Roblox refutes allegations of inflating metrics for investors and failing to protect minors

Roblox has rejected claims in a new report that accuses the company of misleading investors by inflating key metrics, as well as failing to protect young users from sexual predators and inappropriate content.

The report was published by Hindenburg Research, a US-based investment research firm known for activist short-selling. It asserted that, because Roblox is not a profitable business, its stock price is "reliant on the growth metrics it presents to Wall Street" – metrics that Hindenburg believes the company is lying about.

In a statement posted online, Roblox insisted Hindenburg's claims – particularly financial ones made in the report – were "misleading," adding: "The authors are short sellers and have an agenda irrespective of the substance of Roblox’s business model and results."

Two key figures were analysed in the report, the first being the size of Roblox's audience. Hindenburg Research claimed that Roblox's measure of the number of 'people' on its platform does not reflect the true number of daily active users because they can be multiple accounts run by a single individual, including alternate accounts and bot accounts.

Hindenburg alleges that Roblox inflates the number of people on its platform by 25% to 42% when speaking to investors, regulators and advertisers. It also said that interviews with former Roblox employees revealed the company tracks both accurate metrics for internal business decisions and inflated ones for investors.

Roblox refuted these claims, clarifying that it defines daily active users as anyone who has logged in and visited Roblox through its website or game application "on a unique registered account on a given calendar day."

"If a registered, logged in user visits Roblox more than once within a 24-hour period that spans two calendar days, that user is counted as a DAU only for the first calendar day," the company added. "We believe this method better reflects global engagement on the platform compared to a method based purely on a calendar-day cutoff."

Hindenburg also claims Roblox "massively inflates" the number of engagement hours it reports. It says that while the company reported 2.4 average hours of engagement per day per user in 2023, this is 58% higher than the average time 8-12 year olds in the US spend on all mobile games.

The research firm hired a technical consultant to analyse 297.7 million rows of real-time player data across the top 7,200 Roblox games and 2.1 million Roblox servers. This review of 30.4 million unique daily users found they spent an average of 22 minutes playing Roblox per day.

Hindenburg claimed the engagement hours metric is inflated by bot accounts that remained in-game for more than 24 consecutive hours, and accused Roblox of incentivising developers to create 'away from keyboard' games that artificially increase engagement hours.

The report also raised concerns over protection for minors, describing Roblox as "an X-rated pedophile hellscape, exposing children to grooming, pornography, violent content and extremely abusive speech."

Hindenburg suggested that there is no up-front screening to prevent sexual predators from joining the platfrom, and that Roblox's social media features make it easy to target children.

The company found that, even when registering a user account as under 13 years old, they were able to find dozens of groups with hundreds of thousands of users openly exchanging child pornography and soliciting sexual acts from minors. Chatrooms for these groups had no age restrictions.

They were also able to access user-created Roblox games featuring inappropriate content and themes, such as titles where players were challenged to attack homeless people and pregnant women, go on a shooting rampage through a hospital, and simulating sex – all accessible with a child's account.

When it came to safety measures, Hindenburg said that interviews with former Roblox moderators revealed protecting users was "largely outsourced to Asian call centres."

Roblox disputed the dangers posed to minors within its platform, stating: "Safety and civility have been foundational to Roblox since the company’s inception nearly two decades ago, and the company has invested heavily throughout its history in its Trust & Safety efforts."

The company claimed tens of millions of users of all ages are able to play Roblox safely every day, and that it takes inappropriate content or behaviour within its platform "extremely seriously."

Finally, Hindenburg Research accused Roblox insiders of cashing out $1.7 billion in stock since the company went public in 2021. In the last 12 months along, it claims that insiders have sold $150 million in stock, with $115 million of that sold by CEO David Baszucki.

Roblox has a history of facing allegations over how it protects younger users, as well as an in-depth 2021 report on how its business model allegedly exploits children.

Back in July, a Bloomberg report claimed prolific abusers were able to evade detection on the platform. Roblox responded to this, pointing to over 13,000 reports of child exploitation it made in 2023, which led to around 24 arrests.

In August this year, the game was banned in Türkiye due to child safety concerns. Two lawsuits were also filed against Roblox last year; one regarding a lack of child safety precautions, and another over an "illegal gambling ring"" for minors.

It was also revealed last year that Roblox was initially not available on PlayStation due to Sony's concerns over child safety.