Roblox's algorithm, safety changes dent bookings forecast; shares slump

By Harshita Mary Varghese

July ‌30 (Reuters) - Roblox forecast ​a ​steeper-than-expected drop in third-quarter bookings on Thursday as a shift toward lower-spending games and new safety measures weigh on in-app purchases, ‌sending its shares down 14% in after-hours trading.

The company said ⁠bookings were impacted after changes to its recommendation algorithm steered younger users toward newer and ‌evergreen games that generate less ‌revenue per hour than the viral hits that drove spending last year.

"Monetization weakness is likely to continue," Chief Financial Officer Naveen Chopra said ​on a post-earnings call, adding the changes would improve long-term retention and ultimately offset the near-term hit to bookings.

Roblox, which allows users to ⁠build and explore their own digital worlds on its platform, expects bookings between $1.58 billion and $1.65 billion in ​the third quarter, compared with estimates of $1.77 billion, according to data compiled by LSEG.

The company, which built its business ​around younger players during the pandemic, has ‌implemented age verification following heightened scrutiny of its child-safety practices, but the added steps have made it harder to ⁠sign up and reduced access to certain features that help keep users engaged.

"Investments in AI, content diversification, long-term retention, and safety, though creating near-term friction, position us ⁠to maximize our share of the global gaming market," Chopra said.

Roblox's daily active users (DAUs) fell ​7% sequentially to 123 million in the second quarter, but were up 10% from a year earlier.

Bookings for the quarter rose 8% to $1.56 billion, in line with analysts' ‌estimates.

The company has focused on attracting older users and expanding internationally to diversify.

Users over 18 years accounted for 27% ‌of age-verified DAUs in the second quarter, the company said, a particularly valuable ⁠group as U.S. users aged ‌18 and older generate ​more than 50% higher monetization than users under 18.

(Reporting by Harshita Mary Varghese in Bengaluru; Editing by Sahal Muhammed and ‌Sriraj Kalluvila)

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Tesla plans 'flying' Roadster stunt at SpaceX Texas site as early as August
• HeartCore Enterprises, Inc. (HTCR) Misses Q2 EPS by 185c
• SanDisk upgraded at JPMorgan after investor day; shares climb