What's New: What Roblox IPO's $38B valuation means for creators

(from the latest issue of the Indie Hackers newsletter)

Social gaming platform Roblox is sitting at a $38B valuation:

• Roblox's opening stock soared 54% at its NY Stock Exchange debut, proving that investors are on the road to the "metaverse." Roblox aims to become a platform of virtual human co-experience where users can play, find entertainment, learn, and work. For founders, now's the time to tap into this virtual playground.
• Product Hunt announced a new micro-grant program for early-stage startups, boosting the perks of one of the most popular unpaid growth channels. In the battle of paid vs. unpaid acquisitions, founders should consider impact and ease before pursuing optimization.
• Founder Jen Yip went from living in a commune in the French mountains to hitting 1,000 paying users and $80K ARR. Her top hack? Living abroad for a few months each year keeps the inspiration flowing.

Want to share your ideas with nearly 70K indie hackers? Submit a section for us to include in a future newsletter. —Channing

🤖 What Roblox IPO's $38B Valuation Means for Creators

from the Indie Economy newsletter by Bobby Burch

Social gaming platform Roblox is sitting at a $38B valuation after Wednesday's debut on the New York Stock Exchange, with its stock soaring 54% on opening day. Investors’ warm reception places Roblox among the world’s most valuable gaming companies. Roblox is now valued near household names like Electronic Arts ($37.6B) and Nintendo ($65.5B).

What is Roblox?

Roblox 101: Roblox’s mission is to create the “metaverse," which is a collective, virtual shared space where users explore, build, and socialize in 3D digital worlds. Users create avatars and navigate virtual communities with such themes as “Natural Disaster Survival,” “Work at a Pizza Place,” and “Scuba Diving at Quill Lake.” Roblox generates most of its revenue via the sale of its digital currency “Robux,” which allows users to buy in-game objects and upgrades.

Built for builders: Roblox Studio allows developers and creators to build, publish, operate, and generate revenue from 3D experiences and other content. Founded in 2004, the San Mateo, CA-based platform is free to download on phones, tablets, and consoles.

Covid-19 supercharged: Pre-pandemic, Roblox was already heating up; Covid-19 accelerated its growth. Roblox hit $925M in 2020 revenue, an increase of 82% from 2019, and the company now expects sales to rise about another 60% in 2021. By the end of 2020, Roblox had 32.6M daily active users. It expects up to 36.4M daily active users by the end of 2021. In total, there are more than 150M Roblox users, according to Roblox CFO Michael Guthrie:

We headed into 2020 with strong organic growth which was further bolstered by social distancing restrictions. As those restrictions ease, we expect the rates of growth in 2021 will be well below the rates in 2020, however, we believe we will see absolute growth in most of our core metrics for the full year.

Creator opportunities

Creators rejoice: Developers have the opportunity to make serious cash by creating games and experiences on Roblox. About 1.7M creators are earning revenue on the platform, and Roblox expects to pay its users more than $250M in 2021. Some users earned seven figures on the platform in 2020.

Revenue sharing impact: Roblox is paying its users so much that revenue-sharing significantly widened its 2020 losses. Roblox’s net loss grew to $253.3M in 2020 (up from $71M in 2019), as the company nearly tripled the amount it paid to developers. While wide losses seem to be a staple among burgeoning tech companies, it shouldn’t be an immediate issue for Roblox. The company recently raised $520M in a Series H round led by Altimeter Capital and Dragoneer Investment Group.

A young demographic: The platform is wildly popular with younger people who have been out of school during the pandemic. Remarkably, over 50% of kids in the US under age 16 played Roblox in 2020. Its mostly underaged userbase could spell trouble for Roblox: In a filing with the Securities and Exchange Commission, Roblox said its young user base will lead to more scrutiny of the platform and higher standards of regulation.

Fueling creators: Nearly anyone, regardless of their technical experience, can build on Roblox. Roblox Studio teaches users how to code and create games for its platform, and the Roblox Developer 101 course is used by educators around the world. The company also offers an accelerator program that mentors more than 100 developers per year. That foundation should help Roblox become yet another powerful platform for the creator economy to leverage, as outlined by Roblox CEO David Baszucki:

Our focus is to give developers the tools and resources they need to pursue their vision and create larger, more complex, more realistic experiences and collectively build the Metaverse.

The metaverse vision: Roblox expects to generate billions of users as it evolves to become a platform of “human co-experience.” Robloxers can play, find entertainment, learn, and work. The platform’s ability to host such offerings as concerts, virtual classes, and meetings will likely dramatically increase its userbase as well.

What are your thoughts on Roblox and the metaverse? Share in the comments!

Subscribe to Indie Economy for more.

📰 In the News

from the Volv newsletter by Priyanka Vazirani

📇 Facebook is testing a feature to allow creators to monetize Stories by including ads that look like stickers.

💰 A non-fungible token (NFT) from digital artist Beeple has sold for a record-breaking $69M.

🍿 Netflix is reportedly testing a feature to curb password-sharing: “If you don’t live with the owner of this account, you need your own account to keep watching.”

🤨 Bill Gates has labeled himself a "bitcoin skeptic," revealing that he would rather invest in vaccines than in cryptocurrency.

🌳 Actor Seth Rogan's weed site, Houseplant, crashed because of 'insane traffic' on Day One.

Check out Volv for more 9-second news digests.

🤷‍♀️ Paid or Unpaid Acquisitions? Finding Your Best Fit.

from the Demand Curve newsletter by Julian Shapiro

Product Hunt recently announced a new Maker Grant program that will help founders get started with a $5K micro-grant. This is the latest boost for one of the top unpaid acquisition channels. When deciding on paid vs. unpaid channels, most founders should focus on 2-3 scalable options at most.

Paid Channels

There are two types of ad targeting strategies:

1. Behavior: Serves ads to people searching for your product. Use these channels to capture inherent demand. Example: if you sell dog food, you should run ads on searches like "best dog food."
2. Profile: Uses profiles/engagement to serve ads. Use these channels for product discovery. Example: run ads to dog owners to help them find your product.

Beware of saturating your audience with ads when using profile-targeting channels. No matter how many users are on Facebook, YouTube, etc., targeting a very niche subset risks drowning them with unwanted ads. Your audience will begin ignoring them, and ad overload could also have a negative effect on your brand's image.

You can avoid annoying your target audience by limiting daily ad spend. Trade short-term volume for long-term affordability.

Ultimately, to get paid acquisition to work for your startup, you must consider these three factors:

• Cost: Is your margin high enough to sustain the channel's cost? Is this a keyword you can afford to compete with?
• Audience Fit: Does it offer the right targeting to reach your audience?
• Volume: Can you consistently reach that audience? Is the market large enough to allow you to always target new people?

The greater your margin, the easier it is to get ads working. Here are the highest-performing paid channels:

• Facebook and Instagram: These ads perform remarkably well because they're impossible to ignore as part of the Facebook Newsfeed. They also offer rich targeting.
• Google Ads: Google is the world's dominant search engine, with at least 3.5B searches per day. This reach is important for creating a more impactful campaign.

If you can't get ads to run profitably, consider unpaid channels like SEO and content marketing.

Unpaid Channels

Startups should prioritize unpaid channels if they have longer time horizons, or if they can't get the margins of paid channels to work.

Paid channels scale quickly, while unpaid channels (like blogs) need time to build momentum.

Unpaid channels fall into one of two buckets:

1. Persistence: Growth through consistency. (SEO, Twitter, YouTube)
2. Hit-or-miss: Focused on achieving virality. (Reddit, Product Hunt, Hacker News)

Prioritize the first one: Persistence channels offer compounding returns, and rely more on time and effort than hard-earned cash.

Hit-or-miss channels are still valuable, though. Use them as accelerators by cross-posting content to these channels for a better chance of occasionally going viral.

What channel should you start with? Use the ICE framework. Score each channel on the following variables from 1-10:

• The Impact this channel may have, if successful
• Your Confidence that it will succeed
• The Ease of trying it

Rank channels based on their average scores; the highest should be your top priority.

Takeaways

• Use the above insights to figure out which acquisition channel to prioritize for your startup.
• Run growth experiments until you find the best channel for your company.
• Once you've found what works, focus on optimizing it.

Have you found more success with paid or unpaid acquisition channels? Please share in the comments.

Discuss this story, or subscribe to Demand Curve for more.

🌐 Best Around the Web: Links Posted to Indie Hackers This Week

👕 I sold over 1,000 t-shirts at launch for my clothing brand. Posted by Fajar Siddiq.

📞 Twitter will let everyone host Spaces next month. Posted by Channing Allen.

🤑 For creators, everything is for sale. Posted by Eliot Couvat.

📈 Migrating from Substack to WordPress 10x-ed his audience. Posted by Lesley Sim.

💲 TinySeed raises $25M to back more boot-strapped startups. Posted by Rosie Sherry.

Want a shout-out in next week's Best Around the Web? Submit a link post on Indie Hackers whenever you come across an article you think other indie hackers will enjoy.

🍽 Jen Yip on Bootstrapping to $80K ARR

By Jen Yip

Hi, I'm Jen! I'm the founder, engineer, designer and customer support guru at Lunch Money.

I've always been open to sharing my journey and the highs and lows of running a SaaS. Here's a summary of my journey so far:

I studied computer engineering in university, and started my career as an engineer at Twitter before co-founding a pet health start-up. We went through YC Fellowship #1 and 500 Startups before I eventually burnt out. I then left the company, the US, and all prior constructs surrounding work and personal happiness behind.

Traveling around Asia and Europe for seven months allowed me to have new experiences like living and working on a farm in rural Thailand, living in a tiny commune in the French mountains with a local family, and working as a waitress and living on a campsite in wine country. I also wrote about how much solo traveling cost me.

After my travels, I moved back to my hometown of Toronto and started freelancing for various companies. At the time, my husband and I settled into fully remote work. This allowed us to live abroad in Asia during the treacherous Canadian winters, and return to Toronto for the blissful summers and falls.

While in Fukuoka, I started working on an idea for a new app to solve my own needs for a budgeting and expense tracker that supports multicurrency – thus, Lunch Money was born!

After eight months of coding, I launched on Show HN. It's been nearly 20 months since then, and I've recently reached a milestone of 1K paying users and $80K ARR!

I'm still operating as a company of one, and I have recently hired contractors on a part-time or project basis. I feel lucky that I'm finally in a position where I absolutely love what I do, and I'm proud of the impact that my work has had so far.

Currently, I'm living in Taipei, Taiwan.

If you're interested in diving deeper, do check out my blog or my Twitter! The following posts on solopreneurship may be of interest to the Indie Hackers community:

• The biggest mistakes I've made with Lunch Money - so far
• Optimizations as a company of one
• Preparing for solopreneurship

AMA in the comments!

Discuss this story.

🐦 The Tweetmaster's Pick

by Tweetmaster Flex

I post the tweets indie hackers share the most. Here's today's pick:

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Special thanks to Jay Avery for editing this issue, to Nathalie Zwimpfer for the illustrations, and to Bobby Burch, Priyanka Vazirani, Julian Shapiro, and Jen Yip for contributing posts. —Channing