Gaming IndustryRobloxRoblox clashes with an ‘activist short-seller’ who’s going after its share price with accusations that it’s running a ‘pedophile hellscape’ and lying about user numbersWhen you purchase through links on our site, we may earn an affiliate commission.Here’s how it works.
Gaming IndustryRobloxRoblox clashes with an ‘activist short-seller’ who’s going after its share price with accusations that it’s running a ‘pedophile hellscape’ and lying about user numbersWhen you purchase through links on our site, we may earn an affiliate commission.Here’s how it works.
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Hindenburg Research, an investment research firm that “specializes in forensic financial research,” has released anin-depth reporton the massive gaming platform Roblox, accusing it of lying to investors in order to spur growth, and more sensationally, that it is a “pedophile hellscape.”
The Hindenburg report is remarkably in-depth and goes right for the throat, noting at the start that Roblox hasn’t turned a profit since it went public and thus “is reliant on the growth metrics it presents to Wall Street” to maintain and increase its share price.
Roblox is legitimately huge, reporting nearly 80 million daily active users who spend an average of 2.4 hours per day on the platform. But Hindenburg says that’s not an accurate count of users because it doesn’t differentiate individual users from bots and alt accounts. Roblox reportedly told the SEC in 2023 that it is “unable to identify if a user has multiple accounts,” but Hindenburg calls that “a flat out lie” too, saying it’s spoken to multiple former employees who claim the company does in fact track users with multiple accounts through a process called “de-alting.”
“The data suggests that Roblox could be massively overstating the true level of user engagement across its platform: our review of an average of 30.4 million unique daily users found they spent just ~22 minutes in games per day,” Hindenburg wrote. “Further analysis of play times showed numerous games in which obvious bot accounts remained in-game for more than 24 hours straight. Our representative sample flagged millions of ‘zombie’ engagement hours that can majorly skew Roblox’s reported ‘average’ engagement.”
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The much uglier accusation is that Roblox is “compromising child safety in order to report growth to investors.” Hindenburg says it was able to access a wide range of adult and illegal content despite listing its age as “under 13” when setting up an account, and cites numerous specific examples of games built around violence and sex, sometimes both, with millions of cumulative visits. It also claims that moderation “is largely outsourced to Asian call centers,” with moderators “being paid $12 a day to review countless instances of child grooming and bullying with a limited ability to keep perpetrators off the platform permanently.”
The nature of the content also means advertisers on Roblox, much like those on X, potentially face “major reputational repercussions,” the report goes on to say: “For instance, we found Instagram ads in the same school simulator game with Nazi hate speech and photos of male genitalia.”
Industry analyst Simon Carless has what I think is a pretty good take on the report on hisGameDiscoverCo newsletter, writing that Roblox “is giant and chaotic, so of course there are going to be bots and weird behavior all over the place,” but that there’s no real indication of “systemic bad behavior.” At the same time, he acknowledged that while some of the Hindenburg report “comes off as mud-slinging,” it does make a number of fair points, particularly with regard to moderation and bot detection.
“With tens of millions of pre-teens but also a bunch of teenage (and post-teen!) edgelords hanging out in the game, and easy creation of 3D levels, there’s going to be a LOT of bad content,” Carless wrote. “Roblox can—and needs to—do better here.”
Hindenburg shows no indication of backing down on its claims, saying Roblox’s statement on the report “is an abject failure to address the two core allegations in our report.”
Roblox’s response is an abject failure to address the two core allegations in our report, including:1. Evidence that Roblox has been systematically lying for years about the number of people on its platform and their genuine level of engagement.2. That the platform is a… pic.twitter.com/Tj2KiANOnIOctober 8, 2024
Roblox’s response is an abject failure to address the two core allegations in our report, including:1. Evidence that Roblox has been systematically lying for years about the number of people on its platform and their genuine level of engagement.2. That the platform is a… pic.twitter.com/Tj2KiANOnIOctober 8, 2024
Roblox included in its response to Hindenburg a link to a recent “Special Note Regarding Operating Metrics” filing that breaks down its use of average daily active users and other metrics in greater detail. It also said it “looks forward to discussing its most recent financial results and answering any questions on the company’s third quarter earnings call,” which is set to take place on October 31.
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