User-generated content (UGC) in games continues to grow in scale and impact, and staying on top of this dynamic market has never been more important. In this episode, Naavik analyst and consultant David Taylor joins Aaron Bush to discuss the most important trends and developments on Roblox, UEFN, and beyond. We discuss emerging patterns that make successful UGC experiences, game-changing roadmap features, how studios should approach this market, the possible eventual scales on these platforms, and much more.
Whether you are already creating UGC games or are interested in participating in the market in some way (as an investor, brand, or publisher), this episode is a must listen.
- The State of UGC (2024) report: https://naavik.co/deep-dives/state-of-ugc2024/
- Interested in chatting or working with us? Contact us here: https://naavik.co/contact-us/
- David Taylor’s LinkedIn: https://www.linkedin.com/in/jdavetaylor/
Big thanks to GRID for making this episode possible. GRID is a game data platform providing esports data infrastructure, analytics, and distribution solutions to leading game publishers including Riot Games, Ubisoft, and KRAFTON. If you're a fan, developer, or entrepreneur with an idea for a live data-powered project, make sure to apply for GRID Open Access, get free access to official data, and start creating today! To lean more, visit https://grid.gg/
This transcript is machine generated and we apologize for any errors in it.
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Hi everyone. I'm your host, Aaron Bush, and today I am delighted to be joined by David Taylor. David has been a product manager at companies like EA and Super Social, but what you really need to know is that he is on top of UGC gaming [00:02:00] as much as anyone in the industry. If you read Naavik Digest or our Deep Dives, for example, you've almost definitely read David's great content regarding the latest on Roblox, UEFN or other platforms.
David also recently spearheaded Naavik's state of UGC Gaming in 2024 report, which if you are to read any single piece of content this year on UGC and games, this is it. So I'll link that one to the show notes so you can check out if you haven't. Already. But really I'm very excited to, to have David on the podcast today.
He is also a consultant at Naavik and works with teams all around the industry to help them better succeed in the realm of UGC games. I've learned a lot from him, and I think you'll learn a lot from him today as well. With that, David, welcome to the Naavik Gaming podcast. Thanks for having me, Aaron.
Well, David, we have a bunch of topics to get into today. We're gonna dig fairly deep into the current and future states of Roblox, [00:03:00] UEFN and other platforms, mainly from a developer perspective. But before we dig in, I was just curious a question about you. What about UGC Gaming made you decide to go all in on it?
What's your story and how you got into this? Yeah.
David: Interestingly, my origin story for UGC Gaming is also a little bit of a Naavik origin story as well. So it all started, I was doing a strategy project at EA around Web3 in the Metaverse and was obviously listening to a lot of Crypto Corner. And in my research I just stumbled upon Roblox and, I had been looking at the central land and the sandbox as these, web3 platforms and I went to my boss and I said, Hey, Sandbox and Decentraland have a thousand DAU, and then over here we have Roblox, which has 50 million DAU. And should we maybe do something with Roblox? Because, they check the same boxes of being able to sell your [00:04:00] cosmetic items, being able to take them across experiences.
And my boss was basically like Roblox is a competitor. I don't think we'd wanna like partner with them on anything. And so I started just doing my own independent research and I think my first article for Naavik was around a license was around Sonic speed Simulator and like Legacy IP that was being licensed on Roblox and being successful, like Hello Kitty as well.
And it was through that, that I discovered that a bunch of these studios had raised venture funding. I was perplexing to me. 'cause obviously the TAM for a Roblox developer is pretty capped by the platform itself. And so I wanted to do a little bit more research on that.
And then I wrote that article, Roblox Developer Unit Economics, just breaking down like how to be successful on the platform or what it takes to be successful on the platform. And that got a lot of traction. A lot of people reached out to me interested to learn more. And I think that sort of, that article is really [00:05:00] what, got me into UTC.
A couple things were, one, there's a ton of data available. These platforms are building in public because they're, they're doing it for players, but they're also doing it for creators. And so you get to see in real time, like what are the features that they're working on because their developers, the creators, it's synonymous in this world.
They. They need to know what's coming down the pipe. So it was, a function of, there's just a ton of information available to do analysis on. And then the other thing is both, Roblox and Fortnite, who we'll talk about, I think later probably they publish the active user bases that concurrent players of each of the experiences.
So you can actually do analysis on the games themselves. So just the wealth of information that was available was really compelling. And then the fact that not a lot people were writing about this. People were reaching out to me and really interested to learn more, which is obviously extremely
Yeah, you definitely opened a lot of people's eyes onto, I think, [00:06:00] the scale and just the unique way that things are done in these platforms that you know, many professionals around the industry they kind of know of, but they don't really know. , you continue to do that.
So for those wanting to know more sign up to, to not digest and we'll discuss more ways to follow David later. But one, one more question before we dive into the weeds on Roblox first. So you've been paying attention to the UGC gaming world for a couple years in depth I would say.
Now. Is there anything over that time that you have. Changed your mind on, in a
David: big way? Yeah, so just at the beginning I was skeptical, right? As I mentioned, just the total addressable market being capped by, the platform themselves. And I think I haven't changed my mind about that.
They are, they're definitely capped. It's hard to be profitable as a Roblox studio. It's just extremely competitive. But I think the thing that I, that has really opened my eyes is just [00:07:00] like the talent that I'm building on these platforms. Just to give an example, like at SuperSocial we had one of our like senior engineers was 19 years old, and he had been developing since he was seven.
And I'm working with this, kid for all intents and purposes who had more, who had 12 years of work experience, which is more work experience than I have. And when you think about that and how a lot of these kids are learning these technical skills, and also not just learning technical skills, but game design, marketing, community management, all the things that are critical to game development today extrapolate 10 years from now, these are gonna be the superstars of the game industry.
And that already manifesting today with, Zeekers, making $50 million in a matter of months off of Lethal company. And I just think that that's not going to be the last time we see that. And in fact, I expect to see that a lot more in the coming
Aaron: [00:08:00] years. Nice. Let's go ahead and jump into Roblox.
We'll hit on UFN and some other platforms later. But of course, in our industry, there really is no shortage of discussion about Roblox. I feel like many people are still sleeping on both the current relative scale of the platform, but perhaps especially the future trajectory of how big Roblox can eventually become from an active user and monetization perspective.
So before we, we dive into what's working or not on Roblox, so what's next? Could you maybe start just by framing up some numbers around Roblox's scale for everyone before we dive in? Yeah.
David: I wrote some numbers down here. We got three-fifty million MAUs. That's an estimate, but.
Three to three 50 million. maus is realistic number.
Aaron: Which, so I'll just quickly add to, I think PlayStation is 1 20, 1 30, something like that. Yeah. [00:09:00] And Xbox is even smaller, so that's larger than both of the largest console platforms combined. But anyways, continue. Yeah.
David: Yeah. And so 70 million BAU and then, 10 million concurrence at, peak times.
And as you mentioned, bigger than PlayStation and Xbox combined. Also from a current player's perspective, it's the same size as Steam. And so this is obviously one of the largest, close to the largest gaming platforms in the world. And and then, in terms of revenue, it's obviously a lot smaller, 3.3 billion in bookings.
Compare that to Xbox, which I think report $16.3 billion in bookings. But interestingly. If you look at their sort of reported numbers for Xbox Game Pass, I think that last time I saw was 3.6 billion. So as when you think about a content platform, Xbox Game Pass and Roblox are on parity in terms of revenue generating [00:10:00] platform.
Obviously as a free to play platform, it's not it's not gonna be monetizing on a player basis as highly as console, but still a large amount of money going into the to, to
Aaron: Roblox. Let me lead in to start talking about the content side of this. Now, and this is a loaded question, but what are a few underrated elements or patterns of the most successful Roblox games
David: today at the platform level, the most underrated element is just the seamless ability to go from experience to experience.
So like in a single play session. A Roblox player will play eight different games which I think is a different play pattern than what in other, on other platforms where players really sink into one or two, maybe three games at a time. But on Roblox it's not the case. They are just they're migratory players.
They go from one place to the next, and as a result retention is a lot lower. And I think because of that transient element to [00:11:00] players, you see a lot of explicit effort to retain them with really big offers to, come back on a daily basis and get a really big reward. One of the things that you'll see in Roblox experiences is just a lot of incentives to get people to play for long periods of time, come back on a daily basis.
Help these, developers hit their metrics that helps them get into the discovery algorithm for Roblox.
Aaron: Is there anything on like the monetization side or the social side or, what actually is being built that you've noticed is any type of pattern that's been more successful over the past year or so?
Community is obviously a huge part of it. I don't think that's that different from other platforms, but the ability to, publish a game and show it to tens of thousands of your followers makes a really big difference in terms of getting the attention of the Roblox algorithm.
David: Essentially, everything comes down to getting the attention of the [00:12:00] Roblox algorithm. If you don't do that, then there's no other way to succeed. So basically it's all about getting the attention of the algorithm, making sure that your metrics. Hit the metrics of your other competitors that the algorithm deems you to have.
And from an from a audience perspective, having an existing community really helps. The other lever is is leveraging influencers who are representative or have a similar audience to what you're trying to target. Because, on the Roblox platform, there's no guarantee that your game's gonna get put in front of your target audience.
Hopefully the algorithm eventually susses that out. But if you really wanna make it explicit, you have to find other means in order to get players in the game who represent your target audience and then train the algorithm to to favor those
Aaron: players. That makes sense. And obviously it's changing all the time and we can't.
Necessarily predict how the algorithm will change, month to month or over the long term. But I am [00:13:00] curious how do you think the meta of what makes a standout Roblox game how do you think that will evolve over the next few years? Or, what, like a standout game to get noticed by the algorithm?
Like how is that going to evolve over the next few years? Any like big ideas on that? Yeah,
David: so I think I, just to cover the existing state, just to summarize it's community, having a Discord community that you can publish to. Partnerships, so influencers, but also, having other Roblox games that you can maybe put a portal in to start to final players to your experience.
And then just from a, like a game design perspective, there's a lot of fast following where it's like you look at what's been successful and then you do something similar, but with some sort of innovation that sort of pushes it past the existing successful game. And I don't see that changing anytime soon, but I think the ways in which you achieve that might change.
So with AI tools [00:14:00] coming to Roblox, you might see developers able to develop experiences faster. And so like speed to market becomes more of an advantage because you get faster tools, it's all about can you get your game published and get people into the, to the game?
Because there's a lot of, a path dependency to the Roblox algorithm, which is if you already have players in your experience, then the algorithm is more likely to recommend more players to your experience. And so it's really, there is an advantage to being first to market. And so speed is gonna be a big factor.
I think the other thing is just as the world, gets the next generation of iPhone or Android phone, that's going to enable more high fidelity experiences to be played globally today. There is a sacrifice that you make if you use high fidelity graphics, which is that it impacts performance on lower end devices.
And so you're basically carving out a part of the market that. You can't access [00:15:00] for your audience. So as that changes, there's more flexibility for developers to use those animations and graphics that might, increase their memory usage. And then lastly, I would say if on the community side, if there are new platforms that emerge TikTok has become a huge source of acquisition.
Bladeball exploded off of the back of TikTok videos. If there are new platforms that emerge and just being able to establish an audience on those platforms is a critical part as well.
Aaron: Makes a lot sense. And obviously. Even beyond that, Roblox is trying to expand its audience in various ways on new platforms.
It's trying to age up and retain players for longer. It's expanding into new geographies. It's doing all of this at the same time. And each of those kind of has its own implications and considerations for how the platform might change or what might work on the platform over time. And maybe just to hit on the international piece first, I'm curious to [00:16:00] hear how you think Roblox games, how well they translate internationally and, just for context, when Netflix, a different industry, but still entertainment, when they initially aim to expand internationally the company believed that content made everywhere would translate well to other regions.
And while that did happen in some notable cases squid games as like the peak example. In most cases it actually hasn't translated at all, and they've learned that in order to succeed in different countries, they have to create, more region-specific content for those people. Obviously in the games industry, content gets localized all the time, but also has, a bunch of regional implications where fandoms are bigger in some places or different types of games and mechanics are popular in specific regions.
How do you think this is and is going to play out on Roblox? Do you think it'll be Netflix-like in that way? Or do you think these game experiences actually do translate around the world[00:17:00] better than others might expect? Yeah, just
David: anecdotally, like from the games I've worked on, like you see that different games will have different audience geographic, breakdowns.
Clearly there's different things that resonate better with different audiences. Roblox has localization features as well, which essentially are supposed to make you able to publish once and then it be, consumable across the world. Another thing about Roblox games is you really don't wanna use a lot of words.
Roblox players don't like to read through your paragraph tutorial. They want to just play it and figure it out for themselves, or at least for it to be just intuitive with a lot of like icons and and maybe that's a function of the localization features not being as strong or just that these are younger players and younger players aren't really interested in reading a lot.
But, I think, international is key to Roblox's growth. You've seen, one, one sort of data point from a few years ago is [00:18:00] that 70% of kids between the ages of nine and 12 in the US play Roblox. So if you think about that's okay, the US is getting pretty saturated, right?
And so how does Roblox continue to grow? And expanding into international markets is a big part of that. They've seen, they've been successful for the most part. They've gotten 47 percent cager on DAUs from international markets over the last four years. Or five years, actually years. And it hasn't all been successful.
They had a big push into China that sort of failed. They tried to push into China within a year, they pulled out. But I think for the most part, they're finding success. And you can see that reflected in their sort of 20% year over year growth on the platform that has been pretty consistent over the last few years.
Japan is a big target for them. They grew bookings there 174%. When you look at that kind of growth, I think, whether it's that there are creators in those markets [00:19:00] who are building the experiences that are, facilitating the growth or whether these aren't, they're not local creators, but the localization features are enabling for that type of growth.
The thing about the thing that I think is different about Roblox versus Netflix is Roblox only pays if you're successful. They don't pay for all the experiences that don't make it. Whereas Netflix oftentimes has to pay for content to be produced and then put on their platform.
And Roblox, I think, at the end of the day, is agnostic as to whether they need those local creators to be successful, or if as long as the numbers are going up, like either way,
Aaron: it's fine. That's fair. And then second I just wanted to get your take on the whole aging up argument and whether you whether you buy it, the narrative that Roblox is pushing forward, like Roblox has been saying that the young adult segment is, fast growing.
I think they're fastest growing segment. They attach growth rates, but they don't really attach the base numbers. You know how big of a [00:20:00] percentage it really is of their business. So I'm curious, in your research and work on the platform, have you become more or less concerned about.
Players graduating Roblox and moving on, or do you think they actually have done a pretty good job of keeping players on longer than they would have in the past? Yeah,
David: these are, this is one of those things that Roblox tiptoes around, which also makes me suspicious a little bit. But, if there is a reason to be skeptical, it's not because the data doesn't say that they are aging up.
The da The data definitely says that. I think, I can't remember what the percentage was, but it's 20% of players are over the age of 25, and then between 18 and 25, it's like another 15% something in that range. And so from a data perspective, it's saying that they're aging up. But the problem is that how many of those accounts are kids who are having their parents create accounts so they can access.
More mature content. And I [00:21:00] think that is the question mark that's in everyone's heads. When we would look at our data and it would say, 18 plus is your biggest audience, we were like, okay, but this was a game made for 12-year-old kids, so is it really our biggest audience?
And I think that, I think if there's reason to be skeptical, it's just that, Roblox doesn't have a way to truly track how old their players are. And as such, they may not be aging up as much as they say they are.
Aaron: Yeah. How do you view that longer term though? 'cause obviously, Roblox is always working on a bunch of things to enable more types of games to be made that could, serve, an adult audience better than they've done in the past.
Do you think they'll figure that out? And this aging up argument, will work to some degree. It doesn't mean that people won't. Play other games elsewhere, of course they will. But yeah. In terms of looking at longer term, where do you sit on your bullishness versus bearishness on the aging up argument?
David: I think that there's, I mentioned, as devices get [00:22:00] more powerful, there's more opportunity to create those types of experiences that are targeted to older audiences. Like front lines, for example like front lines everyone talks about is the Call of duty of Roblox.
At the end of the day it only, has between 2000 and 3000 concurrent users, which is a good experience for Roblox perspective, but it's not like anything to be, to write home about that game's probably only making, a 50,000 to a hundred thousand dollars. Maybe more than that.
More, probably more like $200,000 a year. So it's that those types of experiences are not the ones that have really broken through, but I could see that changing in the future. And I think that the thing that makes me really bullish about Roblox is just the social graph. Like the, everyone's grew, like at this point, everyone's grown up on Roblox.
And so if all of your friends are on Roblox, as long as there's things that can keep you engaged, like it's a pretty, there's, it's really hard to leave because then you need to bring all of your friends with you to play like a specific gaming. And if [00:23:00] you grew up on Roblox, you also are not, you're used to a frictionless game switching experience, which other platforms are not able today.
So there's a lot of reasons to stay on Roblox if there's content for you to age and fact that, enabling more high fidelity games and the fact that all of these players are already on Roblox, logically speaking, I think that they could definitely do it.
Aaron: Makes sense. I personally lean. Bullish long term on a lot of these Yeah, these debates you can see the snowball, gradually growing and expanding you.
It's a big snowball already.
David: It really is. It's growing at 20% a year, so
Aaron: basically doubling every three years, it's still rolling down the mountain. Switching gears. Within Roblox, one of the most interesting new economic developments on the platform is advertising, especially immersive ads, which you recently wrote about in Navig Digest.
For those who haven't read your piece, how do you think this feature will play out in the near term [00:24:00] and the long term? Like how transformative really is this for Roblox?
David: I think the opportunity is huge, right? On the mobile game side, I think, Eric Sufert, Data.ai they've estimated about 50% of mobile games.
Revenue comes from advertising, if you think about that being translated to Roblox, which is seventy-eight percent mobile, you can imagine a world where there are $3.3 billion in bookings that they have today, becomes $6.6 billion in bookings when you add advertising on top of it. So personally, I think that there's a lot of opportunity there, but to date, I feel like there's not been a path put forward for advertisers to really see the ROI that they need to scale that advertising that demand, which ultimately is what's required.
I can go into details on some of the challenges at this point. I think what Roblox is finding is they're they've got, they wanna they don't want to favor brand [00:25:00] experiences. They want to be a organic and non-preferential. Ecosystem where the best games, bubble to the top.
And that's what players are exposed to. And the problem that brands are having is that, a Roblox player sees a brand, they know what that is, it's an advertisement, right? And so there's already an inclination to avoid it and to not engage with it. Even if a brand does make a legitimately compelling and engaging experience, at the end of the day, the Roblox player's thinking, this is an advertisement.
I'm gonna get outta here as soon as I get my reward. And and so that's what brands are finding is that, they spend all this money trying to create an experience that keeps players engaged and then it's all free marketing for them. Or in some cases they can make money. But that's not played out.
In reality, what happens is they spend all that money, make a super, high fidelity experience. Really compelling gameplay [00:26:00] because, there's some serious talent at these studios, but at the end of the day, it's got a big brand on it that says, like that says to players like, don't play me.
And and that's hard to get around. What I lay out in the article is basically they need to change their approach. It needs to stop being like a, oh, we can create a persistent experience that will engage players forever. And we only have to pay for it once and start thinking about it as like more traditional mobile games advertising, where you create a smaller experience that's, a short, punchy gameplay experience that players don't have to learn.
They immediately know how to play it and they do it for 30 seconds to, a few minutes and then they get outta it. And I think if you see, if you were to do that, the. The cost for brands would go down and advertising on Roblox would become a lot more compelling opportunity. And then overall the total market
Aaron: would just grow from there.
Yeah, I was gonna, I was gonna ask about the impact [00:27:00] that ads like new ad formats on Roblox would have on branded worlds. 'cause it makes sense why Branded Worlds became a thing on Roblox. It was, like the main way for any company to try to get in front of users when there weren't other options.
But if there do become other options, do you think that basically means that these companies are just gonna shift gears and mainly go more all in on advertising and other forms? Or do you think that's going to build on top of branded worlds and we'll see a lot more of both in the future? Yeah, I
David: mean, it's hard.
It like, I think there's a lot of just copycat. Sort of activity in, in Roblox, not just on the developer side, but also on the brand side. It's yeah, today brands look at other brand experiences and they're like, oh, I wanna do that for my brand. But I think, as pocket marketing sort of marketing budgets tighten up, you start to [00:28:00] need to show that ROI.
And that's where I think it shifts to other opportunities where branded experience is more of a novelty. If you really are trying to drive ROI. Then there's other marketing levers that you can pull, in one in particular that I would, say is if you can activate on an existing experience that already has an established audience that is a lot more likely to drive traffic to your, your brand outside of Roblox, which ultimately I think is what, everyone wants, is to increase sales of their, whatever their products are.
And so like it's a lot less work for the developers just to add some, gameplay mechanic or gameplay component that has a brand element to it than it is to create an entirely new game from scratch. Try and beat the Roblox algorithm, like funnel to the top for organic discovery. That is just such a long and treacherous never proven journey.
Versus [00:29:00] if you go to an experience like LiveTopia and you put your brand in it, you're gonna get, be guaranteed a certain amount of traffic. It might, it'll probably still be expensive because LiveTopia knows what they have on their hands and they know what they can charge. But you're more to see the results.
Yeah, I was just gonna say, to answer your question on like, how does advertising evolve from here? I think, Roblox is working on a couple things. One, they're gonna do rewarded video ads, which I think will allow for more brands to be advertising on Roblox. Second is, hopefully they figure out what to do with immersive ads, because I do think playable ads have a lot of potential, but right now, immersive ads funnel you to the branded experiences, which, are a dead end.
And so if Roblox can figure out some way to use playable ads, but make it more engaging and make it better experience for the developer, for the player, for the brand then I think there's a more opportunity with that feature as well.
Aaron: Yeah, it definitely [00:30:00] could take some time for them to figure this out.
They really are pioneering a new type of advertising in a sense, which is really exciting. But it makes sense that it wouldn't be. That there's like a textbook on how exactly to roll this out very quickly out of the gate. But, so it might take some time, but I'm pretty bullish on where this could go.
And one, one reason why I'm also bullish on where this could go just from like a company standpoint more so than even developers is the worst part about Roblox's business is the take rate that platforms take on it, right? If you just, pay 30% out of the gate to Apple for instance that really limits what you can pay developers and what you keep as a platform owner.
But with ads especially if you can build like a pretty comprehensive ad network internally connected to your platform the margin possibilities on that are so much higher, which is great for Roblox as a business. It's great for. Potentially funneling more in, in the way [00:31:00] to developers. And yeah, hopefully it could even just kinda change how many people view Roblox as a business.
Do you agree with that?
David: Yeah, definitely. Anytime Roblox makes money, developers make money. Now, whether that the take rate is fair, I think is a more philosophical discussion. But for sure as long if Roblox can grow their revenue through ads, then that's definitely gonna funnel to the developers
Aaron: as well.
Okay. Obviously advertising is a massive economic lever that Roblox is likely gonna pull pretty heavily on over the next few years, but it's not the only economic feature or other features that they're working on. They have a ton in their roadmap that we can expect to roll out. David, is there any, maybe two or three parts of the roadmap, whether it's economic related or something else that you think will have an outsized impact on helping Roblox grow as a business, helping developers find much greater success? What are you excited [00:32:00] about in looking at?
David: Yeah, I think in-game commerce is really compelling. So I call it in-game commerce. They call it real world commerce. I like in-game commerce 'cause it's more describes what it is. You're going into an experience and then you have the opportunity to purchase a item in the real world.
And what that unlocks, I think, for brands is a lot of potential. You're able to track or track conversion rates for players who come to an experience and then eventually buy something. And that's really valuable for brands to be able to make the argument internally that their marketing dollars are having a return.
And then I think the other thing is, if players can buy real world items, you've got you've got you can turn a 50 cent purchase into a $50 purchase. That I think is really compelling as a concept Now, training people to start shopping in Roblox versus Walmart.com or Amazon.com, that's gonna take a long [00:33:00] time, but the opportunity I think is quite large for Roblox to grow top line revenue in that way.
Aaron: Awesome. Yeah, I totally agree with that as well. We should probably start wrapping up our Roblox section 'cause we still got UAF and maybe some other stuff to get to here. Sounds good. Obviously I'm fine spending a lot of time on Roblox, so it's the biggest of them all. But in last year's Roblox Developer conference, CEO David Buzuki, he laid out 10 five-year predictions that are all a bit wacky and he is done this before and had, some success doing so.
I just wanted to get your quick take on some of those. Is there any one or two that you think are. Most likely to play out or like any one or two that you would just absolutely bet against?
David: I looked at the list, all of them seemed pretty like in Roblox's control to determine how they were defined and whether they were achieved.
The one that stood out to me was number one, which was a Roblox developer will be valued at $1 billion. So I think this is the one that I looked at and I was like, okay, that's a bold statement because [00:34:00] currently, the top performing or the top monetizing experience makes around a hundred million dollars.
And if we're looking five years out, just on Roblox's current growth trajectory, they're probably only gonna like slightly more than double in size. You'd be looking at a five x revenue at the current four to five x revenue, multiple. The biggest multiple I've seen to date was when Embracer Group purchased Blocksburg for a hundred million dollars when Blocksburg was making $30 million in revenue.
And a little bit more than a three X multiple, which I thought, which I think everyone in the industry thinks it's a little bit high. And I think billion dollars is a bold statement, but if you layer on advertising and layer on real world, world commerce, that looks a lot more achievable, right?
If they can figure out advertising and double the amount of revenue that every player in their player base brings to the platform, [00:35:00] then you start to look at that and say, okay, that looks possible. It's not guaranteed, one of these has to be a bold debt. And I think that's the
Interesting. And just our listeners know what these are, if they haven't seen them. The one that took the most headlines was saying Roblox will become a dating app. Which I mean, okay. Yeah. But other things are like, a Fortune 500 company will use it as part of the recruiting process, recruit process, recruit a school, will integrate a full K-twelve curriculum including language classes, etc.
A fashion designer will be like native to Roblox and become really big without, having started in the physical apparel world or anything. Yeah. So if all of
David: these probably are already happening, if you think about how big Roblox is, like all of these are probably happening on
Aaron: some level.
Yeah, maybe. But I think you're right, that the $1 billion developer mark, that's definitely the sign that they will have unlocked something, massively compelling [00:36:00] as a business. But Okay. Let's see last question for you on Roblox before we move on. Roblox is currently a twenty-four billion dollars business, whereas a business like Metta, the largest, social network in the world is worth a trillion dollars.
So Roblox is still, just two and a half percent of the size of the largest social media company, if that's even a valid comparison. But I'm just, we'll start, we'll end here on a far out question, David, which is, when all is said and done, looking at the long term of Roblox.
How big do you think that they can potentially become? Is, are we talking meta level numbers? Are we talking way less than that? What do you think?
David: I think they're doing all the same things that, that meta does with Facebook and Instagram. Yeah, I wrote a bunch of numbers down to calculate why it could be, I just threw a bunch of numbers at you already, so I'm not gonna do that.
I'm just gonna say yes, it's possible. And I think that the interesting question is like, what type of acquisitions will Roblox make in the coming [00:37:00] years in the same way, meta made a lot of acquisitions for to grow. I'm curious what that would look like for Roblox as they
Aaron: scale over time.
Yeah, that's a very good question. I don't know. They have made a ton of acquisitions, but not really of other major. Types of networks. So that would be, that'd be interesting to see. Okay. Let's go ahead and switch gears to UEFN. The Unreal Editor for Fortnite has only been live for about a year at this point, so it still is very young, still in building mode in a lot of ways.
But David, what is the general consensus among creators about how this first year went and what are the biggest things that are being pointed out that need to be solved for UEFN to take it up that next level? Yeah.
David: I think first and foremost, it's a dream come true for, many or most creators on the platform before the big UEFN announcement in March.
Creators were making a fifth, if not less [00:38:00] than what they're making today. So what that meant for a lot of these top creators is they could quit their day jobs. They, were doing Fortnite creative in their free time making a little bit of supplemental income, but they're mostly just doing their, their traditional day jobs.
So yeah now they can become professional UEFN developers. And I think that is such a gift. And, the $250 million that Epic is investing in this trader economy is extremely generous. So overwhelmingly the sense is thank you for everything that you've done for us.
I think we can talk challenges. There's obviously the, the fact that it's a new tool set, the fact that, Fortnite was not designed to be a UGC platform originally. It has become one. And so you have to deal with all of the tech debt associated with not having done that from the outset.
So it's gonna take some time for Fortnite to introduce the types of tools that allow for the same types of experiences that you see on Roblox. [00:39:00] And that's, that's just been the biggest challenge so far is the fact that, there hasn't been persistence. So you can't have progression in these games.
And if you can't have progression, how do you retain players? Over time we're gonna see more features get added, and I think the quality of the content will just go up from
Aaron: there. This is a, an unfair question, or at least just very context dependent, but if you had to, or a studio was talking to you looking to build on a UGC platform and they were, trying to pick between Roblox or UEFN, how would you go about answering.
That question for them on where to build or both?
David: Yeah. So if you're gonna build a game from scratch, then Fortnite is your place to go because, the creator base is growing. I think when I first recorded on it in December, it was at like 12,500. Last time I checked, it's now at 17,500. So that's a big leap in just a month.
So I, I expect that to continue to grow, but even [00:40:00] still, when you compare that to Roblox's, 5.6 million developers, it's, there's far more opportunity to, make a quick buck in Fortnite than there is in Roblox. So if you're starting, if you're just gonna build a new game then absolutely go for Fortnite.
If you care more about building a specific type of game, or you wanna adopt a game then I would go for Roblox because if you have a game that's already established in Roblox, it's a lot easier to maintain that. You have a lot more options for how you can. Retain players, engage a community. Right now on Fortnite for example, there's no way to link out to a Discord page.
So if a player comes into your game, there's no way to lock them in or be able to communicate with them after they leave the game. So they're basically lost forever. And Roblox, on the other hand, you can build a community by bring bringing players into your game and then when you have an update you can ping them and say, Hey, here's an update.
Come back to the game. There's just a lot more options on Roblox. It's, the problem is that's so darn [00:41:00] competitive.
Aaron: Yeah. Yeah. I think that's fair. Do you think it generally makes sense for teams to build on both? I know there are a bunch of, UGC studios that are trying to build on all of these different platforms.
Do you think that generally is a wise move or should teams be specializing in one of these platforms?
David: I think a lot of these studios you build on, both are doing branded experiences and. That's a way to have, more guaranteed revenue, maybe a lifestyle business, but that isn't gonna lead to, becoming the next Blocksburg, for example.
So the developers who I've seen successful on Roblox, I've been building for many years they're very familiar with what works. They're familiar with who they should be partnering with. It's just a lot easier to, once you have success, to keep it on Roblox versus Fortnite. It could be gone in a few weeks.
Aaron: Yeah. I'm curious to get your take on what is actually working [00:42:00] on UEFN so far and how does that compare to
David: Roblox? Yeah, so like on U.
Have a very clickable thumbnail. Apparently the thumbnail is like the most important thing to get players into your game, which yeah, is surprising on one level. But also, if you think about it, it's these players come to shoot guns and shoot each other. Theoretically you put 'em in any environment that they can do that in, they're gonna do it.
And so thumbnail ends up being the differentiating factor. And that's been representative of the Fortnite creative ecosystem to date. Like you only see one or two non-practice maps or, shooter maps in the top 25 anytime you look at it. And that's because a vast majority of players still play battle Royale and they use Fortnite creative as a way to warm up for their session or to practice.
So I think unfortunately on Fortnite, if you wanna have a breakout success, you're still locked into a [00:43:00] very specific type of game. That doesn't allow for creators to differentiate themselves through gameplay. And it more ends up being about like, do they have the most clickable Thumbnail?
Aaron: Yeah. Hopefully that changes. It makes sense. You see a meta like that on YouTube as well, where, thumbnails help drive attention, but still at the end of the day, you have to retain people through your videos, get them to subscribe and such. And so maybe a similar dynamic will eventually take place on UEF ed, although it's weird to think about in a game setting like that.
You also had laid out some elements previously about what makes a successful Roblox game. How does that compare or contrast to UEF n Or is it still really just about the thumbnails
David: these days? Yeah, until I, so Fortnite just introduced save point devices or persistent devices. So basically now you can save a [00:44:00] certain number of of player data types I would call it.
So that does allow for there to be a certain degree of progression. I haven't seen any games come out that are like super deep in terms of progression, but it's more around like being able to track what your like kill death ratio is over time and being able to do leaderboards and those types of things, which is obviously really important for the existing audience.
So it's still a big win. But hopefully over time we see more, more diverse content, one. Quite compelling is isometric, dungeon crawlers that similar to Diablo. And that was enabled by a recent update where you have more options for camera angles. And so that I think is really compelling is if players can play these other types of games and they can progress and collect, loot, they can loot, they can come back more and wanna do the next level once it's updated, there's a lot more opportunity for building an audience over time.[00:45:00]
So I'm definitely bullish on the platform. It's just, it's gonna take some time for those features to come online and then for players to change their, their play patterns to be more towards all sorts of game genres versus just battle royale extensions.
Aaron: Yeah that makes sense as well.
And obviously one major difference between Roblox and Epic is that Epic is also making games and experiences, whereas Roblox is purely the platform provider, and that's not necessarily new. They've been building the Unreal engine forever. Fortnite has been a successful game for a long time alongside it.
But even so that that way of working persists and with Epic, some say that's a good thing because you learn a lot from being your own customer. And, they recently launched, the collaboration with Lego and a racing game and a music game that maybe, grows the overall pie of who wants to play on Fortnite.
But you also have some people that are critical in saying that it's a conflict of interest, that, they're creating experiences that take attention away from what other creators on the [00:46:00] platform are making. Where do you fall on this and see this playing out longer term? Yeah,
David: First and foremost, there's no Fortnite creative without battle royale.
So I think there's no world in which you can say that epic creating its own games is bad for the creator economy and the creator ecosystem. There are some negative side effects, mistrust. I think there probably are creators, or there will be creators who feel like their games tanked in metrics because Fortnite came out with a experience that was basically making their their game irrelevant or obsolete.
So I think you'll see these examples where, an existing game gets totally tanked because there's just a better version of it created by Epic. But at the end of the day, like when you look at it from a total ecosystem level, epic is bringing in millions of players that eventually trickle into these creative experiences.[00:47:00]
And they're, that is, objectively good
Aaron: For creators. Yeah. Last question for you on UEFN. I asked you the big wild question about Roblox. Can it be this big, massive thing in the future at another tier of scale? How do you think UEFN's scale potential compares to Roblox?
Does it also have that same potential? Do you think it'll always be smaller than Roblox? How do you see the size of the big two, if you wanna call 'em that playing out over the long term?
David: Yeah, one thing is there's not a lot of crossover between between the Roblox and Fortnite ecosystems or even player bases.
I think that's compelling because it means that the whole UGC industry is, can grow, simultaneously. There's not gonna be as much cannibalization at least for now. But Fortnite just announced that they're gonna be launching mobile up again in Europe, and I think that will be a really interesting experiment to see how many more players are coming [00:48:00] into Fortnite now that they're accessing mobile.
Because seventy-eight percent of players on Roblox are mobile. You do a little bit of math and you take let's say it's 70 million I'm trying to remember, a hundred million MAU I think that was probably at the peak, but let's just say it's a hundred million MAU. You divide that by by 0.3, then you're, you're gonna triple, you're gonna more than triple that.
So basically that ends up being around 300 million MAU potentially, which is close to Roblox. So if you are comfortable with those assumptions, you could say that Fortnite would be as big as Roblox if they had access to mobile, which they don't today. And as we see Europe come online, we'll start to get a better sense of how many new players are coming in to play Fortnite on
Gotcha. It'll be an exciting future to see where this all plays out. Obviously Epic is still having regulatory battles, fighting, [00:49:00] fighting against Apple to, change fees to change the way games are accessed, third-party storefronts, et cetera. It wouldn't be surprising to just see the foundation of like how these companies potentially reach certain users around the world to, to change.
Over time as these rules change, as new platforms grow, et cetera. But let's go ahead and switch gears to our last segment, which is just really quickly to hit on other platforms and obviously what we in gaming consider. UGC gaming is dominated by these big two Roblox and UEFN, but there are others out there in their own niches.
Is are there any others that you think the industry is sleeping on? Who else should we be paying more attention to? Yeah.
David: You can't forget about Minecraft. If I was gonna say big two, I would call it big three. Okay. The challenge with Minecraft is that it's owned by Microsoft, which is under [00:50:00] scrutiny from regulators.
And so they're gonna be very conservative about moderation and what they do with the UGC ecosystem. So I wrote an article like a year ago, just basically not super, somewhat bearish on, on Minecraft as a result of that, but there's still a massive user base there. I think. Bill Spencer reported last year that there was 120 million monthly active users on Minecraft still, and a lot of those are playing single-player experiences.
But the UGC economy is still a large chunk of the overall market. Not as big as Fortnight or Roblox, not too far behind in terms of payouts to developers. I don't know what their strategy is, but it will be interesting to see if they are able to reinvigorate that creator ecosystem because so far, you don't see a lot of updates from them.
And that could just be, a function of them wanting to keep their strategy to themselves. [00:51:00] But, it's easy to forget about them because there's not a lot of new news coming outta that, that ecosystem. That's true. I think on the, leaving the UGC games platform side and just looking at modding, there's, a couple big ones, GTA, the Sims that are both coming out with new games in the next couple years.
It'll be super interesting to see how they evolve their large UGC ecosystems. I'm hopeful that they will take steps to make it a little bit more accessible for, new creators to, to get involved. Because right now. You have to do all sorts of of manual sort of hacks in order to be able to create your own content in these platforms.
So that's what I would say is those are two really large franchises that have an audience ready to consume UGC, and that's really important for getting a healthy UGC ecosystem going. So I personally am bullish on any franchise that has a large audience that is thinking about UGC.
Aaron: Do you think that'll become [00:52:00] more the norm, these large franchises unlocking UGC components in bigger ways?
David: Yeah, a hundred percent. I think that's where the majority of growth for the creator economy is gonna come from in the next 10 years is franchises starting to adopt these features.
Aaron: Yeah. And another example that I wrote about Enovic Digest maybe a couple months ago, but you reinforced in the state of UGC report was what we're seeing with Studio Wildcard and Arc Survival Ascended, which they're, they're their modding capabilities are basically being powered through Overwolf.
But what's interesting is it's not just users building mods and, this dinosaur survival, game. But there are, other game studios basically building what are like larger mods or DLCs on top of another studio's game. And this is really like the only example still that I can think of where this is happening, although it's like a really intriguing idea.
I just wanted to get your pulse [00:53:00] on, how realistic is it that we see this type of scenario existing more in the future? It's somewhat adjacent to UGC, but it's still in that realm of just people building on top of everyone else's games.
David: I think I'm gonna turn this one around on you because I feel like you wanna answer this question.
I, I have not taken a deep dive into ARK Survival so I I am less familiar with it, but I will say this, look, I like the Roblox generation is, gonna continue to age up, right? And they grew up with an expectation of being able to create and engage. The content that is in front of them.
And I think that's just going to become table stakes for developers across the world is being able to to unlock creativity of their audience and allowing them to engage in the content on a deeper level and customize their
Aaron: experience. Yeah, and you mentioned turning it around at me, I honestly have no idea where that's gonna go.
I generally think that, as barriers to [00:54:00] creation fall and as we create tools for others to build on top of a wide range of other experiences, if the opportunity is big enough then, in the same way that we've seen more professional studios, build on Roblox, which wasn't really met for that, additionally, but it's happening anyways.
'cause that's where all the people and all the money is that similarly, sure if the audience is large enough, the economics are compelling enough. I think you could see more. Organized businesses come in all sorts of new directions to try building on other people's platforms or other people's games.
I'm not really sure where that goes, but it's an interesting new world that we could be entering.
David: I definitely think we're entering that world actually. I saw century Games is a fairly well-established mobile game company. They they produced White, white out Survival, which I think hit like 400 million Yeah.
Dollars in revenue in its first few weeks. They have [00:55:00] Lipetopia on, on Roblox. And they, I think that launched in 2020. So they're a mobile native developer who came to Roblox to, to develop a game. And then just a few weeks ago, actually maybe last week, they announced that they're creating a mobile game for LiveTopia.
Oh, that's gonna be a really interesting thing to track is, can these developers, whether they be AAA.
Build either new IP or leverage existing IP to grow the audience and then monetize that audience on, in more traditional, more highly monetizable
Aaron: platforms. I think they totally can. As you mentioned earlier in the episode, we're all, it's already happening, right? You mentioned Zeekers with lethal company, I think.
Yeah. And so I think we're gonna see so much more of that. And I, one thing that I've talked about off and on, briefly on the podcast is I'm just really curious what this generation of entrepreneurs will do in the games industry. [00:56:00] Obviously making games is one piece, but if your worldview of what gaming can and will be is coming from a completely different perspective, like how does that also change your view on what other tools should be made or what other and distribution, are possible Or like, how else can we think about building on top of.
All of these experiences in ways that just haven't really been thought through yet. So I'm just really curious to see what this generation of entrepreneurs will do. And I think we're just starting to see the beginnings of it through the lethal companies of the world, and obviously the successes on Roblox as well.
Oh, one question I did wanna ask was just about ai. Obviously it's like the craziest buzzword of late, but it is interesting in a UGC setting because it further enables the barriers to creation to be lowered, which is the foundational purpose of UGC gaming. And I just wanted to ask like, where in the UGC gaming world do you think AI could actually have the most [00:57:00] impacts in unlocking something big and new for the industry?
David: Yeah, for UGC because most, most players don't have technical skills. So being able to just write a prompt and see something populate and then hopefully, being able to manipulate that in ways to refine it, with dragging drop tools, I think is a really clean use case that could unlock a lot of new content and a lot more creativity from those who are less technically inclined.
And where do I see that happening? Roblox is working on AI tools right now. I think they've got a treasure trove of of training data off of 5.6 million developers. So essentially anything you could possibly imagine is probably. AI and so it'll be really interesting to see what is able to be created off of the back of that.
I've seen some early demos of it. It looks pretty, pretty compelling. And when you combine chat GPT with Roblox, you can actually create like pretty Robust experiences without [00:58:00] knowing how to code, just copying whatever chat GPT says. So I think if you see that happening in Roblox, it will unlock it a ton of creativity.
I think my concern is just like what that means for the developers who have, put in the hard work to learn these technical skills and whether those will be as valued as they're today once AI Enables people to just put in a prompt and get the output.
Aaron: Yeah my guess is it'll probably turn out to look a bit more like mobile in the sense that.
A lot of what differentiates the winners and losers is their ad budgets. And you mentioned earlier how ROBLOX so far is pretty meritocratic and how they handle the algorithm. But it really wouldn't surprise me one day if they look to at least have a separate, more like sponsored games or, sponsored experiences, similar to what on Amazon, even or
David: the app store.
They do have sponsored [00:59:00] experiences. It's just that there's a cap on how effective that the, that advertising lever is. But yeah, I think, before that can happen, there needs to be higher monetization potential in order for developers to really lean on marketing more heavily like you see in mobile
Yeah, I think that's fair. But especially for those who have had that success and already have it and maintaining it and kinda keeping their lead like a Candy Crush has, maintained its dominance for so long. I don't know, maybe we'll see a history rhyme a little bit there. Last question for you on UGC games, David.
You see a bunch of small teams here that most people in the industry probably are not paying attention to. Could you maybe just, give a couple shout outs to a couple of talented teams you think are working on cool things you think could pop off in the future or just that you're excited
So one thing to, to note about the Roblox ecosystem is it really is all about who you [01:00:00] know and if you want to, if you wanna know about the like top developers you should probably reach out to Naavik for some consulting. There are a couple that I will shout out because they're talented and I have a lot of respect and they've, helped me learn about the platform.
David: Simple Games is a developer who, hasn't had any massive hits, but consistently produces games that do well and get out really good return. So right now he has a survival game out. So the.
That's really good for the platform and he's super knowledgeable, thinks about things in a really sound way. And he was a key contributor to me thinking through Roblox, developer unit economics. So if you wanna learn more about the platform, he's super friendly, very busy, so he may not be available, but definitely [01:01:00] a good person to, to chat with.
And then obviously I have to give a shout out to my team at super social really talented developers over there. If I could invest in individuals, I would definitely invest in a few of the devs on that team. Team. Yeah that's what I'll say as far as.
Aaron: that's great. Thanks for sharing those. We can go ahead and wrap up. I think really the last thing I wanna say is that if you enjoyed this conversation, you enjoyed our content on UGC more broadly, and you're either building in the space or are eyeing it in some way, as an investor or a big studio or a brand or whoever you are, please reach out.
Vietnamic with David in particular would be thrilled to chat and see how we can help. We work with a bunch of studios, brands teams in and around the industry. All the time and would love to see if we can help you out in this crazy new world of UGC gaming.[01:02:00] I'll leave a link for reaching out to us in the show notes.
But also, I recommend too, just paying attention to our content. I'm guessing if you're listening to this episode, most of, you're probably signed up to Novig Digest, but if you're not, you're missing out on a lot of great content that David is writing. He even published a piece I guess it'll be like a week ago when this when this episode comes out.
But definitely make sure to sign up and see that. But also David I know you're sharing insights elsewhere too for those who are listening that want to get the maximum. Insight out of you, where should they be paying attention? Yeah,
David: LinkedIn appears to be my jam these days. I would, I given my generic name, I would look for David Taylor Naavik to find me.
'cause you'll probably see there are millions of David Taylors out there in the world doing really important work.
Aaron: Yeah, your LinkedIn game is very strong. Definitely recommend checking David out on LinkedIn. Awesome. This has been a lot of fun, [01:03:00] David. So thank you for hopping on and I look forward to continuing to learn from you and the months and years ahead.
David: Thanks for having me, Aaron.