Roblox gets Hindenburg-ed: should we take it seriously?

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[The GameDiscoverCo game discovery newsletter is written by ‘how people find your game’ expert & company founder Simon Carless, and is a regular look at how people discover and buy video games in the 2020s.]

Huh, so we’re striding triumphantly back into the building like we own the place? It can only be time for another week’s GameDiscoverCo newsletters. And we deeply appreciate all of you for coming along for the (bumpy, but entertaining) ride recently….

Before we start: AA Milne’s classic book Winnie The Pooh entering the public domain has already led to oddness like the movie Blood & Honey. Now, the creators of Ring Of Pain have released a demo for Winnie’s Hole, a clever roguelike where the affable bear is… hideously combat-mutated by a virus? Pooh’s really stronger than he seems in this..

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Roblox x Hindenburg Research - so is it explosive?

Imagine our surprise this morning when ‘activist short-selling’ company Hindenburg Research - somebody you absolutely do not want to put research out on your company - made its first journey into the video game space by putting out a giant Roblox report.

For context, Hindenburg - named after the 1930s German airship disaster - exists purely to target public companies it believes are being deceitful or disingenuous about their finances in some way. And they also bet money that shares will go down..

They’ve made some big splashes in the past - including tanking an Indian tycoon’s wealth by $80 billion while making $4 million on the share turmoil. And so it’s big news that Roblox got a stealth surprise. But what are the key allegations? Basically:

• Roblox is inflating key stats by insufficiently accounting for bots and alts: the claim: “Roblox is lying to investors, regulators, and advertisers about the number of “people” on its platform, inflating the key metric by 25-42%+. We also show how engagement hours, another key metric, is inflated by an estimated 100%+.”

• The company “is compromising child safety in order to report growth to investors”: “For the second quarter of 2024, in a push toward profitability, Roblox reported a 2% year-over-year decline in its trust and safety expenses. Core to the problem is that Roblox’s social media features allow pedophiles to efficiently target hundreds of children.”

So, pretty strong stuff in here - and Roblox shares briefly dipped as much as 9%, and are still 3% off for the day. That’s almost a billion dollars removed from the company’s market cap. So, let’s look at each of the allegations and try to understand if a big deal?

Firstly, when it comes to players using ‘alt’ accounts, inflating DAU, and so making Roblox’s growth look better than it really is - there’s some truth to this, but we wouldn’t call it a bombshell. (It does illuminate some careless exec talk, though.)

Having lots of accounts is something hardcore Roblox players - and bots - doubtless do. So there seem to be at least three different possible metrics for DAU:

• Roblox’s public DAU (daily active users): which execs sometimes refer to as ‘players’ when hyping the company, something that looks sketchy in this context, since it is more accurately ‘number of unique accounts that logged on’.

• Roblox’s internal de-’alt’-ed stats: allegedly, Roblox does try to calculate this internally, and Hindenburg quotes an anonymous former Roblox data scientist as saying: “Let’s say if that number [DAUs] is not de-alted, I think the actual one would be like anywhere between 30 to 20% lower…”

• An even more ‘objective’ set of unique Roblox human players: we don’t know how Roblox is internally de-’alt’-ing. But we’re pretty sure you could get a lot more sophisticated with detecting player behavior to find more bots, etc.

Of course, even tools like ‘unique IP’ to de-alt may not work, if there are multiple kids in one household playing Roblox. Heck, we know that the company sometimes bans sets of accounts partly based on IP, and siblings get caught in the crossfire!

Hindenburg also did a survey looking at Roblox user IDs across all games, which led to a stat of “each unique account playing an average of ~22 minutes per day”, vs. the 2.4 hours Roblox trumpets.It’s unclear how ‘smoking gun’ this is, but it’s interesting.

Anyhow, our view on this is that there’s no systemic ‘bad behavior’ by Roblox here. The game is giant and chaotic, so of course there are going to be bots and weird behavior all over the place.

Nonetheless, Roblox’s share price & rep is built on “~79.5 million “people” spend an average of 2.4 hours per day on the platform.” So ‘how many of those people are really people?’ is a v.relevant question - especially given that Roblox is disincentivized to sweep away bots or alts, since it’ll mess up their growth metrics.

As for “Roblox’s lack of effective child safety features”, this makes for pretty grim reading in the report. With tens of millions of pre-teens but also a bunch of teenage (and post-teen!) edgelords hanging out in the game, and easy creation of 3D levels, there’s going to be a LOT of bad content. Roblox can - and needs to - do better here.

There’s some other interesting analysis - including the fact that ‘DAU to paying DAU’ conversions are declining slightly over time, since Roblox is player-saturated in Tier 1 markets, hence pushing more advertising for revenue creation. (There’s a big tie-up with WPP for ad measuring in 3D worlds announced today.)

Overall, our view? Look, Roblox is a vibrant and growing business - revenue was up 31% year on year in its latest quarter. And some of Hindenburg’s report comes off as mud-slinging. But the activist short seller also makes some fair points, particularly on content moderation and bot/alt detection.

So perhaps, the question is not if Roblox works as a business? (Cos it does!) But does it deserve, as they ask, “a 57% premium on a Price to Sales basis… When compared to established peers in the gaming industry like Electronic Arts, Take-Two Interactive and Nintendo.” Well, it’s slightly less than a 57% premium now, thanks to Hindenburg…

Sept. 2024’s most-watched streams, analyzed..

It’s back! What is? Our monthly collab with livestream analytics platform Stream Hatchet - which grabs data from basically all the major (non-China) game streaming platforms, and we find helpful for seeing what PC/console games are being watched.

As occurs monthly, here’s the full ‘Top 100’ for September(Google doc) that Stream Hatchet exclusively provides us. And the Top 10 is similar to ‘normal’, sure, but here’s some interesting things from both it and the full chart:

• World Of Warcraft’s new expansion & EA Sports FC 25 surge: Blizzard’s classic MMO launched The War Within Season 1 in Sept, with hours watched up a whopping 70% to 62 million. Also notable: ‘formerly known as FIFA’ soccer sim EA Sports FC 25, which debuted at #10 with an impressive 41 million hours watched.

• Warhammer 40,000: Space Marine II and NBA 2K25 were other ‘big’ debuts: Saber and Focus’palpable hit Space Marine II made it to #19, with 20.6 million hours watched - good stuff. Also, basketball perennial NBA 2K25 hit 18.8 million hours in September - and heck, the NBA season hasn’t even started yet.

• Satisfactory and Core Keeper crest a wave on their 1.0 release: hit automation game Satisfactory saw hours watched up 39.9x to 9 million (#37) thanks to its 1.0 release. And excellent co-op mining adventure Core Keeper was up 94% to 3m hours (#81), alongside a similar 1.0 release that included console versions.

Otherwise, we’ll quickly shout out other new entries of note, which are: TCG Card Shop Simulator (#39), Throne & Liberty (#41), Frostpunk 2 (#46), The Casting of Frank Stone (#53), Astro Bot (#55), and Zelda: Echoes of Wisdom (#81).

An honorable mention goes to horror game Fears to Fathom: Woodbury Getaway(#84, 2.8m hours and we’ve never heard of it!) We also spot co-op 2D action-puzzle sequel Pico Park 2, which was briefly Switch exclusive but launched on Steam in September, and hit #79 with 3 million hours played. (It’s frustrating, but very streamer-friendly…)

Oh, and we were tickled to see ‘guess the real world location’ game GeoGuessr make it into the Top 100 this month - at #88, with 2.6m hours watched. This undoubtedly due to the World Cup Finals in September - we recommend watching the highlights!

The game platform & discovery news round-up…

Finishing things up, we’ve got a whole heap of interesting links to examine. So we’re going to lob them at you starting… now:

• GDCo’s latest list of ‘trending’ Steam games (above) - updated daily for paid subs - is headed again by Valve's Deadlock (#1) and Capcom's Monster Hunter Wilds (#2), with soccer sim perennial Football Manager 25 at #6 on pre-orders, and driving sim Assetto Corsa EVO riding an official announce trailer to #9.

• Upcoming ‘PlayStation Network on PC’ drama alert: “Sony’s controversial PlayStation Network requirement for its PC games is once again in the spotlight, after the company delisted the original Horizon Zero Dawn on Steam and [EGS] and added the PSN requirement to the upcoming single-player remaster.” Forums are full of complaints.

• The UK’s physical (and much digital!) game sales for September had an 8% YoY gain, as: “EA Sports FC25 launch sales are slightly lower than FC24, but premium edition sales are up… Space Marine 2 is already the No.3 best-selling new game of 2024… Astro Bot sales are 24% up over Ratchet & Clank.” Not bad!

• Epic has triumphed in its Google Play Store U.S. court case, and Google must - for 3 years - “distribute rival third-party app stores within Google Play, and it must give rival third-party app stores access to the full catalog of… apps, unless developers opt out individually.” Also Google Play can’t pay games for exclusivity on Android? Wow.

• If you’re a smaller game and get a Daily Deal on Steam, how much $ is it worth? This Reddit post details it for Final Profit - it was “around 1200 units (10x better than previous best day)… around $10,000 USD revenue. This is ~12.5% of lifetime revenue for the game in the 20 months it's been available, or 15% of lifetime unit sales.”

• Meta bought quite a lot of VR game studios to bolster first-party Quest content, and RoadToVR has done an interesting review of what those studios actually made. Some, like Camouflaj (Batman: Arkham Shadow) are front and center, whereas others have very much slipped into the, uh ‘shadows’, *rimshot*.

• Since Valve hasn’t shipped SteamOS for other handheld PCs quite yet, Ars Technica has been trying out ‘Linux for Steam’ alternative Bazzite, a Steam Deck-like OS which adds EA App, Epic Games Store, GOG.com, itch.io, Rockstar Games Launcher, and Ubisoft Connect onto the ROG Ally handheld. (Clever!)

• Here’s a data-filled piece looking at how much Jonas Tyroller’s popular PC games like Thronefall caught the attention of the Steam Discovery Queue. (Related: Chris Zukowski is doing an anonymous survey on Discovery Queue traffic, if you want to fill it out.)

• Saber’s Tim Willits made some notable comments on ROI on megabudget games: “We don't need to sell four million units to make Space Marine 2 a success. There are many games, sadly, especially out of North American developers, where if you do not sell five million copies you are a failure. I mean, what business are we in where you fail if you sell less than five million?”

• Leftover Epic things: Brendan Stock did a text dump of the ‘Success in the Discover area of Fortnite UGC’ talk at Unreal Fest; Epic’s CEO Tim Sweeney said in his keynote: “Last year, before Unreal Fest, we were spending about a billion dollars a year more than we were making… Now, we’re spending a bit more than we’re making.”

Finally, Cygames’ ‘horse racing but with girls’ multimedia franchise Uma Musume: Pretty Derby - featuring both an anime and a huge, >$2 billion grossing F2P mobile game in Asia (see below!) is prepping for an English language release soon.

As a result, the publisher just announced that it is sponsoring the famous Breeders’ Cup U.S. horse racing series as a result: “Cygames will become the partner of the $2 million Cygames Breeders’ Cup Sprint.” That’s a fascinating sponsorship choice - are they hoping staid horseracing fans will jump on the ‘gambling on horsegirls’ bandwagon?

[We’re GameDiscoverCo, an agency based around one simple issue: how do players find, buy and enjoy your PC or console game? We run the newsletter you’re reading, and provide consulting services for publishers, funds, and other smart game industry folks.]