Roblox CEO David Baszucki, 53, cofounded the San Mateo, CA CA +0.21%-based computer gaming platform in 2006. With 12 million users last month, it lets people create their own virtual immersive experiences, like modeling in a fashion show or making pies at a pizza parlor. Users buy virtual currency, called “Robux,” so they can increase their power in the experiences and games. Game creators, who range in age from 14 to 25, get a cut of the payments, and the popular ones can earn as much as $30,000 a month, according to the company. Baszucki, who studied engineering and computer science at Stanford, chose the name Roblox because it combines “robot” and “blocks.” The company logged revenue of more than $50 million last year. It has 170 employees. In this condensed and edited interview, Baszucki explains why he thinks the company, which had more than $50 million in revenue last year and employs 170, will be worth billions of dollars.
Susan Adams: What did you do before Roblox?
David Baszucki: I founded an educational software company called Knowledge Revolution. We had the first fully animated physics lab on the computer. You could take ropes, pulleys, balls and anything else you’d use in your physics textbook and the program would allow you to build anything you can think of in a physics lab.
Adams: What happened to that company?
Baszucki: It was acquired for $20 million by a public company called MSC Software.
Adams: It sounds like you didn’t need to work again.
Baszucki: That’s fair to say.
Adams: What made you want to start a new company?
Baszucki: Seeing how kids lit up when they were creating things using our physics software made me think of what would be the ultimate platform for our imagination. Also I like construction toys and I saw the direction 3-D rendering was going. It became clear to me that there was an opportunity to create an immersive, 3-D, multi-player platform in the cloud where people could imagine, create and share their experiences together.
Adams: Doesn’t the blockbuster game Minecraft do that?
Baszucki: Roblox was created before Minecraft and today it’s growing much more quickly than Minecraft. It’s very likely that in the next couple of years we will pass their number of active monthly users.
Baszucki: I was attracted to this venture out of pure passion. But ten years later, people in the industry are starting to see the potential for the ultimate size of companies in this space. I believe companies like ours are going to be as large as media companies and social networking companies that are valued in the tens of billions of dollars. I don’t know how long it will take but we know the opportunity is huge.
Adams: How did you get the company off the ground?
Baszucki: Another early employee of Knowledge Revolution and I got together and we wrote the first version of Roblox over the course of two years. We were self-funded. Later we raised $11 million from investors but we haven’t needed to raise any money in five years. We became profitable last year.
Adams: For people who don’t play videogames, can you describe what you were trying to build?
Baszucki: Roblox is less a game than a 3-D social platform where you and your friends can pretend to be in different places. You can pretend to be in a fashion show or that you’re trying to survive in a tornado or that you want to go work in a pizza restaurant, or that you’re a bird and survive by catching insects. It’s like when I was a kid and I’d go outside and play pirates. On Roblox people are playing in 3-D environments created by the community.
Adams: What’s one of your favorite Roblox environments?
Baszucki: I really like Natural Disaster Survival. You and your friends get transported onto an island in the middle of the ocean. Every three minutes a new disaster strikes, like a typhoon, a meteor shower, a lightning storm, a tornado. You have to figure out where to run and hide. It’s fun and it gets your adrenaline going.
Adams: Who created Natural Disaster Survival?
Baszucki: One of the members of the Roblox community. It’s been played more than 40 million times.
Adams: How does your company make money?
Baszucki: There are 500,000 people creating things on Roblox every month. Using Roblox is free but the creators are able to charge virtual currency for the experiences. In our bird simulator you can become an eagle for $10. Users can buy virtual currency with a credit card or a prepaid card or through iTunes or wherever they are.
Adams: Do the creators get to keep part of the payment?
Baszucki: Yes. The developer gets 18% of the dollars spent on the eagle. Some of our developers are earning more than $30,000 a month. One developer, Gus Dubetz, a student at Dakota State, paid his tuition and bought a house for $120,000.
Adams: Do you also sell advertising?
Baszucki: From very early on we have had remnant advertising, similar to banner ads. But over the last five years we’ve started immersive advertising partnerships with big brands that want to reach our audience. We’re running a deal with Disney for Finding Nemo sequel Finding Dory.
Adams: How much is Disney paying for that deal and do your developers get a cut?
Baszucki: Some of our advertising deals are six figures and beyond, and our developers get some of that money. About a quarter of our revenue comes from advertising.
Adams: What’s the gender breakdown of the people who use Roblox?
Baszucki: It’s approximately 35% female but the ratio of female players is growing. We don’t just have first-person shooting games. We have Roblox Top Model and Pirate Mermaid Neverland Lagoon.
Adams: To create a Roblox environment or game, do your users need to know how to code?
Baszucki: You can make an initial Roblox experience by dragging and dropping. If you want to become one of our top developers, you have to use code. Lua, our coding language, is built into the site. We have tutorials. Hundreds of thousands of people are learning to code on our site.
Adams: You say you played pirate games outside when you were growing up. Do you regret that Roblux keeps kids glued to screens indoors?
Baszucki: We want people to play outside as much as possible. But when our users have screen time, we prefer they use it in an imaginative, creative way, rather than consuming content or following steps in a procedural way.
Adams: How much screen time do you think kids should have?
Baszucki: I have four kids, aged 13 to 19, and they had screen time limits. When they were between 8 and 12 it was in the one to two hour range per day.
Adams: How much screen time do your kids use now?
Baszucki: My three girls use their phones, not computers. They do social media and listen to music. My son is at U.C. Berkeley studying computer science and he doesn’t have a spare second.