistle-blowing testimony regarding Facebook's data and advertising practices. She shared that the MSI or Meaningful Social Interactions metrics drove more polarization in order to increase ad revenue.^[2]

This internal culture resulted in decisions that create a product that became creative division divisive and addiction. The drive for higher Daily Active Users and Time On Site becomes a hurtful north star metric.

While Roblox also has similar metrics in terms of usage and number of active players, because they start with kids, they must internally consider civility and safety a priority, not an afterthought or point of leverage to achieve better numbers.

Now that the company is public, can it take long-term positions to preserve the culture and product experience at the expense of short-term earnings hits?

I think the foundation seems too strong not to, which becomes an advantage.

It would be helpful, however, if they did have a public metric that showed both: their cultural north star and how its a leading indicator towards business health.

5. Roblox doesn't depend upon User Generated Opinions and Data for Engagement, but Upon Creativity and Collaboration

Facebook's utility model of keeping up with friends had to degrade quickly to change the feed to content, also user generated, but to increase advertising clicks and impressions. This meant their model depends on a flywheel of acquiring more detailed demographic information while priorizing polarizing user generated content.

This is a great short-term flywheel. Advertisers benefitted because they were the primary customers.

Roblox's primary personas are the Creators of the games (it's far from perfect, but it's the right model) and the players. There's no reliance and really polarizing actors to keep people on site.

What's fascinating when watching my children play is that they can play and "hang" with each other. The person to person interactions are weak, but to me, "being together" is like the kid version of collaboration.

My daughters are "collaborating" when role playing or even when running through an oby together. This foundation will mature as the product enables real-world collaboration which will be the opportunity for the older users.

What are the risks?

I think there are few risks Roblox will lose specifically to Facebook. But potential areas are:

1. Something breaks trusts with parents around their kids

This would be an existential risk. Even if Roblox successfully captures older demographics, starting with kids is the lifeblood.

I keep a tight watch on my kids in Roblox, joining them so I can see what's going on, making sure that they know there are people who are "sus", and overall keeping tabs.

This feels like a pretty low risk, but it's asymmetric: lots of companies have survived data breaches, including banks, and you'd think that would be existential.

A damaging kid experience, even a false positive, could wreak damage.

2. Wedge games pull fickle consumers away

Roblox has an advantage through its marketplace that it doesn't depend on a single game experience. In the event a wedge game that is insanely popular were to appear on another competing platform, it would have to be so unique that a version couldn't be replicated in Roblox.

However, that's possible.

For example, there was a period where the Wii was a great experience, and that can't be replicated in Roblox.

For a short run, Pokemon Go was a phenomenon, and that couldn't be replicated in Roblox.

The gaming market is a fickle one; despite their broad diverse base, there's still a potential risk.

3. Users permanently age out

The promise of the metaverse is to capture a wide range of digital interactions, including our workplace.

Roblox can do that as well as another other contender right now. Yes, it may seem like it would be a leap to go from boxy kid environment to conducting a board meeting.

But what are the factors that would improve it? Real time sound? Better graphics resolution?

Those aren't foundationally hard things to solve.

I think those are not the limitations to it becoming a common workplace environment, however.

So the risk is there the product does age well with the users.

Opportunities

Neither of these seem to be on the roadmap for Roblox, but if we were to work backwards from what successful metaverse "dominance" would mean, I would suggest these two areas.

These two areas, however, are ripe for Roblox to lead in:

1. Trusted compute platform for the metaverse

The metaverse will depend on extreme edge compute. Latency thresholds for real time operations are probably in the 5-7 milliseconds range.

Two relatively close AWS datacenters that are 300 miles away, are no less than 28 milliseconds.^[3]

Because the compute and asset loads will be so huge in the metaverse, getting as closer to the user will be a requirement.

Roblox, because of its high brand value and large user base, could deploy a "trust minimized and execution verified" Roblox server that consumers pay for. In return, consumers get not only a better experience, but can earn Robux for serving execution jobs to other players.

The Roblox cloud could have hundreds of thousands, perhaps millions, of micro Pops around the globe without any upfront capital expense by Roblox. Instead, that capital would come from players who recover those costs in Robux.

This compute and the platform for rendering, could then be opened up to other developers for a fee.

The metaverse is unlikely to be a single environment at the presentation layer.

But it very well could be a single environment for the compute layer.

2. Trusted currency-based economy

It's quite possible that, if different worlds were to run on the Roblox cloud, they could be unified with a single currency which aligns all the stakeholders on securing the network and encouraging gameplay.

The token based economy of "In Robux We Trust" would actually be a way for Roblox to have broader cultural impact. Currencies, capital, and governance impute values.

Developers, their games, and their customers can align on a set of values that are enforced through staking, rewards, and slashing of these tokens which not only secure the network (Robux tokens become the mechanism for securing the platform by rewarding nodes), but incentivize a true north behavior of civility, creativity and collaboration that Roblox is already cultivating.

Conclusion

"The future often begins as a toy" is a common Silicon Valley adage.

Roblox may be one of those that truly brings it to life for the better.

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https://twitter.com/timfong888/status/1634272304871112705