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Chris's AI Deep Dive

Why Roblox is Unprofitable

26 Feb 2025

Description

This analysis examines Roblox's impressive scale and user engagement alongside its financial challenges. Despite boasting millions of users and substantial revenue, the platform struggles with profitability due to high costs, including app store fees, developer payouts, and research and development expenses. The author explores the discrepancy between Roblox's positive cash flow and accounting losses, attributing it to deferred revenue recognition and stock-based compensation. Several strategies are proposed to improve profitability, such as reducing app store fees, increasing user spending, expanding advertising, and exploring new 2D use cases. The article suggests that if Roblox can successfully execute these strategies, it has the potential to become a more financially sustainable and dominant media platform.

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