Roblox ecosystem appears unmoved following report on inflated numbers and child safety issues

As it stands, Hindenburg Research’s short position does not appear to have paid off yet. Although Roblox’s share price dipped by as much as 9 percent in the hours following the publication of the report, it has since bounced back to its highest point since 2022, experiencing a significant boost following Roblox’s Q3 2024 earnings call on Oct. 31.

Scrutinizing the numbers

Shortly after the publication of the Hindenburg Research report, Roblox released a statement refuting the report’s claims and pointing out that Roblox’s bookings and cash flow had consistently grown, regardless of its user numbers.

Roblox’s response — and its focus on bookings — provides some insight into why the company’s investors appear to have largely disregarded the report. If Roblox’s user numbers are lower than reported, but its bookings have consistently increased, that indicates that the company has actually managed to squeeze more money out of each individual user than the reported numbers have indicated.

“They’re not actually questioning the underlying financials. If revenue is staying the same, but total users are overestimated, then that’s great, because we are more efficiently monetizing our user base than we thought,” said games industry analyst and Roblox investor David Taylor. “Therefore, we actually have more upside to look forward to if we continue to grow, and a longer time horizon in which we can maintain this 20 percent year-over-year growth.”

Child safety issues

At the end of the day, investors care about the numbers, and Roblox’s numbers are looking okay, whether or not the metrics are inflated — narratives move marketers, after all. For the media buyers purchasing ads on the platform, the other side of Hindenburg’s report — a long list of anecdotes describing child safety risks on Roblox — was the larger concern. No brand wants to show up next to games that simulate hospital shootings or reference Jeffrey Epstein, among the numerous other examples outlined by the report.

In conversations with Digiday, three media buyers with Roblox experience declined to comment on the record, pointing out the sensitivity of discussing issues such as child safety while representing major brands or corporations. However, all of them said that, while the child safety issues were a serious concern, they had been in contact with Roblox regarding its efforts to improve child safety on the platform — and that they did not believe Roblox’s safety issues were any worse than other major social media or entertainment platforms. None of them said they had slowed their spending or engagement with the platform as a result of the Hindenburg report.

When reached for comment regarding the report, a Roblox representative flagged a series of child safety updates that rolled out today, Nov. 18, which include improvements to parental controls, increased restrictions on the ways under-13 users can communicate on the platform and new content labels.

“The report was done by a known short-seller — that profits by driving down stock prices. They have every incentive to paint a misleading portrait and obscure the facts, which is what they did,” said a Roblox spokesperson. “Our big investors and partners know our business, recognize how invested we are in safety, and didn’t take the bait.” 

Although Roblox’s safety fixes have been in the works for months, the company’s response reflects that the platform views child safety as a significant focus going into 2025.

“There have been some really terrible stories, but unless you’re shutting down the internet, we’re going to have to work through these challenges,” said Yonatan Raz-Fridman, CEO of Roblox development studio Supersocial. “I think Roblox needs to do a better job at proactively getting in front of these issues and not waiting for some Wall Street firm that is shorting it to tell the negative stuff — and I’m not saying Roblox is doing a perfect job, but they’re probably doing a better job than most other platforms.”

Although the Hindenburg Research report pointed out some uncomfortable truths about Roblox, it did not contain any bombshells that were entirely unknown or surprising to individuals already familiar with the Roblox ecosystem — including the investors and media buyers who may have been the targets of the report. As a result, Roblox appears to have weathered the storm relatively unscathed so far. As it continues to expand and age up its user base, however, the child safety concerns flagged by the report continue to be a sensitive area for both Roblox and the brands advertising to its users.

“When you’ve got a platform that has 90 million daily active users, you’re going to have all sorts of content, and there’s no way you could moderate all that,” Taylor said. “It’s just like the internet, right? If you’re going to search for inappropriate content on Google, you’re going to find inappropriate content.”