In this episode, host Devin Becker welcomes fellow Naavik host and consultant David Taylor to discuss insights from Naavik’s recent State of UGC Gaming deep dive and beyond. We discuss how leading UGC platforms are evolving and where they face the most promise and challenges, from Roblox’s growing ad and brand integrations to Fortnite’s challenge of escaping its battle royale roots. 

We also explore emerging contenders like mods, Highrise, speculate on how GTA VI might impact the UGC landscape, and consider whether we’re due for a new wave of platforms altogether. Lastly, David reflects on how AI could shape the future of creation and how developers might adapt as the UGC ecosystem continues to expand.

We’d like to thank TikTok for making this episode possible. In a dynamic gaming market where a majority of games fail within three years, TikTok has become a critical partner in helping games achieve long-term player retention and substantial revenue growth. Learn more: https://bit.ly/LiveOpsProgramNAVPodcast 

We’d also like to thank Overwolf for making this episode possible! Whether you're a gamer, creator, or game studio, Overwolf is the ultimate destination for integrating UGC in games! You can check out all Overwolf has to offer at https://www.overwolf.com/.

This transcript is machine-generated, and we apologize for any errors.

Devin: Hello everyone. I'm your host, Devin Becker, and today I'm delighted to be joined by David Taylor, founder of Creator Games, and also a fellow Naavik analyst and podcast host. So today we're gonna actually explore the current state and future of user generated content, otherwise known as UGC, which you'll probably hear that term referenced a lot more than the full name in games, followed by following the recent release of a big, huge Naavik deep dive that we just put out not too long ago on the state of UGC games, uh, by another senior Naavik consultant, Jordan Phang.

So, for those of you who don't hear David's already other podcasts on the channel, could you just quickly tell us about yourself, and let people know, you know, what you do and get them familiar with you?

David: Of course. Yeah. And thanks for having me, Devin. Appreciate you inviting me to talk about Jordan's article.

Yeah, so I'm the founder of games, as you mentioned. What we've built to date is a Roblox analytics platform. We track 35,000 games and we, you know, track all of their metrics, engagement, average session length, and even monetization. So if you wanna know how much any game on the platform is making, you can basically go to creator exchange.io and check it out.

Some of these games are making a lot of money, so you might be surprised by what you see. Additionally, in my nine to five is as a senior business manager at Xbox Game Studios Publishing. My opinions here are my own, not, not Microsoft's just for the record. But yeah, in my free time, I'm, I'm really focused on the UGC game space, and particularly Roblox, but always keeping an eye on Fortnite as well.

Devin: So, I, and I’m always curious what brings people to this user-generated content space, like the UGC space, because, you know, some people have a long history with it. Some people are just think it's cool from a business perspective. What's your own personal interest in UGC? What, what brings you space? And you said emphasize roadblocks, so especially that like area of things.

David: Yeah, I, what, what brought me originally was a strategy project at my former employer Electronic Arts. It was a, it was a Web3 project. We were looking at platforms like Decentral Land and the Sandbox, and then I stumbled upon Roblox and I was like, well, they have all the same sort of, you know, user, user selling points as far as the ability to earn money on the platform as, as far as your ability to own cosmetics and, and keep them or trade them.

So I thought to myself like, maybe we should do a partnership with, with Roblox, but my, my boss wasn't interested at the time, so I just started writing about it for Naavik and my, basically my first article just blew up. And, clearly there was like, interest in the, in these platforms, but no one was really writing about it.

So I just kept writing about it. And, you know, that led to me getting a job at Super Social, which is a Roblox Game Studio. I, I headed up product there. And ever since I've just been, you know, trying to get deeper and deeper in the space through, through various entrepreneurial endeavors, which has, you know, brought me to where I am today with, with the analytics platform, which is eventually gonna be an m and a platform facilitating buying and selling of, of Roblox games.

But in terms of what has really like interested me, I think it's, it's evolved over time. Initially it was the data because Roblox publishes data through an API, it's just a stream. So if you stream the data that they're publishing, you can basically track every game on the platform and, and the sort of lifecycle of every game on the platform.

And if you do some additional work. You know, this is proprietary to our company. You can estimate the revenue. And so there's really interesting insights that, that come outta that. So, yeah, so in terms of, you know, how I got started was really the data. And then all over time, you know, interviewing creators in the space, I just realized like creators are super down to earth.

They are really interested in sharing their own stories and very welcoming to others who, you know, are coming into the ecosystem. And so it really started to feel more like my own community. And so once I had that sort of sense of I'm part of this community now, I wanted to sort of contribute to it, and that's sort of how we got to, all right, I want to build a platform that, you know, is, is solving, you know, a key pain point for creators in the space.

And, and I think the other bit is like, is that Roblox is also like the ultimate game loop if you're as a creator, right? You, you, you do some work, you make a game, you launch it, players come in, you see the numbers go up, you look at your data to see like where the areas that you need to improve. You go back, you do some more work, you go back, you check your data.

How like, is it, is it doing well? You know, you interpret the data and so you go back and forth over and over again. And I think that's a really compelling and, and in, in a good way, addicting experience for, for people to have because, you know, it's analytical, it's entrepreneurial, it's creative. And so that whole, that whole game loop has sort of attracted me as well.

And I've always been very fascinated with, you know, people, other people's creativity. You know, I think being able to support other people in, in, you know, bringing the, the, the creativity out of them is something I really am excited about.

Devin: It is funny 'cause in a way you ended up being a creator around creators by creating these platforms.

You got, it's like you got that creator itch from watching all them do it, but you're just like, I would do around Roblox instead of in Roblox.

David: Yeah. I mean, I, I think, you know, I'm trying to find a place where I fit into the, to the ecosystem and that's where there was, you know, as I mentioned before, like nobody was writing about the space.

So there's clearly an opportunity for me to add something at the, at the high level, you know, explain to people what are the dynamics of the, of the ecosystem, what is the data saying at the, at the platform level.

Devin: I mean, I guess you're talking about people have the, the access to the analytics and stuff where they're working when they already have a game and they can be in that loop.

But I guess when, when people are entering stuff, like what you're providing is helping people that are having the analytics ahead of time of the space so they can go and do it a little more informed, whether that be from a business perspective or from a creative perspective. Right. Which I mean all the, all, all the more information, the better, right?

So you don't walk it up blindly when it's been around. As long as it has, you don't wanna just kind of stumble into it. I'm sure there's, you know, similar things in like the YouTube creator space, things like that where people just don't wanna walk into it totally blindly. But, you know, in terms of numbers and analyst analytics and things like that, that, the deep dive sort of state of, of UGC gaming report, I think went into a lot of data, which of course, you know, that's what we do at Vic is taking lots and lots of information, trying to make it so that there's, you know, a lot of good takeaways from it stuff.

But it definitely was a long one because it's an entire year's state of things. And, and you yourself, having worked on previous ones, what are your kind of big takeaways from this existing one? Obviously, like I said, there's a lot, you're not gonna repeat the whole thing, but what, what stood out to you in terms of especially contrast to where you'd seen the state of gaming before?

What, what you know, was the big takeaways this year for you?

David: Yeah, I think the, the biggest change or the biggest thing that I thought stood out differently from the 2024 report was just that some really large AAA developers are starting to like, enter the space from a moding perspective. You know, Hogwarts Legacy was one that introduced moding through mod.io, I believe.

The other one was, Hogwarts, Baldur's Gate, or sorry, maybe Baldur's Gate was mod.io and Hogwarts Legacy was Overwolf. But in any case, these are some really large games that are starting to, you know, want to benefit from UGC and extending the life of those games through the creativity of their players and, and of creators.

So I think that was one big difference. And one thing that we sort of had predicted from the last, last report. The things that really seemed to stay similar for me were, Roblox had a really strong year. They had 2020, they had 24% bookings growth year over year, 21% DAU growth year over year.

And then on the Fortnite side, you know, we saw that they had something along the lines of like 15% DAU growth on the Fortnite creative end. But I think a lot of that is attributable to the long tail of the Big Bang event in December, 2023 that they're benefiting from. So not really, really an in indication of anything that they did successfully in 2024.

And also, you know, keep in mind that's also that. That's their first party event. Right. And so when I look at it all up, I think Fortnite continues to sort of be having some middling results in terms of being able to deliver on the promise of UGC through their increased, engagement payouts. But they, but, but that they've reported $350 million in engagement based powers, which is a ton of money, especially given, you know, the results that we're seeing.

Devin: Yeah, I remember seeing the report too, that it was like kind of outsized for Fortnite per individual creator versus Roblox, partially because you've got a much smaller pool of creators where it's like, it looks like you're hardly getting anything on average as a creator in Roblox. But that's just because that's on average, right?

Because there's so many creators versus a lot fewer, in Fortnite creator. And you're talking about like, there's sound, like smaller growth. Perhaps at the, in Fortnite.

David: Yeah, I think that's a, an interesting point to touch on. I think one of Roblox advantages is that a lot of those creators are kids or young adults who don't have expectations of making money versus Fortnite creative.

If you're making a map in Fortnite Creative, you're probably like a, you know, at, at youngest you're a, you know, older teenager, but oftentimes you're no, you're, you have a, another full-time job, or you wanna make this a full-time job. And so the expectations of being able to earn a living on the platform are much higher on the Fortnite side.

And, you know, I always had GDC, two weeks ago talking with Fortnite creators, and I think the, the sentiment from, from many who I spoke to was like, it's, it's, they're struggling to get by even more so than they were before. Creator Economy 2.0. Obviously these are sort of OG creators. Right. But, but yeah, they're, they're, you know, because so many creators have entered the space, 70,000 I think was the reported number from Epic versus 12 and a half thousand the year before, you know, it's, it's become so competitive that even now they're, you know, the, the original creators had had less money from a, for, for the ecosystem, but were able to make more than they can now.

Devin: I mean, it's interesting too, given the, the two different business models, but you brought up something that, that just made me think back to the report in terms of something that I noticed that was kinda interesting is, you know, there was a discussion of ages, you know, you're talking about Fortnite generally being an older demographic, and I just always felt like, you know, Roblox was still just stake at like the grade school level, but it was, it was surprising to me to see the graph of.

For, the Roblox players aging up, but not just aging up as individual people growing up with the platform, but older people coming in a bit more in terms of like, it was higher than you'd see from just people aging up. So when you're, you know, I imagine you've talked to some of the people in person as well.

What are you seeing in terms of like the age demographics and that sort of, is it like, are, are people overlapping? Do, do Roblox players also play Fortnite? That sort of thing? That demographic seems really interesting, I think, to dig into.

David: Yeah, so there's a, there's a sizable overlap between Roblox and Fortnite, you know, there, I think there's probably that, that 14 to 18-year-old teenager demographic that's doing both, I think a lot of the reason why, you know, a lot of, a lot of what Roblox serves for kids is an alternative to Fortnite because their parents won't let them play Fortnite, but then they go and they play, you know, FPS games and Roblox and their parents have no idea.

So there's definitely some overlap, but, but Roblox is just so big that there's obviously not, you know, I think, I think the overlap is like 30% a according to ampire analysis which is large overlap, but it's not everything. Right. So, there's definitely, there's definitely some, some elements of that.

Devin: I, nice. I mean, obviously, you're, you're big on Roblox, but I'm kind of curious what other platforms, and, and it could be totally outside of, you know, UAFN and and and Roblox altogether. What other platforms are you kind of bullish on or, or you find really interesting or think have an interesting potential future?

I know you mentioned some of the mod platforms, things like that. Where's kind of your interest line or excitement outside of those main two maybe?

David: Yeah. I think GTA is gonna be an interesting one. I think people are hyping it up a little bit more than what it, what it actually will be. Just knowing how difficult it is to introduce UGC tools, having watched, you know, Fortnite struggle with it.

I think they're going to, you know, take a marginal improvement approach, not, completely, completely revamp it. What it is today is, is basically people using this, this server, SDK provided by five M to basically spin up these individual servers that they host themselves. And so there's not the same dis scalability through discovery like you see on, on Roblox in Fortnite.

Basically, the way that these communities operate is they, they go from, from one server to the next as a collective. Like these are people that, that they've gotten to know online and when they leave a server, like everybody leaves the server and moves to a different server to try out that server. And so it's a, just a different ecosystem, but it will be interesting to see given, you know, GTA scale, it will be interesting to see, you know, what are the elements that they decide to include in GTA six role playing versus GTA five and how they make the on-ramp into being a creator a little bit easier and also, the on-ramp for a player easier as well.

Devin: Yeah, it'll be interesting to watch. I mean, obviously there's a lot of hype around that and we'll, we'll get to talking about GT six, I think a little bit further on as well. But just because that's, I, I wanted to say the elephant in the room, but you know, there's a million elephants in this room.

I think at this point it's becoming very interesting space, but one of the things you mentioned was the difficulty in putting these platforms together, trying to build them over time. Roblox has had what I think, over a decade of building this stuff up two decades. Yeah. It, it, it took them a bit of work to get there.

Right. And I think a lot of people kind of see the success now. Forget how long the road was there. I mean, I guess surviving during all that was probably the, the tricky part, right. When, how do you, like the network effect is just massive now, getting to that, but they, it took them forever to get there and building up that critical mass, it's even gonna be harder to try and build up that, that sort of critical mass with a group that keeps aging out.

In the early days at least, probably. I mean, now maybe they're retaining a bit more, but I gotta imagine earlier it was like they'd kinda just age out and do something else. Yeah. But especially around Fortnite, but including Roblox as well, which has, it sounds like from the report, has also been doing a, a great job of addressing lot of issues.

But I'm just kinda curious in general, between these two platforms and over the last year especially, what do you see in terms of like, have they been able to address a lot of the shortcomings where, whether that be from tooling or community response or managing discovery? There's a lot of different areas, but like how do you see that progressing over the last year and, and maybe even into this year?

David: Yeah, so I can start with Roblox and then, and then go to Fortnite. So on the Roblox side, I, it's hard to describe these things as shortcomings, but maybe we call 'em areas for improvement. So, so what they said that they were focused on this year wa, or what drove a lot of their, their success from a DAU perspective being up 24 percent year over year, was sort of improvements to search and discovery. So, basically the ability for, for better recommendations to be made to players and also for, you know, more, more content to be discovered, which benefits creators. They talked about virtual marketplace. So, you know, the ability for anybody to be a UGC creator, these are the, the cosmetics that can be taken from experience to experience.

And, and then also some other things around, you know, new monetization stuff, price optimization. So like they'll tell you like what you should price your in-game cosmetics at based off of your, like, your sales numbers. And then, you know, they made improvements to app performance, so fewer crashes, quicker speed to change games.

And then live ops, they've been having these events, which is sort of like taking a page out of fortnight's book, which is I think is interesting. So the two bits that I think are. Our most, impactful for Roblox were search and discovery and, and app performance. And I'll tell you why. So on the search and discovery side, what that enables is for creators who may not otherwise be discovered to, you know, to be discovered, their content to be discovered.

It allows for new play styles to be, to emerge on the platform that innovation, you know, facilitates new games, breaking out and, and going viral. I. You know, 'cause when you have a new, when you have a new play pattern, you know, there's a lot more interest and a lot more distance that players can go in those, in those games before they sort of exhaust it.

And that's what we saw through some big breakout hits with rivals and dressed to impress. These were like new play patterns that people hadn't experienced before that they were really excited about. And that ended up driving DAU in Q3 of 2024. And you can see there's a significant uptick that's driven by these new games that, that came out and went viral.

So I think that's the, that's like a really critical component to, to their success. And then the reason why I think app performance is so important is because the ability to change games rapidly also facilitates the, the discovery of new content, right? Fortnite has this problem where it takes like three minutes to get from one game to the next, which is super high barrier to try new content.

And so as a player, you're, you're, you're probably not gonna. You're way less likely to discover new content and for those innovative games to really bubble through and, and be successful. So I think that Roblox is ability to change games within eight seconds. I, I, I did a post timing, basically like the speed to enter a game on Roblox versus the App Store versus Steam.

And Roblox is like eight seconds. The app store is like 20 seconds and then Steam is like 31 seconds or something like that. So anyways, they're, they have this massive innovation, which is like the ability to seamlessly go from one game to the next. And that's what's driving a lot of discovery as well because players are trying out eight, you know, can try out eight different games in a, in a single play session. So, they, you know, the fact that they were able to make headway on all of those things has, has, I think, contributed a lot to that 24% increase in bookings and 21% in, in DAU growth. So yeah, that sort of brings me to the Fortnite side, right?

So Fortnite has a few problems right now. I think the, the first is that the tooling is still sort of limited, like the types of content you can make are pretty constrained even though they introduced,  you know, per data permanence in the last year, which was really important. 'cause now you can act, there's actually a reason to come back to a game 'cause you your data stored, which is kind of mind blowing, but it's a long road as I've, as I've written about previously.

And so, you know, they still have a long way to go before they're enabling the variety of content that, that Roblox enables. Basically, on Roblox, you can make any game imaginable. On Fortnite. It's still pretty constrained to these like short, short sort of progression system games. And so that's definitely gonna hamstring them in the, in the long-term goal of like bringing in a larger audience and, and giving people of all sorts of demographics.

Something to play. The second thing I would say is that, the engagement based payout system that they have is fairly limiting in, in Epic's ability to identify what content is really compelling to players. Right? Because like if you think about what are the, like if you're an, if you're an algorithm, like what are the key features that you'd be looking at on a game to decide whether or not it's high quality or not, it's probably gonna be retention and monetization, right?

Session length is a little, can be a little bit misleading because people can take advantage of that and have all sorts of like, sort of a FK features away from keyboard features that are just artificially extending the playtime. So you, so really retention and, and monetization are, are the key, key, levers that you can look at for whether a game is compelling or not.

And so then they've taken out monetization. So now that you've just got retention, but then. On the retention side, like you don't have, a lot of, you don't have easy access to communities like you do on, on Roblox via Discord, right? Discord is not widely used by the, the Fortnite community. Just to give you a, a stat there, like the top, the top Fortnite creator has a discord of 77,000 players.

And so that's good gamers. The Boy Dillys company, just blocks fruits for point of reference, has 2 million players in its discord. And so you can kind of get a sense of the scale of, of community engagement that can occur on, on Roblox, which is a key part of driving retention versus Fortnite. So, so again, so like going back to the discovery bit of, we've, we can't do monetization because of we're, we're just sort of ruling it out de facto.

And then retention is not really something that you see a lot, a lot of activity on, on Fortnite. It's just not something that happens both because you can't have long-term progression currently. And secondly, because there's not easy access to community engagement tools. So there's a very, you have a very limited scope of data that the algorithm can rely on in order to, you know, surface high quality content.

And as a result, what you see is very few new games breaking through on Fortnite. And, and just to give you some data on that, so for Roblox, five out of the top 10 games in March were made in the last year, right? Or actually last 18 months. Five outta the top 10 games in March were made in the last 18 months for Fortnite.

Zero out of the top 10 games were made in the last 18 months. And so that kind of gives you a sense of whether or not new content is being discovered and, and breaking through and becoming popular. And that's really important for the reasons I previously described, which are a, that it drives engagement and monetization for the platform at large when they have new content that people are playing.

And Roblox even stated this in their, in their Q3, investor letter, that basically what they see is when people play new games, they spend more and they they play more and they spend more. Right. So, so yeah, so, so they, they aren't able to capture that, that additional monetization and engagement that comes from new content.

And then secondly, when creators are looking at the space, you know, when, when creators are [email protected] to see like which games are breaking through. You know, when they see, oh, there's five games that have broken through in the last 18 months to be top earning games, that tells them like, oh, I could do that.

Right? Like, there is an opportunity for me to, to reach that potential. That's a, that's a signal to them that they should be creating, that they can make a lot of money if they, if they make a really good game. And then secondly, it's a signal to, and so, so when you have more competition coming in, when you have people excited to make games that are gonna, that are gonna be innovative and, and potentially replace the existing incumbents, the incumbents then need to reinvest in, in live ops and making their games even better.

And so there's a sort of virtuous cycle that happens when you have a very competitive environment that all of the creators are putting their money that they've earned from the platform back into the platform. And that's something you see on Roblox, but not so much on Fortnite. And, and, you know, I had Chad Mustard on the podcast and he basically stated like, it's kind of frustrating when you see someone who's, you know.

Making $10 million a year, but not pushing any up new updates or not really contributing to the right, the ecosystem. And, that can be really sort of discouraging for an entire creator base when, when that's the case.

Devin: One of the interesting things that's different than I guess about the Fortnite model is that because they're monetizing through just retention, which isn't happening, and they can't actually monetize directly in the game, so it sounds like a situation where they're not really incentivized to update, especially if people aren't really coming back most of the time.

The just the monetization model sounds like it, it skews that reinvestment like mentality.

David: Yeah, I mean, creators are, are, you know, doing their best, right? They're, they're invested in the platform. They're gonna do whatever it takes to try to make their game as successful as possible. They put a lot of hard work into getting the game out in the first place, and then they're gonna push updates until, you know, eventually they give up.

So it's not necessarily that they're not gonna do it, it's more that, just the incentive structure where, you know, if you're, if you're unable to monetize, then you're basically just building games that are driving long play sessions, which sort of, you know, it, it, it puts the type of game that you can make be successful in the platform in a box.

You're not gonna see a lot of niche content being successful on Roblox. You know, there's, there's a game that's like, it's called Fight in the School, and it's like the top 35 earning game. And then it's like the top 120 engaging game, right? So this is a game that only has like 6,000 CCU in it, but it's making a few million dollars a year.

Right. Which is very high monetization. Now, if that game were on Fortnite, it probably wouldn't even, you know, you know, it would probably be dead in a few weeks. Right. And so it, that monetization is, is a way to identify whether there's a smaller user base that is having a high degree of, of engagement or fun that's driving spend or retention.

Right. So it's, it's more around the ability to allow for different types of content to be successful on the platform and showing to creators that it is actually successful. Right. You know? Right. The creator of that game is, he may, you know, he's probably happy with 6,000 cc, let's be real, but, but like.

He's also like, oh, I can, you know, get more engineers to work on this. I should keep working on this rather than building a new game. And I think that's, that's the problem with Fortnite right now, is like you have to make content that the existing audience is ready to engage in, which sort of stifles innovation.

Devin: I'm looking forward to kids building out live ops teams for the Roblox games, like learning that early. 'cause you know, maybe they could send some of, some of the WB execs kids over to, to Roblox to learn that.

David: Dude, it is, it's happening man. There's some really sharp kids who are making a lot of money on the platform and they're savvy.

They're, they're able to find contractors through discord and, and bring people in when their game starts to gain traction. Like.

Devin: Yeah, fantastic. Like a lot of kids just learning to be little entrepreneurs, which of course Roblox is, you know, touted for a long time is something they feel like they're empowering kids in.

But one thing you mentioned around Fortnite, I, I find that interesting based off of, you know, some of the ways they changed, and this was in covered in the report a bit as well. , the monetization model you're talking about, you know, the, not a lot of, you know, metrics coming from retention, not no metrics coming from modernization.

And it sounded like, like Fortnite or Epic in this case was looking at actually not even either of those two. It's how many new players do you bring into the game? 'cause they care about this, using this as a growth engine for Fortnite, which doesn't super really align with creators the way a lot of the other metrics kind of did.

Do you think that's also potentially hampering some of this, that like these creators are like, I'm not gonna go out to YouTube and bring people in, like you're supposed to give people to me from your game and then I keep them entertained for you?

David: Yeah, I think, I think that it makes sense because ultimately that's what Fortnite wants is for new players to come in. I think that it gets, it's a little bit fuzzy because they're not transparent about how much money you're actually going to make for bringing those new players in. And if you're gonna bring new players in, you know, that's basically marketing spend. And then the thing about sort of UGC platforms, at least today, is that if you bring players in, then you're sharing those players across the rest of the platform.

So you're basically like acquiring a player, but then sharing the revenue from that player across many different games. And Roblox had this initiative they announced at RDC this year, which I think is sort of a step in the right direction, which is that if you bring a new player in, then you capture 50% of the revenue that that player generates over, I think a six to 12 month period.

I can't remember exactly what it was. But that basically says like, look, if you, if you spend money to bring in a player to your game, we'll also give you the money that they generate on other games, which is, I, I, I think a really smart move. I, no, I haven't heard any creators talking about like, oh, I'm making so much money now because I'm like bringing in new players.

Right. But I think at least like being transparent about what exactly you're getting when you bring in new players is important because ultimately when you're doing. You know, a ROAS calculation, you need to know what the return is, right? Yeah, exactly.

Devin: Well, kids, kids definitely learning about that, you know?

Yeah. That whole, that whole business model, their cash flow model and Uck. Yeah. It'd be interesting to see in terms of like monetization more maybe on, on the business side of things from, you know, both Epic and Roblox, there's been, you know, looks like some shift in how Roblox thinks about advertising and brand integration, and that also goes to creators, right?

With integrating brands into, you know, different, you know, creations, different games and things like that. Like what do you think overall of that, the whole platform? I mean, just the, the platform in general, especially Roblox as a, as a platform for businesses coming in to either advertise or integrate into like brand experiences, whether those be integrated into existing games or their own standalones, that whole sort of movement.

I know that's something you've, you've explored a bit yourself.

David: Yeah. So. I guess the early, in the early days, the way to advertise on Roblox was through building a branded experience. And, , over time that sort of, you know, Roblox did a lot of handholding and a lot of incentives to people, to brands who did their own branded experience that enabled them to artificially get engagement over time.

They sort of removed that advantage that they had given to brands and as a result, branded experiences have basically like been ghost towns for the last two years or so. And, and, and so, you know, one of the things that they were promising brands and have been promising for a while is like other ways to advertise to, to players beyond branded experiences.

The way that brands have been sort of, you know, able to reach players at scale. So, so far has been through brand integrations, which is like, you find experience that already has a really large audience and you like, you know, do an integration where like, I dunno if it's a, if it's a role playing game, you might, in your Coca-Cola you might say like, oh, we're gonna put like Coca-Cola vending machines in the role-playing game and that might be your way of doing an activation.

And then you pay the creator, you know, 20,000 to a hundred thousand dollars to have those Coca-Cola vending machines in there for a month or, you know, two months and. Because the scale of these Roblox games is so massive, you know, this is probably the biggest marketing arbitrage opportunity there is right now.

Because Roblox hasn't figured out how to, to effectively monetize all those eyeballs and creators are going from having no ad revenue to having some ad revenue. And so there, you know, the prices are definitely going up as people are catching on and, and creators are becoming more sophisticated about what the value of their player base is.

But still, there's so many, there's so many games that have, you know, 10 million d well, one to 10 million DAUs that like you can still reach just an absolute massive audience for a fairly low price in these games. And so that continues to still be an opportunity for brands, I think is under, I.

Underappreciated. I think people are just not comfortable because it's a little bit harder to measure like engagement. But, but that's, that, I think there's no doubt that that leaned in engagement of gaming is far superior than a YouTube passive, passive ad that, you know, people stop watching the second that it goes to an ad or, or just waiting for it to end.

So I think the quality of engagement, the, the cost, you know, the CPMs on it are absurdly low. I, I calculated it. So I think YouTube is somewhere between like 10 cents and 3 cents, CPM, and then Roblox is like 1.50 cents, CPM, uh, for some of these, you know, top games to, to do an integration in. So. Yeah, essentially it's like a better form of, of brand engagement and it's cheaper as well on Roblox at the moment.

Devin: So it sounds like the power is more actually on the creator side than Roblox side. If Roblox can't get advertising working in a way that they could directly monetize, you know, themselves and maybe kick down a little bit to the creator as opposed to creators themselves getting paid on this, because right now, you know, creator payouts are pretty much directly through Roblox to the, you know, that percentage of Roblox that they get and get that cut.

Whereas if they're working with a, with, you know, a brand, they could be getting paid directly by that brand integrated into the experience that they're monetizing through Roblox and then they get money from both sides without having to like funnel it through Roblox first. I mean, that's my understanding.

Right. That sounds like that's a great opportunity for creators as opposed to a great opportunity for Roblox.

David: Yeah, yeah, yeah. So they do circumvent the, the Roblox fee as well. And obviously Roblox is trying to capture this. I. Right. Because they need to show to investors that this is an advertising platform that they're generating revenue off of it.

So much so that like Roblox has actually like stepped in. So, so before, like the company that I used to work at Super Social would, would work with brands directly to build these, these Roblox experiences, right? Roblox now has stepped in to be an intermediary, which is something that these third parties were providing before.

Mm-hmm. I think that market is probably like a, you know, 80 million to a hundred million dollar market that they're sort of stepping into. And, and that's because they're so desperate to show to, to investors that they're generating advertising revenue. That they're basically like, all right, we're just gonna do the job of these third party agencies slash brand studios.

In the meantime, they're also trying to build out these different ad units. The most recent one they announced was rewarded video ads, which I think is, you know, that's a really interesting one. Creators I've talked to are, are, are excited about this as well. I think it just makes a lot more sense because, you know, when you're playing a game, you want, you want to gain currency, right?

And like usually you have to pay for that currency or you have to pay for that reward. But guess what, like if you watch this 32nd video, you can get it for free. Right? Yeah. So like, that makes sense to, to creators. And I think it's something that's been missing in, in Roblox is previous miss, which was immersive ads where you could just like.

Put portals in games and hope that people walk through them and like, go to a different experience, which made—

Devin: That doesn't sound like a great alignment with the game because they're just, they're leaving your game temporarily at least, right?

David: It didn't make sense for anyone. Like the, the player's confused because they're like, well, I was just in this other experience and now I'm like completely in this new context.

I don't get what's going on. And it's a crappy branded experience, by the way. So it's not good for players, it's not good for creators who's taking players away from your game and disrupting their engagement in the existing game. It's not good for brands because players get into that new experience and they're like, oh, I'm leaving this immediately.

Which tanks? Which tanks the metrics on that game. So it'll never get into organic discovery. And never, never scale in terms of its player base. And then, you know. So like it's a lose, lose, lose across the board player brand, creator. Like nobody, nobody gets anything. But with this new model, players are getting rewarded for with currency or some other cosmetic reward.

The brand is getting someone to look at their video for 30 seconds and then, you know, there's some positive affinity with the reward that they're getting as a result of watching that brand, and the creator's making money. So and Roblox makes money too.

Devin: Right? I'm curious though, like how that works out for the creator in the sense that they now have to integrate that sort of concept into the game design a little bit, right?

Because if it's rewarded, you have to design that reward into the game's economy and things like that. I can't just be like, I'll just slap it in. I have to con, you know, consider now people can, am I limiting how many times people could do that? What, what size, you know, reward am I giving them? And then also, am I hurting my own, like cannibalizing my own monetization?

Because people could do that instead of spending money, and I'd imagine the payout's gonna be much lower than what you'd get from like a direct in app purchase, right? With with Robux.

David: Yeah. I, I think that this is gonna be, it's a tactical question for the creator, right? Like, you might, if you have like an RPG game, like the game that I mentioned before, like if you're monetizing at that rate where you're, you know, making an, you know, an ARP doo of like, you know, two plus Robux.

Then you shouldn't probably do that. But if you're one of the lower monetizing experiences like an ABI or like a, I don't know, like these kid, younger kids games that are on there, like those kids aren't, I guess you can't advertise to under 13, so you're sort of in a tough spot. But like, all right, let's say you're in like a low monetize, you have like a low monetizing demographic, right?

Like let's say a lot of, you know, Philip Philippine users are playing your game for whatever reason, like that's the perfect opportunity to, to do it because you wouldn't necessarily expect them to monetize anyways.

Devin: Well, I guess in situations also where it's mostly younger audience playing is the, is it then okay to monetize your brand?

Like when it comes to, rather than advertising, using brand integration, you know, the, where you throw in the Coca-Cola machines and that, is that okay for when you're dealing with a, you know, under 13 audience?

David: What do you mean by, is that okay? Like meaning you're having to deal—

Devin: With the cop cop killing you at that point basically in terms of, you know, if you can't advertise to like period to people under 13, then your situation, well you just, if that's a large part of your audience, you just can't do it.

Whereas if, if you're allowed basically, you know, without dealing with any kind of problems afterwards to just do the brand integration instead, that seems like that would be a high potential with so many potentially under 13 players in the game.

David: Yeah, I mean, I think that's more of a, that's a, it's a gray area and it's on a case by case basis, by brand.

Like I'll, I can tell you like when I was at Super Social, we had one brand that wanted us to make the brand invisible for all under 13 players. And which, you know, you can do technically. And we did, and then we had others that didn't have an issue with it being visible to all players. So I. It just depends on the partner.

And I think from a legal perspective, it's sort of a gray area that I'm sure a lot of parents are, you know, up in arms about.

Devin: Yeah, I, I mean, and on the topic of all the ad monetization, brand integration, stuff like that is there anything you've seen on the, the Fortnite side of things? I mean, obviously there was the big integration of like, you know, changing manager turtles and stuff like that, but that was a top down integration from, you know, epic side, bringing that in and then allowing creators to participate in some of that.

But are there creators then bringing stuff in? I, I know there's only like some limitations on what you can create yourself, right? I'm not sure familiar with the current state of what that's like, but what, what does that look like in the Fortnite space?

David: It's kind, it's basically the same, although it's basically the same from a branded experience perspective and brand integrations perspective, you know.

You can, you can build your own Fortnite experience and pay somebody to, to build that for you. You can also bring a brand into an existing Fortnite experience. I know Alberto, who I've had on the podcast, who's a, you know, a top 20 Fortnite creator. He's had many brands coming through his game.

Mini game Box, PVP. So you can do both again. Integrations are always the way to go. People are already playing these games. If you can figure out a way to like, you know, a tasteful way to include the brand in the overall experience, it doesn't impact engagement and. For the game itself. And, and then the brand gets all of these, you know, highly engaged players.

So I think that's always the best way to approach it, is just to work with creators and ideally work as close to the actual creator as possible. 'cause there's a lot of middlemen in the space, the, on the sort of programmatic advertising side, which is like what Roblox is really bullish on and, and driving at right now.

I think Tim Sweeney's been pretty vocal about, like, he doesn't want ads in games. And so I don't think that's mm-hmm. That's ever gonna be a path. Although, you know, again, there's, there's so many ways in which, you know. Fortnite is being hamstrung by, by the sort of, the, the constructs of what is, , you know, what is right from the, from the founder's perspective in terms of monetization, in terms of ads.

These are all things that would be generating revenue for creators that they're not, they're not allowed to do and they don't have plans to do.

Devin: I mean, do you see also any issues with that? Let's say they were to allow ads or if we're just talking about brand integrations with the content itself in terms of, you know, Roblox is not a game.

It's just a platform for games and there's whatever on there, and because of that, it actually trends away from as much overt violence, right? There's a lot of role playing. There's a lot of stuff like that. And even the violence is very like beyond cartoonish down the bar. It's like, you know, ridiculously low polly, silly looking, doesn't even look like violence almost kind of thing.

Whereas Fortnite is very explicitly a game of shooting and killing each other, you know, maybe it's not gory bloody, but it is definitely a violent game and most of the experiences tend to be something revolving around that. There's not huge amount, and not that there isn't a growing percentage of it, and there's some good detail in the report talking about some of that growing out a little bit.

But overall, it still seems to be a huge amount of gravity towards the shoot Achilles experience. In, in it's different iterations. Do you see that as a problematic space than for brands? Because like, not every brand's gonna do very well, so it's like a, a different problem than the under 13 problem, right?

It's like the over 13 problem, I guess.

David: Yeah, I, I will. So yeah, just they, that was one of, for Knight's wins I think was like, they, they said that 30% of Fortnite creative engagement was in non shooting experiences, which suggests that there are new types of players coming to the ecosystem, which is great.

I think that's a, that's a big win for them, and I'm not gonna diminish that the, the thing about the question around shooting, I think is more of a, a public perception thing, right? There's plenty of super violent games in Roblox, and I, you know, now that they have their sort of mature age ratings that they can put on things, you know, you've got some really gory games too on the platform that particularly in the RPG genre, like, you know, there's this game right now. That is yeah, just incredibly gory and is doing quite well.

So yeah, so I think that it's really just about public perception, which is obviously very important. A lot of brands don't wanna do Fortnite because it's shooting, right. But it doesn't, you know, there's way to ways to have games on Fortnite that aren't shooting shooter games at this point. And conversely, on Roblox, there's plenty of violent games.

It's just that people don't necessarily think of Roblox as a violent place.

Devin: Right. The public association, whether or not they've, there's exceptions generally people don't know about that.

David: And, and I kind of said this at the beginning, is like one of the things that has, you know, one of the Roblox is, sort of secrets that they've benefited from is the idea that it's not a place for first person Jeter games. So all the kids who wanna play Fortnite, that their parents don't let them, they just go to, they just go to Roblox to play it so much. So there's actually like, there's actually like 10,000 CCU 10 to 20,000 CCU in Fortnite replica games on, on Roblox.

So it's like actually like the way around.

Devin: The Roblox replica games in Fortnite. Right. I think we've seen a little bit of that.

David: Well, sure. Yeah. So like re re reinventing like the brookhaven's and the, and the murder mysteries and Yeah. Yeah. You definitely see sort of taking the play pattern and bringing it.

Bringing it over. Yeah.

Devin: It'll be interesting to see that, that sort of demographic spread and like, I mean, on that topic, it, it's kinda funny. We got like, you know, the, the younger age and then sort of like teens into young adults potentially. And then GTA, right? The, the big one that's like, this is definitely a mature game and, and like one that, you know, kids probably shouldn't be playing, uh, and that sort of thing as a UGC platform.

Then it, you know, I kinda wanted to just talk a little bit about that sort of impact of, let's say it does release this year. I'm always a little bit skeptical of them hitting any kind of re you know, release date, including for the UGC, right? Like, let's say it does come out, but the UGC stuff is, you know, a year out from that because they're like, Hey, we can't prioritize that.

We gotta get this game out. Those kinds of situations. Yeah. But in general, this, this sort of impact, right? You've got this higher on the age demographic spectrum, but it's got a huge built-in audience and brand. It's not like Fortnite where it came in and built its brand from that singular game.

And Roblox having, you know, as you said, 20 plus years. GTA HA has also a long history, but it's, it's building off of it brand. Like what do you think the impact looks like?

David: Like I said before, I think GTA has, you know, been a little bit overhyped so far. I, I just, as you sort of inferred on, on that question, like you, the main priority is getting outta game that is like fun, free of bugs, all these things.

And as anybody who's worked in the industry knows, like the closer you get to launch the, the more things get, get sort of scrapped from the scope. So like it's really hard to prioritize UGC when you know the majority of the success. Is contingent on making a really fun and and compelling game first, and then you can add the UGC to sort of prolong the life of the game.

But like, if you don't make a good game, then there's no reason to have UGC tools 'cause nobody's playing it anyways. So you really have to prioritize making a really high quality game. And, and I'm sure rockstar knows that. And as a result, I'm sure the UGC team over there is like just sc being very scrappy and trying to get whatever resources they can dedicated to, to the platform side of things.

And I just think like, you know, that's, that's gonna always be a struggle for them and I'm sure they're doing great work, but. Realistically, it's probably gonna be some incremental innovation off of what already exists in the five M ecosystem where, you know, they maybe make it slightly easier to be able to engage with, with the RP side of things and find different servers to go into.

But I don't think they're gonna have like massive innovation in terms of discovery, in terms of ability to try out new experiences. And certainly, probably not on the tooling side. I don't think they're gonna, they're definitely not gonna be investing in like creator tools to make it easier for people to, to make mods and stuff.

Devin: See, you think it's just gonna depend on the sort of the mod scene and mostly just kind of launching with the role-playing stuff that they've acquired to demonstrate out, you know, other experiences expanding the aim and see how long that can kind of coast them while they work on, you know, DLC type content.

You know, the live ops, the heist, the things that they did. You know what, I'm not sure what they'll do in terms, I don't know if they'll do heist anymore, but that, that sort of idea that they're gonna be focused on that for most of their extension as opposed to like, well, let's kind of see how this RP thing does.

Let's see if we can kinda let it sort of organically grow, maybe throw mod people a bone, things like that.

David: I think the biggest, the, the biggest win that Rockstar is looking for right now is to effectively convert all of those GTA five RP players to GT six. That is sort of like, that's what success looks like for them, what they're gonna do to make that happen.

Whether it's like making it easy to port the, the, the servers over to GTA six or giving some sort of monetary incentive is unclear, but like, I just mean from a technical perspective, like they're not, they're not gonna be able to bring, put the amount of investment that Fortnite has put into to UEFN or, or Roblox has, has done for their entire 20 years that they've been building that platform.

Devin: I mean, I guess, you know, let's say the game's a huge, massive of success and makes, you know, tons and tons of money, do you think they can, you know, use that money, not necessarily to ramp up hiring, but maybe to acquire some talent or things like that to be able to sort of speak? I mean, they already did that to an extent, right?

By acquiring some of the role playing servers, can they sort of buy their way into making some of that work so they don't have to focus on it themselves and they could continue to focus on developing the content that they monetize?

David: Yeah, there was that, there was that article, I can't remember who, who wrote it, but that apparently rockstar had been talking to Roblox and UAFN creators about coming over to their ecosystem.

And yeah, of course, like, like in UGC, talent is the scarce resource for sure. And so you'll always see different platforms talking to the successful creators and other platforms and trying to convince them to come over and build something great. So I don't think that like, you know, that'll, that'll always be there.

But I think that ultimately, like they're, they need to prioritize making the game and getting it out when. It makes sense for the, from a market perspective as opposed to, you know, being able to dedicate too many resources to building the next ROBLOX through GTA. It's just not, especially

Devin: given the current market, right, where it's like, if you could be a success as a AAA right now, that's, that's already a good start given.

Yeah. The amount that on their face, I think.

David: You know, they, I like, my biggest critique of Fortnite isn't that they're building a UGC ecosystem or how slow it's going. Like those are all things that are just, I think first of all, I think it's the right move strategically to build the UUGC ecosystem. My biggest critique is that they spent, they, they five x or six x the payouts to creators before they had given them the tools to actually make different content.

And so, so for, for Fortnite, they've now spent, you know, $700 million. To acquire like seven K or 70 K creators, which is like a thousand dollars per creator, which is like crazy high, cost of acquisition of a creator. And you know, to the point I made earlier, it's like, but there's no new games in the top 10.

Like there's N's nothing that is really driving value for Epic Games at this moment based off of that $700 million investment, right? So if we're looking at it, if we're taking that lens to GTA, it's like that, that whole ecosystem has driven a ton of revenue because people are buying GTA games paying, you know, 50 to $70 in order to play GTA role playing.

And that's why they allowed that separate ecosystem to exist, even though they weren't monetizing it. So now, you know, there's this opportunity that they can maybe monetize that a bit more if they, if they own it. And then secondly, there's the, the, you know, desire to port all of those. All of those creators, all of those players from GTA five to GTA six, the, I think the biggest mistake that they could make is to sort of do what Epic did, which is like, go all in on this thing before they were ready, right?

If they, if they think of GTA as like a 50 year franchise, they can just sort of incrementally add these tools in without sort of dedicating too many resources to it without sort of, you know, disappointing creators. , and so it makes a lot more sense for them to just slowly add, you know, features that solve sort of the biggest pain points versus just like.

You know, go all in like, like Epic did.

Devin: Yeah. I wonder if Epic was just thinking, well, by doing this, we, we make a big splash, get people excited about the idea. Hopefully bring in players as well as creators, but also get creators that are top talent and want to push things and then we can see which way they wanna push and try and respond.

I'm just guessing at maybe what their mentality might've been around that. Like, let's, let's take this money. It's not gonna directly work, but it'll like help give us feedback or something like that.

David: Yeah. I think there maybe, and this is, we're all, this is all speculation at this point, but my, my sense is that there is maybe too much pressure or fear of like public.

Backlash if they didn't give a high enough percentage to creators. So they're looking at like, okay, well Roblox gives 25% or 20, I mean, ultimately it's 21% of revenue to its creators. And then I think Minecraft gives something, I think it's like 50%. I, I'm honestly, I don't really follow the Minecraft ecosystem, so I don't actually know, ironically, even though I'm at Microsoft.

And, and so they're, you know, they're thinking like, what's, what's better than Roblox? So they will threw out this 40% number. Right. You know, and, yeah, I think that was sort of the, the key mistake is like, yeah, they were thinking about what's gonna look better versus, right. What's act, what is this going to cost and how long is it gonna take us to actually reap the benefits of that?

If they had just, if they had, if they just included the tools and not done anything to the, to the, to the, uh, engagement based payouts, like you would've probably seen a similar result.

Devin: Yeah.

David: Right. Like there would be fewer creators to be, to be clear. Yeah. But like all the, all these creators right now are basically making the same games over and over again because that's all they, that's all they can do with the current tool set.

Devin: So, yeah, it makes me wonder if they just not overly incentivized it and just kept it as like a mod toolkit at first, where it's like, you could do this for fun. We're not like trying to pay this out yet. We're just building it up for you and we're gonna spend money like building it, but we're not like really gonna give out money till we feel like comfortable with that.

I could see that being a valid strategy.

David: Yeah. You obviously want to build with, with your user base, like actively. Right. I think that's like a key part of success, particularly in games, is like as you build something out, you wanna constantly be getting feedback, which is the benefit of. Having this economy right now, but I don't think it needed to be that much money.

And, you know, those resources could have gone to more developers to maybe help them build the tooling out faster, you know, they had those layoffs in 2023 that were sort of correlated with the UAFN launch. So like, you know, there were serious consequences to that misstep, I believe.

Devin: Well, hopefully those people can find a place.

Maybe they'll find it over at GTA certainly.

David: But certainly not a great job market right now.

Devin: No, definitely not. I mean hopefully there's definitely something for the growth, growth opportunity for these people. And I mean, on that topic itself actually, my, I guess my last question for you is in terms of, you know, we have Roblox clearly dominating the market, UEFN being at least doing what they can to be, you know, close competitor GT eight.

It sounds like, you know, from your speculation, probably not looking to be a big competitor anytime in the near future, unless, you know, it just happens to launch just the right thing. Is there a space in this space for more people? I mean, you mentioned at the beginning like, you know, and this is covered in the report a bit about mods and stuff like that.

Is there room in this, in this space in general for more platforms? I know network effect is obviously a big part of it and you know, you can't, it's hard to compete with 20 years of Roblox, but do you think there's like a finan or either financial or just even attention, distribution enough to be able to survive in this, in this sort of competitive landscape right now?

David: Yeah, I mean there, I don't think that anyone who's taking the same approach that Roblox and Fortnite have taken is going to be able to be successful. As I mentioned, like talent is, is certainly is a big scarce resource here. And that talent's gonna gravitate to either the platforms they're already on or the platforms where they have the greatest potential to succeed.

And that just is really hard to, to do if you're an upstart. Like I think Jordan mentioned high-rise in the, in the report in my right.

Devin: The sneaky one.

David: Yeah. I've heard like there are a lot of hype about, I have actually not really checked it out myself, but like he said, that there were, that they paid out $444,000 to 5,000 creators.

I mean, that's crazy. It's just no money. That's not, yeah, that's not no money at all. So that's not going to really. Like they might, I don't know if Highrise is like a really compelling user experience in like, in fun game, like, great add UGC tools on top of it and, and then extend the life like a, like a typical, you know, mod scenario.

Devin: So think it makes more sense than to look maybe if, if anyone's looking to expand in this space, looking at it more as a, as a mod , extension of an existing successful game, maybe than rather like technically more of the Fortnite strategy than the ROBLOX strategy.

David: Yeah, I mean, I mean, I think more of the like Baldur's Gate, Hogwarts legacy strategy or build a, build a really big game that's successful and then figure out UGC modding tools using, you know, the third party SDKs of mod A or over overwolf to make it easy to, for creators to come onboard and then extend the life of that.

Of that game by adding like new interesting content from the community. What about like Bethesda's approach then?

Devin: Because they've definitely had their, they've been big on modern tools for a long time, and I believe they have a, a program now where people could sell mods. Again, like a, a bit, a bit of time has, has passed since that whole backlash on Steam where they, I think they have a, a plan now.

I haven't looked into the recent, implementation of it, but I know they were doing something around allowing monetization of content.

David: As a, as a studio of Microsoft. I am not going to comment on that.

Devin: Oh, I fair, fair enough point. I didn't think about it that way, but, I, I'd be interested to see what that, I know there, like, I think Starfield had their stuff released recently.

I'm not expecting you to comment on that, but I'm just, as a side note, I think they're, they're continuing to push in that space. So, yeah, no, I think see where that—

David: Goes at a high level, people are recognizing that, that, that if it can be easier to integrate UGC into, into games, that it, it's definitely worthwhile, especially if you have a, a really large audience.

It's, that's the key bit is like, do you have an existing large audience? If so, that it makes sense to. To have UGC because you know that content can be distributed across that large audience and there's more money for different creators to make.

Devin: Well, I hope that, I mean, I hope that happens. Becaue I think I'm a big fan of mods myself.

You know, like we need like the, the early do mod days and the half-life one mod days and stuff like that to sort of bring some of that fun back, even if it's not monetized. I know monetization helps motivate people, but we, we just need those tools in general and if that's the way to motivate creators to, or, you know, the, the game developers to build those tools.

Awesome. Yeah. But I, so, so final, final question. What are you looking forward to in the next state of UGC report to, you know, to have happen between now and then? To be talking about, to be excited about whether, whether it's realistic or not, you know, what are you hoping to see going forward between this report and next report to be talking about then?

David: Yeah, so I mean, I'm, my, my primary focus is on the Roblox side at the moment, so it's, it's gonna be, you know, stuff on the Roblox side. I think that the, there's two kind of things, I think m and a is a really exciting area right now on Roblox and then ai, and I think they're actually connected. So, so, and actually it's also goes back to your previous question about like what could upend the current power dynamics.

I think AI is definitely something that, you know, it's hard to predict how it will change the, uh, creator's ability to make content, how it will change the dynamics of, of these platforms that have, you know, these massive network effects. But if you have like AI agents producing content instead, like maybe you can just, you know, replace all of the creators instantaneously and then, you know, have a competitive platform.

So I think that like if there is gonna be someone to upend the existing structure. It will be someone who finds a way to leverage AI to sort of, you know, supercharge those network effects or surpass the network effects that ROBLOX has, has established. The reason why I think this is really interesting from, from a Roblox and m and a perspective is that basically the reason why creators have started turning to, to acquisitions rather than building net new experiences is because it's, there's so many experiences made on a year to year basis, right?

Twenty million experiences, I think was the latest, was the most recent report in the New York Times that, that Roblox gave on how many experiences are created every year. So, there's 20 mil million experience created every year by 5 million creators. Like the probability that any one creator is gonna have a breakout hit is basically zero.

Right. So it makes a lot more sense for you as a creator to go and acquire something that already has traction and then, you know, make it better. You know, if you're a sophisticated creator, that's probably the route that you want to take. But with AI it's like, okay. So Roblox vision with AI is, is to basically make it so that anybody can be a creator.

Okay? So, you know, now we're gonna have a hundred million creators Yeah. Producing billions of experiences every year. And in that scenario it just becomes even more, more, you know, competitive and, and, saturated. So I think, like what is, what sort of the acquisitions, uh, phenomenon that we're currently seeing, and we've seen some pretty big acquisitions, right?

Brookhaven was acquired by a lot of money. You know, I'm hearing, you know, five to six x revenue, multiple. And so basically, uh, what that, what, so what what that's a function of is this idea that like creators and, and actually I, when I was talking with Sergey on the, on the previous podcast, he brought this up, which is that creators like don't necessarily want to always be building from scratch, right?

They want to evolve on, on things that already exist, which is sort of what Moding is, right? Like, right, I'm gonna just build a new game. They want to add little parts and, and new pieces of content to it. Something that already exists. And I think that's sort of where I could see this all going is, is rather than everybody having to build something new from scratch, they're able to sort of collaborate on a massive scale.

I. To make these games better and better and better rapidly. So when a single piece of content starts to take off, let's say, you know, it gets to 10,000 CCU, that initial creator can bring in additional creators pretty seamlessly to add in things and, and make it better and, and then allow it to sort of reach its full potential.

And that's how I think I see these, these ecosystems operating and, and that would all be enabled by ai. And then maybe long term you all of the creators disappear and the AI is just doing that and you know, it's creating for us all day long. Yeah. But we don't have to think about that.

Devin: Yeah. Probably not by the next state of the UGC report.

David: I don't think any of anything that I just said in the last one minute is not gonna be in the state of the briefly mentioned as inside. I do think that we will see some. Even bigger acquisitions than, than Brookhaven. So it, I would, I would definitely, I definitely believe that there's a lot more money entering the space.

People are taking notice at the revenue multiples, the margins and the size of revenue that people are making. So I expect it will only heat up from here. Yeah.

Devin: Especially given the risk right now in entering any market in games.

David: Well, everything else is shrinking. Roblox is growing 20 plus percent year over year.

It is swallowing the rest of the games world and 20% is, is a lot. Right. That's 24% year over year increases. It's doubling every three years. So like, you know, I don't think that the creator base is growing that fast. So there's definitely more money being available as a participant in the ecosystem than before.

Right. I'm giving away my alpha, but whatever we do it for the pod.

Devin: Yeah, exactly. For the Vic. Cool. Well, I, I wanna thank you so much for coming on. I, I really appreciate it. I, you've got a wealth of knowledge in this space and, and hopefully people that are interested in, in finding out more, especially about creator platform and things like that, I reach out to you.

We'll, of course, make sure to link to your stuff in the show notes as well as the state of UGC gaming report will be in there as well. And so, you know, who knows, maybe you'll be, collaborating on the next one with Jordan or whatever. But I mean, we look forward to your input and I appreciate that you went from being interested in the space to sharing.

What you were so excited and interested about because it definitely was needed at, at the time and continues to be needed. So thanks, thanks for all that and thank of course to listeners for, for sticking around for what was hopefully an insightful conversation, which now you've gotta spend the rest of your time going and rereading the report if you didn't already.

So, you just missed the weekend. Make sure to reserve next weekend for that. So it is, it is a good, good read, good long book, but full of information that is actually actionable and statistics and, and things like that as opposed to just a, a fluff piece or something. So really appreciate that as well from Jordan.

So big shout out to him as well, who was not able to attend, but definitely attended in a very big way here. And thanks to everyone and we'll catch you on the next interview as well as I'm sure David will have some, coming out in the future as well, potentially. So make sure that if you didn't already check those out recording, you gotta record later this week.

Yeah, already big back catalog of David's stuff if you're, if you're suddenly excited about David, on Naavik Podcast. So, but I hope you guys enjoyed, and catch you guys next time. Thanks.

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