When I was a kid, video games were straightforward: stay alive, progress through the levels, beat the final boss, and win the game. For my kids, however, the objectives are totally different. Nowadays gamers socialize, build, buy and sell, and play out possibilities not limited by finite game constructs.
To illustrate what I'm talking about, I'll use a recent example from Volkswagen Group (VWAGY +1.60%). The company's premium Lamborghini brand just sold three digital items on Roblox (RBLX +1.54%) for 1,500,000 Robux each -- Robux is the in-game currency. Lamborghini's digital items swiftly sold out despite a hefty price tag.
As of this writing, 22,500 Robux can be purchased for $199.99. This means that 1,500,000 Robux costs over $13,000 at this price.
Video games aren't what they used to be. The early version of the metaverse is here and Roblox is perhaps ahead of the rest of the pack.
Roblox is about digital experiences
Roblox isn't a video game platform in the traditional sense. In the company's own words, Roblox's 70.2 million daily active users "create, play, work, learn, and connect with each other in experiences built by our global community of creators" [emphasis added]. And as it turns out, Lamborghini is part of that global community of creators.
NYSE: RBLX
Key Data Points
Lamborghini has created an experience on Roblox's platform. Users can design a custom version of the company's upcoming electric vehicle (EV), the Lanzador, and race it against other users.
It's a way for Lamborghini to create awareness for its new product and foster engagement from consumers. Lamborghini isn't alone in building such experiences on Roblox. Athletic apparel retailer Nike has Nikeland. And even Walmart has Walmart Land.
Many Roblox experiences are free to users. However, there are digital items that can be purchased, such as Lamborghini's Golden Bullhead. This is an accessory that can be worn by the user's character. The company only made three available at the steep cost of 1,500,000 Robux, but they quickly sold out nevertheless.
Lamborghini's Golden Bullhead is more than just a digital accessory. Owners are entitled to a visit of Lamborghini's headquarters, provided they pay for their own expenses to travel there. There will also be other real-life perks, but the company hasn't revealed what yet.
The metaverse is here
When investors think of the metaverse, they often think of some futuristic concept in which adopters are transported to virtual worlds via virtual-reality headsets and other haptic devices. And that version could come someday. But for now, the metaverse looks a lot more like Roblox.
Roblox stands out from regular video games because of the in-game economy. Everything on Roblox is user-generated, such as the Golden Bullhead created by Lamborghini. Users buy Robux from Roblox, spend it on items from creators, and Roblox subsequently pays creators a piece of the pie.
This all comes with some pretty favorable economics for Roblox. The company's gross profit margin is 76% and has steadily increased since the company went public. It's not a profitable business in large part because of how much it spends on research and development. But that shouldn't overshadow its impressive gross margin, which points to future net profit potential.
RBLX Gross Profit Margin data by YCharts
I'm not necessarily saying that Roblox stock is a buy today -- indeed, trading at nearly 11 times trailing sales, it's a pricey investment.
That said, it's important for investors to understand that Roblox is far more than a video game company. It seems people are increasingly wanting to have digital experiences and this platform is one of the largest in the world today.
Furthermore, with 70.2 million daily active users, Roblox is likely developing a network effect -- more companies like Volkswagen, Nike, and Walmart will be drawn to the platform because of its large user base. And as these build out experiences, it could draw in even more Roblox users.
Therefore, Roblox stock is one to keep an eye on. Not every user will plunk down $13,000 to buy a digital item. But millions of users are increasingly willing to spend at least some money in the digital world and that's to the company's advantage.
