Roblox (RBLX 2.90%) has garnered a lot of hype from investors in recent months. The stock is trading at a serious discount right now, down more than 35% year to date.
In this segment of Backstage Pass, recorded on Jan. 11, Fool.com contributors Jose Najarro and Rachel Warren, along with Fool senior analyst Asit Sharma, take a closer look at the company's innovative business and revenue model.
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Jose Najarro: I want to show how this showcase. I've never play Roblox. But I've decided, the best way to learn this, to just jump in. Let's say I was a creator, let's say I design my own game. How am I going to make a few bucks out of here?
I create my own game I create my design, and this is me creating my own quick account. All these real quick are games created by other designers and one thing that I noticed really quick that I thought was pretty cool within Roblox, they have created their own currency and their own ecosystem. The first thing I'm getting hit with are advertisements, and these advertisements are for different game experiences within the platform so that's pretty cool.
They created their own ecosystem. They have their own currency and now whenever they advertise anything to their consumers, it's just another game for you to go play. Like I mentioned, they have their own currency. They call it Robux.
For $4.99, you can buy 400 Robux or you can even make it a subscription service, so where you can get 450 Robux per month instead of 400, and the way they work let's say I was creator, I have some gamers. I advertise in their platform. Now I have some gamers in my game. I can sell certain kind of experiences.
Maybe this is a racing game. I can sell maybe now your car has like car radio and are paying 50 Robux for it. I get some portion of that cash. The overall company, Roblox, also get some portion of that funds. Here we can see, I just wanted to show how Roblox is also funding next-generation of experiences so one thing that I think is pretty cool is, they're focusing a lot, obviously to teach the next developers and one of the tools that they are teaching them on is also in virtual reality.
We saw Apple, Microsoft, and Facebook [Meta Platforms] earlier when Demitri mentioned how they're poaching engineers for that market. Roblox believes that the future experiences are also going to be in virtual reality so they are also teaching people how to use tools to create virtual reality games.
Again, I think it's a pretty cool company. I would recommend maybe not for a stock but for if you have some form of child that wants to learn some form of coding or anything Roblox education is pretty cool and free to do so.
Rachel Warren: Are Robux like equivalent to USD like, is there an easy like cash-out system in place for creators who are making these games or is it a different, like what's set up there?
Jose Najarro: They have conversion rate. I don't know that conversion rate and how volatile it might be. But obviously could convert it back to regular currency.
Asit Sharma: I think there's a threshold too for conversion. If you're crater, I think you have to have a certain amount of earned Robux to convert back into USD.
There's some shortcomings of the platform. I'm a fan, actually of Roblox, but they've been criticized for the fact that it actually can be really hard if you're not a very skilled developer or you don't have money to advertise to actually make money on the platform.
But the flip side is what Jose showed us that if you're a young creator, it's actually quite expensive for you to develop a game and put it on a platform so they're subsidizing with their profits.
The ability for a lot of young kids to learn coding. Of course, it's in their ecosystem, it benefits them. I think you have to balance out some of the criticism with this really great opportunity they are giving to kids.