Damning Roblox report claims company inflates player numbers to investors by as much as 42%

UPDATE 9/10/24: Roblox has responded at length to yesterday's report by Hindenberg Research that alleges the platform has not been transparent with shareholders over its user activity metrics, and that there are continued further examples of the platform being used for adult activity around minors.

In a statement, Roblox said it "rejects" the report and pointed to previously-released details of its efforts to try and combat inappropriate content. On the issue of user activity, such as Daily Active Users (DAUs) being inflated by secondary accounts and bots, Roblox said it has previously communicated that its daily active user totals were "not a measure of unique individuals accessing Roblox" - and has previously acknowledged that "fraud and unauthorised access to our platform may contribute, from time to time, to an overstatement of DAUs."

ORIGINAL STORY 8/10/24: A new report has alleged that Roblox misleads investors by falsely reporting player numbers, and has highlighted yet more examples of inappropriate - and allegedly, illegal - content being shared via the platform.

The report, published by short-selling firm Hindenberg Research (via Wall St Journal), claims that daily player counts and engagement statistics have been inflated by Roblox since 2021, based on interviews with multiple former employees at the company.

A Roblox spokesperson has responded to the report to say it was "simply misleading".

More damning still are a fresh set of examples that appear to show Roblox's content moderation system failing to keep children safe - and to stop adult content circulating.

"We firmly believe that Roblox is a safe and secure platform," a Roblox spokesperson said in response.

The report includes examples seen by Hindenberg Research of Roblox experiences named after sex offender Jeffrey Epstein and sex trafficker P Diddy, as well as chatrooms where Hindenberg staff say they witnessed child sexual abuse images being openly traded.

Roblox's share price tumbled 4.6 percent in the wake of Hindenberg Research's report being published - and it's worth acknowledging that the business model of short-selling firms such as this is to benefit as a result. Still, this on its own does not bring any of its research into doubt, and any share price recovery from the report being proven incorrect would expose it to a huge amount of risk.

In its report, Hindenberg Research claims Roblox insiders have cashed out $1.7bn in stock while reporting losses each quarter. Publicly, Roblox boasts off of huge engagement statistics, but the report says user numbers have been inflated by "25 to 42 percent", while user engagement hours have been "inflated by an estimated 100+ percent".

The report claims that Roblox user numbers are being artificially inflated by multiple accounts owned by the same user, as well as large numbers of bot accounts used to farm in-game items or artificially boost player follower accounts. It's these secondary accounts which former employees say the company detects but does not flag publicly.

Thus, Roblox is claimed to have an actual player count it uses for internal business decisions, with "alt" and bot accounts removed (a correction process it refers to as its numbers being "de-alted"), as well as the publicly-communicated player number it reports to investors.

"If that number [Daily Active Users] is not 'de-alted', I think the actual one would be like anywhere between 30 to 20 percent lower," a former data scientist at the company told Hindenberg Research.

The report details how it has determined that large numbers of bot accounts are active on the platform, and highlights the existence of widely-available tools for users to run more than 20 Roblox bot accounts at the same time.

On the issue of child safety, the report dubs Roblox an "X-rated paedophile hellscape" that exposes children to "grooming, pornography, violent content and extremely abusive speech".

A former senior product designer told Hindenberg Research that compromises to protect child accounts meant "limiting users' engagement" which meant "hurting your metrics... in a lot of cases, the leadership doesn't want that".

The report's authors say they, using an account set with an age "under 13", personally witnessed child sex abuse images being openly traded within user groups, and members "soliciting sexual acts from minors".

The report details numerous Roblox games titled "Escape to Epstein Island" and "Run From Diddy Simulator" and variations thereof, images of male genitalia being shared in a "school simulator" game with no age restrictions, and other games designed around killing pregnant women, going on a shooting spree in a hospital, or simulating sex acts in public toilets.

Finally, returning to player numbers, the report claims Roblox is now reaching a saturation point in the US and Europe, with profitability per user falling as it seeks to continue growing its audience numbers, as it adds "loss-generating users in markets like Asia, per a former employee".

Roblox, a game played by millions of young people, has continually been criticised for its child safety breaches. This summer, a Bloomberg report revealed that Roblox itself had reported 13,316 instances of child exploitation in 2023, and that more than two dozen people had been arrested for abusing minors, following contact in-game.