What happened
Shares of Roblox (RBLX 1.96%) were down 9.8% as of 10:32 a.m. ET on Wednesday, following the release of November engagement metrics.
After the drop, this initial public offering stock is still up 40% since it began trading in March.
So what
Investors were disappointed to see slowing growth in daily active users (DAUs) and time spent on the platform -- two key operating metrics that investors closely watch for insights about how well Roblox is attracting and retaining users.
Roblox finished November with 49.4 million DAUs, representing an increase of 35% year over year. It said that users spent 3.6 billion hours on the platform in November alone for an increase of 32% over the year-ago period. As impressive as that might sound, those numbers represent a slight deceleration in growth from what was reported for the month of October.
Roblox experienced an outage on its platform from Oct. 28 through Oct. 31. Through the first 27 days of October, DAUs were trending up 43% over the same period in 2020, while hours of engagement grew 41% year over year. Investors might have been expecting similar growth rates through November, especially with kids in the U.S. home for Thanksgiving.
Image source: Getty Images.
Now what
The most important outcome of slowing engagement trends is how it impacts user monetization, since the more time spent on the platform is supposed to correlate to higher sales of Robux, the virtual currency used to unlock new experiences on the platform.
Roblox estimates that revenue grew between 84% and 87% year over year, but average bookings (a non-GAAP measure of revenue) per user declined between 8% and 9%.
This shows a negative trend taking shape. Average bookings per user fell 2% during the third quarter, which followed an increase of 4% in the second quarter, and a 46% increase in the first quarter.
