A troubling report has emerged about the online platform Roblox, alleging that the company has been deceptive toward investors, regulators, and advertisers regarding its active user numbers and the issue of child and sexual exploitation on the site.
The findings from Hindenburg Research are extensive and loaded with serious implications. They claim that Roblox Corp. may have overstated its daily active user figures by anywhere from 25% to 42% or more, and engagement hours by roughly 100%, as these figures fail to account for automated accounts or alternative accounts created by users.
The report points out that Roblox misuses the terms “daily active user” and “person” depending on the context, especially in SEC filings. It’s noted that creating alternative accounts is a common practice among players to protect their main account from potential dangers.
Currently, an independent monitoring service, RoMonitor, estimates that there are around 6.5 billion total registered accounts on Roblox—an astounding figure considering it’s nearing the global population count. Roblox maintains that it cannot distinguish between main accounts and alternative ones, a process referred to as “de-alting.” However, sources, including former employees, argue that the company could do this with the right team in place. They also allege that a separate team is hired solely to report user statistics to investors.
Since going public, Roblox has reported continuous net losses each quarter and has been leaning on its expanding user base to keep investors content. During the Roblox Developers Conference in September, CEO David Baszucki announced an ambitious goal of reaching 300 million daily active users, a significant increase from the 79.5 million currently reported. This announcement was accompanied by plans for creators to sell physical merchandise and the launch of an affiliate program to incentivize attracting new players.
Additionally, the report highlights concerning levels of abuse faced by children on the platform. Although Roblox is free and imposes no minimum age requirement, it does implement a rating system for its games and experiences. Past reports have indicated significant issues concerning child safety, including a recent investigation by Bloomberg, which discussed the platform’s inability to adequately safeguard minors.
While many games on Roblox offer standard, wholesome gameplay, the report names several titles that are highly inappropriate for a child-oriented platform, with some referencing individuals linked to criminal activities.
Hindenburg Research is known for scrutinizing corporations and startups for unethical practices and dishonesty. They gained notoriety in 2020 for their report on Nikola, a company that falsely claimed to have developed a zero-emission semi-truck, leading to legal consequences for its CEO.
