The State of UGC Gaming in 2024

[Music] welcome to the navi gaming podcast where it is our mission to explore the business and future of video games we bring together the industry's brightest Builders investors and thinkers to keep a pulse on current events dissect emerging Trends and games share Lessons Learned and have a great time this podcast is also part of novic growing ecosystem which ranges from free and premium research to Consulting and advice services for more information visit [Music] www.nic.edu including riot games Crafton and Ubisoft along with over 70 csgo and Dota 2 tournament organizers grid supports them all with data infrastructure and Distribution Solutions to drive Innovation unlock new revenue streams and empower both the community and

professional players whether you're developing an indie RTS with modding potential a new FPS with Esports Ambitions or are responsible for an established game at a large studio grid can provide you with the off-the-shelf title agnostic grid SDK or a fully customizable solution to unlock the potential of data for games of any size and if you're a fan developer or entrepreneur with an idea for a live data powered project make sure to apply for grid Open Access get free access to official data and start creating today if that sounds compelling you can learn more and sign up at grid. and with that let's jump into the episode hi everyone I'm your host Aaron Bush and today I am delighted to be joined by David Taylor David has been a product manager at companies like EA and super social but what you really need to know is that he is on top of ugc Gaming

as much as anyone in the industry if you read novic digests or our deep Dives for example you've almost definitely read David's great content regarding the latest on Roblox ufn or other platforms David also recently spearheaded novic state of ugc gaming in 2024 report which if you are to read any single piece of content this year on ugc and games this is it so I'll link that one to the show notes so you can check out if you haven't already um but really I'm very excited to to have David on the podcast today he's also a consultant at novic and works with teams all around the industry um to help them better succeed in the realm of ugc games I've learned a lot from him and I think you'll learn a lot from him today as well so with that David welcome to the novic gaming podcast thanks for having me eron well David we have a bunch of topics to get into today we're gonna dig fairly deep into the current

and future states of Roblox ufn and other platforms mainly from a developer perspective but before we dig in I was just curious um kind of a question about you what about ugc gaming made you decide to go all in on it what's your story and how you got into this yeah um interestingly my origin story for ugc gaming is also a little bit of a novic origin story as well um so it all started I was doing a project at EA around web 3 in the metaverse and was obviously listening to a lot of crypto Corner um and uh in my research I just sort of stumbled upon robloxs and you know had been looking at the Cent land and the sandbox has you know these these um web 3 platforms and and uh you know I I went to my boss and I said hey you know sandblock and D centraland have like a thousand da and then over here we

have ROBLOX which has 50 million da and uh should we maybe do something with Roblox because you know they kind of check the same boxes of being able to sell your your cosmetic items being able to take them across experiences um and uh my boss was basically like well Roblox is sort of a competitor I don't think we'd want to like partner with them on anything um and so I started just sort of doing my own independent research and I think my first article for navic was around a license like um was around Sonic Speed simulator and like Legacy IP that was being licensed on Roblox and being successful like Hello Kitty as well um and it was through that that I sort of discovered that a bunch of these Studios had read Venture funding and uh I was sort of perplexing to me because obviously the the the Tam for a Roblox developer is is pretty capped by the platform itself uh and so I wanted to do a little bit more research on that and

then I wrote that article roblo developer unit economics just breaking down like how to be successful on the platform or or what it takes to be successful on the platform and that got a lot of traction a lot of people reached out to me interested to learn more and I think that sort of that article is really what you know got me into ugc a couple things where one there's a ton of data available uh you know these these forms are building in public because they're they're you know they're doing it for players but they're also doing it for creators and so you get to see in real time like what are the features that they're working on because the developers the creators you know it's kind of synonymous in this world um you know they they need to know what's coming down the pipe so it was you know a function of there's just a ton of information available to do analysis on and then the other thing is both you know Roblox and fortnite who we'll talk about I think later probably

uh they publish the uh active user bases the concurrent players of each of the experiences so you can actually do analysis on the games themselves so just the wealth of information that was available uh was really really compelling and then the fact that not a lot of people were writing about this meant that like people were reaching out to me and really interested to learn more which is obviously extremely motivating yeah you definitely opened a lot of people's eyes onto I think the scale and just the unique the unique way that things are done in these platforms that um you know many professionals around the industry they kind of know of but they don't really know um and so um even you know you continue to do that so for for those wanting to know more sign up to to novic digest and we'll we'll discuss more ways to follow David later um but one one more question before we dive into the Weeds on on Roblox first um so you've been paying attention to

the ugc gaming world for a couple years in depth I would say now um is there anything over that time that you have changed your mind on in a big way yeah so I mean just at the beginning I was skeptical right as I mentioned just the the total adjustable Market being capped by you know the platform themselves and I think I haven't changed my mind about that uh they are they're definitely capped it's hard to be uh profitable as a Roblox studio um it's just extremely competitive but I think the thing that I that has really opened my eyes is just like the talent that are building on these platforms um just to give an example like at Super social we had uh one of our like senior Engineers was 19 years old and he had been developing since he was seven and so you know I'm working with this this you know kid for all intents and purposes who had

more who had 12 years of work experience which is more work experience than I have uh and so you know you think about that and how a lot of these kids are learning these technical skills and also not just learning technical skills but uh game design marketing Community Management all the things that are critical to game development today uh you know extrapolate 10 years from now these are going to be sort of the the superstars of the game industry and you see that already manifesting today with you know zers you know making $50 million in a matter of months off of lethal company and I just think that uh you know that's not going to be the last time we see that and in fact I expect to see that a lot more in the coming years nice well let's go ahead and jump into Roblox we'll hit on ufn and some other platforms um later but of course

in our industry there really is no shortage of discussion about Roblox but even so I feel like many people are still sleeping on both the current relative scale of the platform but perhaps especially the future trajectory of how big Roblox can eventually become from an active user and monetization perspective um so before we we kind of dive into what's working or not on Roblox and what's next could you maybe start just by Framing up some numbers around roblox's scale for everyone before we dive in yeah I I wrote some numbers down here we got 350 million Maus uh you know that's an estimate but you know 300 to 350 million Maus is realistic number um which I'll just quickly add to I think like PlayStation is like 120 130 something like that so and Xbox is even smaller so that's larger than both both of the largest

console platforms combined but anyways continue yeah yeah and so 70 million da and then you know 10 million concurrence at at you know peak times and so you know as you mentioned bigger than PlayStation and Xbox combined also from Aur current players perspective it's the same size as Steam um and so this is obviously one of the largest you know close to the largest gaming Platforms in the world and and uh and then you know in terms of Revenue it's obviously a lot smaller you know $3.3 billion in bookings compare that to Xbox which I think reported 16.3 billion dollar in bookings um but interestingly if you look at their sort of reported numbers for Xbox game pass I think this last time I saw was 3.6 billion so as you know when you think about a Content platform Xbox game pass and Roblox are sort sort of you know un

parity in terms of Revenue generating uh platforms so you know obviously as a free-to-play platform it's not uh it's not going to be monetizing on a player basis as highly as as console but still a a large amount of money going into the to to Roblox right well let me um lead in to start talking about the content side of this now and this is sort of a loaded question but what are a few underrated elements or patterns of the most successful Roblox games today at the platform level the most underrated element is just the seamless ability to go from experience to experience so like in a single play session a Roblox player will'll play eight different games uh which I think is a a different play pattern than what you see in other on other platforms where players really sink into one or two you know maybe three games at a time but but on Roblox

it's not the case they are just sort of you know they're migratory players they go from one place to the next and you know as a result you see retention is a lot lower um and I think because of that transient element to to players you see a lot of explicit effort to retain them with really big offers to you know come back on a daily basis and get a really big reward um so you know one of the things that you'll see in roblock experience is just a lot of incentives to get people to play for long periods of time come back on a daily basis and help these you know developers hit their metrics that helps them get into the the discovery algorithm for Roblox is there anything on like the monetization side or the social side or you know what what actually is being built that you've noticed as any type of pattern that's been more successful over the past year or so yeah I mean Community is obviously

a huge part of it I don't think that's that different from from other uh platforms but the ability to you know publish a game and show it to tens of thousands of your your followers makes a really big difference in terms of getting the attention of the Roblox algorithm essentially everything comes down to getting the attention of the Roblox algorithm if you if you don't do that then there's no there's no other way to succeed so basically it's all about getting the attention of the algorithm making sure that your metrics hit uh hit the metrics of your other competitors that the algorithm deems you to have um and so you know from an from a audience perspective having an existing Community really helps um the other the other lever is uh is leveraging influencers who are representative or have a similar audience to what you're trying to Target because you know on the rblo platform there's no guarantee that your game's going to get put in front of your your

target audience you know hopefully the algorithm eventually susses that out but if you really want to make it explicit you have to sort of find other means in order to get players in the game who represent your target audience and then train the algorithm to uh to favor those players right that makes sense um and obviously it's changing all the time and we can't necessarily predict how the algorithm will will change you know month to month or over the long term but I am curious um how how do you think the meta of what makes a standout roadblock game um how do you think that will evolve over the next few years or you know what like a stand out game to get noticed by the algorithm like like how is that going to evolve over the next years any like big ideas on that yes I mean I think I you know just to cover the existing state just to kind of summarize it's you know having a Discord community that

you can publish to uh Partnerships so influencers but also you know having other Roblox games that you can maybe put a portal in to start to final players to your experience um and then just from like a game design perspective there's a lot of fast following where it's like you look at what's been successful and then you do something similar but with some sort of innovation that sort of pushes it past the existing success full game um and so you know I don't see that changing anytime soon but I think the ways in which you achieve that might change so like you know with AI tools coming to Roblox you might see developers able to develop experiences faster and so like speed to Market becomes more of an advantage um because you know you get faster tools you know it's all about can you get can you get uh your game published and get people into the to the game because there's a lot of

um sort of a path dependency to the Roblox algorithm which is like if you already have players in your experience then algorithm is more likely to recommend more players to your experience and so it's really there is an advantage to being sort of first to Market um and so speed is going to be a big factor um I think the other thing is just as the world you know gets the next generation of iPhone or Android phone that's going to enable more High Fidelity experiences to be played globally today you know there is a sacrifice that you make if you use High Fidelity Graphics which is that it impacts performance on lower-end devices and so you're basically carving out a part of the market that you can't access for your audience so as that as that changes you know there's more flexibility for developers to use those those um animations and and Graphics that might you know increase their

memory usage um and then lastly I would say um you know if on the community side like if there are new platforms that emerge like you know Tik Tok has become a huge source of acquisition blade ball exploded off of the back of Tik Tok videos um if there are new Platforms in emerge and just being able to establish an audience on those platforms is is a critical part as well right that makes a lot of sense and obviously you know even beyond that Roblox is trying to expand its audience in various ways on new platforms it's trying to to age up and retain um players for longer it's expanding into new geographies it's doing all of this at the same time um and each of those kind of has its own implications and considerations for how the platform might change or what might work on the platform over time um and maybe just to hit on the the the international piece first I'm curious to

hear how you think Roblox games how well they translate internationally and you know you know just for context when Netflix you know kind of a different industry but still entertainment when they initially aim to expand internationally um the company believed that content made everywhere would translate well to other regions and while that did happen in some notable cases right like squid games as like the peak example um and most cases it actually hasn't translated at all and they've learned that in order to succeed in different countries they have to create you know more region specific content for for those people um obviously in the games industry content gets localized all the time but also has you know a bunch of regional implications where Phantoms rigger in some places or different types of games and mechanics are popular in specific regions how do you think this is this is and is going to play out on on Roblox do you think it'll be sort of

Netflix like in that way or do you think these game experiences actually do translate around the world um better than than others might expect yeah I mean just anecdotally like from the the games I've worked on like you see that different games will have different audience uh Geographic you know uh breakdowns so you know clearly there's different things that resonate better with with different audiences um you know Roblox has localization features as well which essentially are supposed to make you able to publish once and then it be you know consumable across the world another thing about Roblox games is you really don't want to use a lot of words um you know Roblox players don't like to to read through your paragraph tutorial they want to just sort of play it and figure it out for themselves or at least for to be just intuitive with a lot of like icons and and um and so you know

maybe that's a function of the localization features not being as strong or just that these are younger players and and younger players aren't really interested in in reading a lot um but you know I think you know International is is key to to roblox's growth uh you've seen you know one one sort of data point from a few years ago is that 70% of of um kids between the ages of 9 and 12 in the US play Roblox so if you think about that that's like okay the US is getting pretty saturated right and so how does Roblox continue to grow uh and expanding into International markets is a big part of that they've seen they've been successful for the most part they've gotten 47 uh percent kager on daus from International markets over the last four years or five years actually and I mean it hasn't all been successful they had a big push into China that sort of failed they they tried to to push into China

within a year they pulled out um but I think for the most part they're finding uh success and you can see that reflected in their sort of 20% year-over-year growth on the platform that has been pretty consistent over the last few years um you know Japan is a big Target for them they they grew bookings there 174% so you know when you look at at that kind of growth I think you know whether it's that there are creators in those markets who are building the experiences that are you know facilitating the growth or whether these aren't they're not they're not local creators but the localization features are enabling for that type of growth like the thing about the thing that I think is different about Roblox versus Netflix is like Roblox only pays if you're successful you know they don't pay for all the experiences that don't make it um whereas Netflix often times has to pay for content to uh be produced and then put on their platform and so you know Roblox I think you know at the

end of the day is agnostic as to whether they need those local creators to be successful or if as long as the numbers are going up like either way it's fine that's fair um and then second uh I just wanted to get your take on the whole aging up argument and whether you uh whether you kind of buy it the narrative that Roblox is pushing forward like Roblox has been saying that the the young adult segment is you know fast growing I think they're fastest growing segment U but you know they attach growth rates but they don't really attach the base number so you know how how big of a percentage it really is of of their their business um so I'm curious in your research and and work on the platform have you become more or less concerned about players graduating Roblox um and moving on or do you think they actually have done a pretty good job of keeping players on longer than they would have in the past yeah these

this is one of those things that Roblox sort of tiptoes around which also makes me suspicious a little bit uh but you know if there is a reason to be skeptical it's not because the data doesn't say that they are aging up the the data definitely says that I think you know I can't remember what the percentage was but it's like 20% of players are over the age of 25 and then between 18 and 25 like another 15% something in that range and so from a data perspective it's saying that that they're aging up but the problem is is that how many of those accounts are kids who are having their parents create accounts so they can access more mature content and I think that is sort of the the question mark That's in everyone's head like you know when we would look at our data and would say you know 18 plus is your biggest audience we were like okay but this was a game made for like

12-year-old kids so is it really our biggest audience um and and I think that I think if there's reason to be skeptical it's just that you know Roblox doesn't have a way to truly track how old their players are and as such you know they may not be aging up as much as as they say they are yeah how do you view that longer term though because obviously you know Roblox is always working on a bunch of things to enable more types of games to be made that could you know serve you know an adult audience better than they've done in the past do you think they'll figure that out and this aging up argument you know will work to some degree it doesn't mean that people won't play other games elsewhere of course they will um but uh yeah in terms of kind of looking at longer term where do you sit kind of on your bullishness versus bearishness on the Aging up argument I I think that there's I mean I sort of mentioned you know as devices get get more powerful there's more opportunity to create those

types of experiences that are targeted to older audiences like front lines for example like like front lines everyone talks about is like you know you know the Call of Duty of Roblox um at the end of the day it only you know has between 2,000 and 3,000 concurrent users which is is a good experience for Roblox perspective but it's not like anything to be to write home about like that game's probably only making you know 50 th000 to $100,000 uh maybe maybe more than that more probably more like $200,000 a year um so it's like that those types of experiences are not the ones that have really like broken through but I could see that changing in the future um and I think that the thing that makes me really bullish about roox is just the social graph like the everyone's gr like at this point everyone's grown up on Roblox and so if all of your friends are on Roblox as long as there's things that can keep you engaged like it's a pretty

there's it's really hard to leave because then you need to bring all of your friends with you to play like a specific game and and if you grew up on Roblox you also are not you know you're used to a frictionless game switching experience which other platforms are not able to provide today so there's a lot of reasons to stay on Roblox if there's content for you to play as you age up and I think the fact that you know you know there's going to be more power ful devices enabling more High Fidelity games and the fact that all of these players are already on Roblox you know logically speaking I think that they they could definitely do it makes sense I mean I personally lean bullish long term on a lot of these these debates you you can see the snowball you know gradually growing and expanding it's a big snowball already growing at 20% a year basically every three years it's still rolling down the mountain um well kind of switching Switching gears within

Roblox one of the most interesting New Economic developments on the platform is advertising especially immersive ads which you recently wrote about in novic digest um for those who haven't read your piece how do you think this feature will will play out in the near- term and and the long term like how how transformative really is this for for Roblox well I think the opportunity is huge right uh on the mobile game side I think you know Eric suert data. they've they've estimated about 50% of mobile games Revenue comes from advertising so if you think about that being translated to Roblox which is 78% mobile you can imagine a world where their $3.3 billion dollar in bookings that they have today you know becomes 6.6 billion dollar in bookings when you add advertising on top of it so personally I think that there's a lot of opportunity there but today I feel

like there's not been a path put forward for advertisers to really see the ROI um that they that they need to to to scale that advertising uh that that demand which ultimately is what's required so you know I can go into details on on sort of some of the challenges at this point I think Ro what what Roblox is finding is they're sort of they've got they want to they they don't want to favor brand experiences they want to to be sort of a organic and non- preferential ecosystem where the best games you know bubble to the top and that's what players are exposed to and the problem that brands are having is that you know a Roblox player sees a brand they know what that is it's an advertisement right and so there's already an inclination to avoid it and to do not engage with it even if even if a brand does make a legitimately

compelling and engaging experience at the end of the day the Roblox players thinking this is an advertisement uh I'm going to get out of here as soon as I get my reward right and uh and so that's what what uh brands are finding is that you know they spend all this money trying to create an experience that keeps players engaged and then it's all free marketing for them or in some cases they can make money um but that's not played out in real it what happens is they spend all that money make a super you know High Fidelity experience really compelling gameplay because you know there's some serious Talent at these Studios but at the end of the day it's got a big brand on it that says like that says to players like don't play me and uh and that's hard to to get around so you know what I lay out in the article is basically they need to change their approach it needs to stop being sort of like a oh we can create a persistent experience that will engage players forever and we only have to pay

for it once and start thinking about it as like more traditional mobile games advertising where you create a smaller experience that's you know a short a short Punchy gameplay experience that players don't have to learn they immediately know how to play it and they do it for like 30 seconds to you know a few minutes and then they get out of it and I think if you see if you were to do that the the cost for Brands would go down and and advertising on Roblox would become a lot more compelling opportunity and and then overall the total Market would just grow from there yeah I was gonna I was gonna ask about the impact that that ads like new ad formats on Roblox would have on branded worlds because it makes sense why branded worlds became a thing on Roblox it was you know like the main way for any company to try to to get in front of of users when there weren't other options

but if there do become other options do you think that basically means that these companies are just going to shift gears and mainly go more Allin on advertising and other forms or do you think that's going to build on top of branded worlds and we'll see a lot more of both and the future yeah I mean it's hard it like I think there's a lot of just copycat sort of activity in in Roblox not just on the developer side but also on the brand side it's like you know today Brands look at other brand experiences and they're like oh I want to do that for my brand but I think you know as as you know pocket marketing sort of marketing budgets tighten up you start to need to show that Roi and that's where I think it shifts to other opportunities where branded experience is more of a novelty if you really are trying trying to drive Roi then there's other marketing levers that you can pull

you know in one in particular that I would you know say is if you can activate on an existing experience that already has an established audience that is a lot more uh likely to drive traffic to your you know your brand outside of Roblox which ultimately I think is what you know everyone wants is to increase sales of their whatever their products are um and so like it's a lot less work for the developers just to add some you know gameplay mechanic or gameplay component that has a brand element to it than it is to create an entirely new game from scratch try and beat the up Roblox algorithm like funnel to the top for organic Discovery like that is just such a long and treacherous never proven uh Journey versus if you go to an experience like lopia and you put your brand in it you're going to get be guaranteed a certain

amount of traffic it might it'll probably still be expensive because you know lopia knows what they have on their hands and they know what they can charge but you're you're more likely to to sort of see the results uh that you want to see yeah I was just going to say to I answer your question on like how does advertising evolve from here I think you know Roblox is working on a couple things one they're going to do rewarded video ads which I think will allow for more Brands to be advertising on Roblox uh second is you know hopefully they figure out what to do with immersive ads because I do think playable uh ads have a lot of potential but right now immersive ads funnel you to the Branded experiences which you know are sort of a dead end and so if if Roblox can figure out some way to use playable ads but make it more engaging and make it better experience for the developer for the player for the brand um then then I think there's a more opportunity with with that feature as well mhm yeah it definitely could take some time for them

to figure this out I mean they really are pioneering a new type of advertising in a sense which is really exciting uh but it makes sense that it wouldn't be that that there's like a textbook on how exactly to roll this out very quickly out of the gate but so it might take some time but I I'm pretty bullish on on where this could go and what one reason why I'm also bullish on where this go just from like a company standpoint more so than even developers is the the worst part about roblox's business is the take rate that platforms take on it right right if you have just you know pay 30% out of out of the gate to to Apple for instance um that really limits what you can pay developers and what you keep as a as a platform owner uh but with ads um especially if you can build like a pretty comprehensive ad Network internally connected to your platform um the margin possibilities on that are so much higher which is great

for Roblox as a business it's great for potentially funneling more in in the way to developers um and yeah hopefully it could even just kind of change how many people view Roblox as a business do you agree with that yeah definitely I mean anytime Roblox makes money developers make money now you know whether the the the take rate is is fair I think is a more pH opical discussion um but for sure as long if if Roblox can grow their revenue through ads then that's definitely going to funnel to to the developers as well okay so uh obviously advertising is a massive economic lever that roox is likely going to pull pretty heavily on over the next few years but it's not the only economic feature or other other features that they're working on they have a ton in their their road map that we can expect to roll out um David is there any you know maybe like two or three um parts of the

the road map whether it's economic related or something else that you think will have an outsized impact on um helping Roblox grows a business helping developers find much greater success what are you excited about and looking at yeah I think um in-game Commerce is really compelling so I call it in-game Commerce they call it real world real world Commerce I like in-game Commerce because it's more describes what it is like uh you're you're going into an experience and then you have the opportunity to purchase a uh item in the real world and what that unlocks I think for Brands is is a lot of potential you know you're able to track or track conversion rates for for players who come to an experience and then eventually buy something and that's really valuable for for Brands to be able to make the argument internally that their marketing dollars are are having a return and then I think the other thing is you know if players can buy real world real

world items you've got um you've got like you can turn a 50 Cent purchase into a $50 purchase and that I think is really compelling as a as a concept now training people to start shopping in Roblox versus walmart.com or amazon.com that's going to take a long time but the opportunity I think is is quite large for Roblox to grow Topline Revenue in that way um awesome yeah I totally agree with that as well um we should probably start wrapping up our Roblox section because we still got ufan and maybe some other stuff to get to here obviously I'm fine spending a lot of time on Roblox though it's the it's the biggest of them all um but um in last year's Roblox developer conference CEO David bazuki he laid out 10 5year predictions that are all a bit wacky and he's done this before and had you know some success doing so so I just wanted to get your um quick take on some of those is there any one or two that

you think are most likely to play out or like any one or two that you would just absolutely bet against I mean I looked at the list all of them seemed pretty like in roblox's control to sort of determine how they were defined and whether they were achieved so uh the one that stood out to me was was uh number one which was a Roblox developer will be valued at1 billion I think this is the one that I sort of looked at and I was like okay that's a that's a bold statement because uh currently you know the top performing or the top monetizing experience makes around hundred million and if we're looking five years out you know just on roblox's current growth trajectory they're probably only going to like slightly more than double in in size right so you know you'd be looking at a 5x Revenue at the current uh you know four to 5x Revenue multiple

the biggest multiple I've seen to date was when um embracer group purchased bloxburg for $100 million when bloxburg was making $3 million in revenue and so you know a little bit more than a 3X multiple which I thought which I think everyone everyone in the industry thinks it's a little bit High um and so you know I think billion dollars is a bold statement but if you layer on advertising and layer on real world world Commerce that looks a lot more achievable right like if if they can figure out advertising and double the the amount of Revenue that every player in their player base brings uh to the platform then you start to look at that and say okay that looks possible it's not guaranteed but you know one of these has to be a bold bet and I think that's the one interesting and just so um our

listeners kind of know what these are if they if they haven't seen them um I mean the one that took the most headlines was saying Roblox will become a dating app which I mean okay but other things are like you know a Fortune 500 company will use it as part of the recruiting process a school will integrate a full K12 curriculum um including language classes Etc um you know a fashion designer will be like native to Roblox and become really big without you know having started in the physical apparel world or or anything so like I feel like all of these probably are already happening like if you think about how big Roblox is like all of these are probably happening on on some level yeah yeah maybe uh but I think you're right that the1 billion do developer Mark that's definitely the sign that they will have unlocked something you know massively compelling as a business um but okay uh let's see uh last

question for you on Roblox before I move on Roblox is currently a 24 billion dollar business whereas a business like meta the largest you social network in the world um is worth a trillion dollars so roox is still you know just two and a half percent of the size of the largest social media company if that's even a valid comparison um but I'm just you know we'll kind of start we'll end here on a far out question David which is you know when all is said and done looking at the long term of Roblox um how big do you think that they can potentially become is are we talking meta level numbers are we talking way less than that what do you think I mean I think they're doing all the same things that that meta does with Facebook and Instagram so uh yeah you know I I I wrote a bunch of numbers down to like calculate why it could be but you know I just threw a bunch of numbers at you already so I'm not going to do that I'm just going to say yes it's possible and uh you know I

think that the interesting question is like what type of Acquisitions will Roblox make in the coming years in the same way you know meta made a lot of Acquisitions for to to grow um I'm curious what that would look like for robloxs as they as they sort of scale over time yeah that's a very good question I don't know they have made a ton of Acquisitions but not really of other major types of of networks so be that would be interesting to see okay well let's go ahead and switch gears to to ufn the unreal editor fornite for fortnite has only been live for about a year at this point so it still is very young still in building mode in a lot of ways but uh David what is the general consensus among creators about how this first year went um and what are the biggest things that are being pointed out that need to be solved for ufn to kind of take it up that Next Level yeah I think first and foremost it's a dream come true for for you know many or most

creators on the platform before the big ufn announcement in March you know creaders were making a fifth if not less than what they're making today so what that meant for a lot of these top creators is like they could quit their day jobs they you know were doing fortnite creative in their free time uh making a little bit of supplemental income but they're mostly just doing their their you know their traditional day jobs so yeah now now they can become professional ufn developers I think that that is such a gift and you know the the $250 million that epic is investing in this Trader economy is extremely generous so overwhelmingly the sense is like you know thank you epic for for everything that you've done for us um I think uh you know we can we can talk challenges there's obviously you know the fact that it's a new tool set the fact that you know fortnite was not designed to be a

ugc platform originally it has become one and so you have to deal with all of the tech debt associated with not having done that from from the outset so it's going to take some time for fortnite to to introduce the types of tools that allow for the same types of experiences that you see on Roblox and that's you know that's just been the biggest challenge so far is the fact that you know there hasn't been persistence uh so you can't have progression in these games and if you can't have progression how do you retain players um so you know over time we're going to see more features get added and I think the the quality of the content will will just go up from there this is sort of an unfair question or at least just very context dependent but um if you had to or a studio was talking to you looking to build on a ugc platform and they were you know trying to pick between Roblox or ufn how would you go

about answering that question for them on on where to build or both yeah so if you're going to build a game from scratch then fortnite is your place to go because you know the Creator base is growing I think when I first uh reported on it in December it was at like 12,500 last time I checked it's now at 17,500 so that's a big lead in just a month so I expect that to continue to grow but even still when you compare that to roblox's 5.6 million developers it's there's far more opportunity to you know make a quick buck in fortnite than there is in Roblox so if you're starting you're just going to build a new game then then absolutely go for fortnite if you care more about like building a specific type of game or you want to adopt a game uh then I would go for Roblox because if you have a game that's already established in Roblox it's a lot easier to maintain that you have a lot more options for how you can you know

retain players engage a community right now on fortnite for example there's no way to link out to a Discord page so if a player comes into your game there's no way to sort of lock them in or be able to communicate with them after they leave the game so they're basically lost forever and Roblox on the other hand you know you can you can build a community by bring bringing players into your game and then when you have an update you can ping them and say hey here's update come back to the game so you know there's just a lot more options on Roblox it's the problem is that's so so darn competitive yeah yeah I think that's that's fair um do you think it generally makes sense for teams to build on both like I know there are a bunch of you know ugc Studios that are trying to build on all of these different platforms do you think that generally is a wise move or should teams be specializing in in one of these platforms I think a lot of these Studios you build on both are doing branded experiences and uh you know that's that's a way to

have you know more guaranteed Revenue maybe a lifestyle business but that isn't going to lead to you know becoming the next uh bloxburg for example so the developers who I've seen successful on roadblox have been building for many many years uh they're very familiar with what works they're familiar with who who they should be partnering with it's just a lot easier to once you have success to keep it on Roblox versus fortnite it could be gone in a few weeks yeah well I'm curious to get your take on what is actually working on ufn so far um and how how does that compare to Roblox yeah so like on ufn you know I mentioned there's not a lot of options on ufn you can you know have a very clickable thumbnail apparently the thumbnail is like the most important thing to get players into your game which is surprising on one level but also if you

think about it it's like you know these players come to shoot guns and shoot each other so you know theoretically you put them in any environment that they can do that in you know they're going to do it and so the thumbnail ends up being sort of the the differentiating factor uh and that's that's been representative of the fortnite creative ecosystem to date like you only see one or two non practice Maps or you know shooter maps in the top 25 anytime you look at it and that's because the vast majority of players still play Battle Royale and they use fortnite creative as a way to warm up for their their session or to practice so I think um unfortunately on fortnite you know if you want to have a breakout success you're still locked into a very specific type of game and that doesn't allow for creators to different differentiate themselves through game play and it more ends up being about like do they have the most

clickable thumbnail yeah hopefully that changes I mean it makes sense you see kind of a meta like that on YouTube as well where you know thumbnails kind of help Drive uh attention but still at the end of the day you have to retain people through your videos get them to subscribe and such and so maybe a similar Dynamic will eventually take place on uef although it's kind of weird to think about in a in a game setting like that um you also had um laid out some elements previously about what makes a successful Roblox game how does that compare or contrast to ufn or is it still really just about the thumbnails these days yeah well until I mean so fortnite just introduced uh save point devices or or persistent devices so basically now you can save a certain number of of uh of um player data types I would call it so that does allow for there to be a

certain degree of progression I haven't seen any games come out that are like super deep in terms of progression but it's more around like being able to track what your like kill death ratio is over time and and being able to do leaderboards and and those types of things which is obviously really important for the existing audience so it's still a big win um but hopefully over time we see uh more more diverse content one one of the things I've seen which I think is quite compelling is isometric Dungeon Crawlers that sort of similar to Diablo um and you know that was enabled by a recent update where you have more options for for camera angles and so that I think is really compelling is like if if players can play these other types of games and they can progress and collect you know loot they can loot they can come back more and want to do the next level once it's updated there's a lot more opportunity for for building an audience over time uh so I'm I'm

definitely bullish on on the platform it's just it's going to take some time for those features to come online and and then for players to sort of change their their um play patterns to be more towards all sorts of game genres versus just battle royale extensions yeah uh that makes sense as well um and obviously one major difference between Roblox and epic is that epic is also making games experiences whereas Roblox is purely the the platform provider and that's not necessarily new they've been building the Unreal Engine forever fortnite has been a successful game for a long time kind of alongside it uh but even so that uh you know that way of working persists um and with epic you know some say that's a good thing because you learn a lot from being your own customer and you know they recently launched you know the collaboration with Lego and a racing game and a music game that maybe you know grows the the overall pie of who wants to play on fortnite but you also have some people that are critical in saying that it's a conflict of interests

that you know they're creating experiences that take attention away from what other creators on the platform are making um where do you fall on on this and see this playing out longer term yeah I mean first and foremost there's no fortnite creative without Battle Royale so I think there's there's no world in which you can say that uh epic creating is Zone games is bad for for the the Creator economy and the Creator ecosystem there are some negative side effects you know mistrust I think there probably are uh creators or there will be creators who feel like their games tanked in metrics because uh fortnite came out with a experience that was basically making their uh their game irrelevant or obsolete so I think you'll see these examples where you know an existing game gets totally tanked because there's just a better version of

it created by epic but at the end of the day like when you look at it from a total ecosystem level epic is bringing in millions of players that eventually trickle into these uh creative experiences and there that is you know objectively good for for creators yeah uh last question for you on on ufn um I mean I asked you kind of the big wild question about Roblox can it be this big massive thing um in the future at another another tier of of scale um how do you think uef fn's scale potential compares to Roblox does it also have that same potential um do you think it'll always be smaller than Roblox how how do you see the size of the big two if you want to call them that um playing out over the long term yeah I mean one thing is like there's not a lot of crossover between uh between the Roblox and fortnite ecosystems or even player bases so you

know I think that's compelling because it means that the whole ugc industry is can grow you know simultaneously there's not going to be as much cannibalization um at least for now but uh you know fortnite just announced that they're going to be launching mobile up again in Europe and I think that will be a really interesting experiment to see how many more players are are coming into fortnite now that they're accessing mobile because 78% of players on Roblox are mobile so you know you do a little bit of math and you take uh let's say it's 70 million uh I'm trying to remember 100 million ma like I think that was probably at the peak but let's just say it's 100 million Ma you divide that by uh by3 then you're you know you're going to Triple you're going to more than triple that so so basically uh you know that ends up being around 300 million Mau potentially

which is close to roblocks so like if you if you if you are comfortable with those assumptions you could say that fortnite would be as big as Roblox if they had access to mobile which they don't today and as we see Europe come online we'll start to get a better sense of of how many new players are coming in uh to play fortnite on mobile gotcha well it'll be an exciting future to see where this all plays out obviously epic is still having regulatory battles fighting fighting against Apple um to you know change fees to change the way games are access third party storefronts Etc so um it wouldn't be surprising to just see the the foundation of like how these companies potentially reach certain users around the world to to change over time as as these rules change as new platforms grow Etc um but let's go ahead and kind

of switch gears to our last segment which is just really quickly to hit on um other platforms and obviously what we in gaming kind of consider ugc gaming is dominated by these big two Roblox and ufn um but there are others out there kind of in their own niches is are there any others that you think the industry is sing on like who who else should we be paying more attention to yeah well I mean you can't forget about Minecraft uh if I was going to say big two I would call it Big Three the the challenge with Minecraft is that it's owned by Microsoft which is under scrutiny from regulators and so they're going to be very conservative about moderation and and what they do with the the ugc ecosystem so I wrote an article like a year ago just just basically not super somewhat bearish on on Minecraft as a result of that but

there's still a massive user based there I think um Phil Spencer reported last year that there was 120 million uh monthly active users on Minecraft still and a lot of those are playing single player uh experiences but the ugc economy still a large chunk of the overall Market um not as big as fortnite or or Roblox but you know not too far behind in terms of of uh payouts to developers so you know I don't know what their strategy is but it will be interesting to see if they are able to sort of reinvigorate that Creator ecosystem because so far you know you don't see a lot of updates from them um and that could just be you know a function of of them wanting to keep their strategy to themselves but you know it's easy to forget about them because there's not a lot of of new news coming out of that that ecosystem that's true um I think on

the on the you know leaving the ugc games platform side and just looking at sort of modding uh there's you know a couple big ones GTA The Sims that are both coming out with new games in the next couple of years it'll be super interesting to see how they evolve their their large uh ugc ecosystems I'm hopeful that they will take steps to make it a little bit more accessible for for you know new creators to to get involved because right now you know you have to do all sorts of of uh a manual sort of hacks in order to to be able to create your own content in in these platforms so that's what I would say is like those are two really large franchises that have an audience ready to consume ugc and that's really important for for getting a healthy ugc ecosystem going so I I personally EMB bullish on any franchise that has a large audience that um is is thinking about ugc do you think that'll become more the

norm these large franchises unlocking ugc components in in bigger ways yeah 100% I think that's where the majority of growth for the Creator economy is going to come from in the next 10 years is franchises starting to adopt these features MH um yeah and another example that I wrote about an noic digest maybe a couple months ago but you reinforced in the state of ugc report um was kind of what we're seeing with Studio wild card and Arc survival ascended which they're you know their um their their modding capabilities are basically being powered through through overwolf but what's interesting is it's not just users building mods and you know this dinosaur survival you game um but there are you know other game studios basically building what are like larger mods or DLCs um on top of another Studios game um and this is really like

the only example still that I can think of where this is happening although it's like a really intriguing idea I just wanted to get your pulse on um how how realistic is it that we see this type of scenario existing more in the future it's somewhat adjacent to ugc but um kind of it's still in that realm of just people building on top of everyone else's um games I think I'm going to turn this one around on you because I feel like you want to answer this this question uh I I have not I have not taken a deep dive into Ark survival uh so I uh I am less familiar with it but I will say this look I like the the Roblox generation is you know going to continue to age up right and they grew up with sort of an expectation of being able to create and engage with the the content uh that is in front of them and I think that's just going to become table sakes

for developers across the world is is being able to to um to unlock creativity of their of Their audience and allowing them to engage in the content on a deeper level and and and customize their experience yeah and I mean you mentioned turning it around at me I honestly have no idea where that's going to go I mean I I generally think that you know as barriers to Creation fall um and and you know as we create tools for others to build on top of a wide range of other experiences if the opportunity is big enough um then you know in the same way that we've seen more professional Studios you know build on Roblox which wasn't really meant for that you know initially but it's it's happening anyways because that's where all the people and all the money is that um similarly sure if the audience is large enough the economics are compelling enough I think you could see more organized business is kind of come in all sorts of new directions to try building on on other people's platforms

or other people's games I'm not really sure where that goes but it's it's an interesting interesting new world that we could be entering I mean I definitely think we're we're entering that world actually I saw um uh Century games is a fairly wellestablished uh mobile game company they uh they um produced white white out survival which I think hit like 400 million dollars in Revenue in its first few weeks they have they have Liftopia on on Roblox um and they I think that launched in 2020 so they're a mobile native developer who came to Roblox to to develop a game and then just a few weeks ago actually maybe last week they announced that they're creating a mobile game for Liftopia so oh that's going to be a really interesting thing to track is you know can these developers whether they be AAA or mobile developers can they come to platforms that are they're not native to

uh build either new IP or leverage existing IP to grow the audience and then monetize that audience on you know in more traditional more highly monetizable platforms I think they totally can I mean as you mentioned earlier in the episode we're it's already happening right you mentioned zers with lethal company I think yeah um and so I think we're going to see so much more of that um and I one thing that I've kind of talked about off and on briefly on the the podcast is I'm just really curious what this generation of entrepreneurs will will do in the games industry obviously making games is one piece but if if your worldview of what gaming can and and will be is coming from a completely different perspective like how does it also change your view on like what other tools should be made or what other Innovations and distribution you know are are possible or like how else can we think about building on top of all of these

experiences and ways that just haven't really been thought through yet so I'm just really curious to see what this generation of entrepreneurs will do and I think we're just starting to see um you know the beginnings of it through the the lethal companies of the world and obviously the successes on on Roblox um as well um oh one question I did want to ask was just sort of about AI obviously it's like the craziest buzzword of late but it is interesting in a a ugc setting because it further enables the barriers uh to Creation to be lowered which is the foundational purpose of ugc gaming and so um I I just wanted to ask like where in the ugc gaming world do you think AI could actually have the most impact in unlocking something big and new for the industry yeah I mean it's a great use case for for ugc because most you know most players don't have technical skills so being able to just write a prompt and and see something populate and and then

hopefully you know being able to manipulate that in ways to refine it you know with dragon drop tools I think is a really clean use case that could unlock a lot of new content and a lot more creativity from those who are less technically inclined um and where where do I see that happening I mean Roblox is working on AI tools right now I think they've got a treasure Trove of of um of training data off of 5.6 million developers so essentially like anything you could possibly imagine is probably in that Ai and and so it'll be really interesting to see what is able to be created off of the back of that uh I've seen some early early demos of it it looks pretty pretty compelling I mean when you combine chat GPT with Roblox you can actually create like pretty uh robust experiences without knowing how to code just copying whatever chat GPT says so I think if you see that

happening in Roblox it will it will unlock a ton of creativity I think my concern is just like what that means for the the developers who have you know put in the hard work to to learn these these technical skills and and whether those will be uh as valued as they are today once AI enables people to just put in a prompt and and get the output yeah I mean my guess is it'll probably turn out to look a bit more like Mobile in the sense that um a lot of what differentiates the winners and losers is their ad budgets and you mentioned earlier how Roblox so far is pretty meritocratic and how they handle the algorithm um but it really wouldn't surprise me one day uh if they they look to at least have a separate you know more like sponsored games or you know sponsored experiences you know similar to what you see on on Amazon even uh or the App Store so well

they do have sponsored experiences um it's just that there's sort of a cap on on how effective that that advertising lever is um but but yeah I think you know before that can happen there needs to be higher monetization potential in orderorder for for um developers to really lean on marketing uh more heavily like you see in mobile games yeah I think that's fair uh but especially for those who have had that success and already have it and maintaining it and kind of keeping their lead like a Candy Crush has you know maintained its dominance for for so long um I don't know maybe we'll see history rhyme a little bit there um last question for you on on ugc games David um you you see a bunch of small teams here that most people in the industry probably are not paying attention to um could you maybe just you know give a

couple shout outs to a couple talented teams you think are working on cool things you think could pop off in the future or just that you're excited about yeah I mean so one thing to to note about the Roblox ecosystem is it really is all about uh who you know and so you know if you want to if you want to know about the the like top developers you should probably reach out to navic for for some Consulting um there are a couple that I will shout out because they're talented and uh I have a lot of respect and and they've you know helped me learn about the platform so uh simple games is a developer who you know hasn't had any like massive massive hits but consistently produces games that do well and um get a really good return so right now he has a survival game out um so the

CEO is n is um Nathan Clemens and uh he has a survival game out that has around 8,000 concurrence and you know uh that's really good for the platform and uh he's super knowledgeable thinks about things in a in a really sound way and he was sort of a key contributor to me thinking through Roblox developer unit economics so if you want to learn more about the platform he's super friendly very busy so he may not be available but um definitely a good person to to chat with um and then obviously I have to give a shout out to my team at Super social uh really talented developers over there if I could uh invest in individuals I would definitely invest in a few of the devs on that team so um yeah that's what that's what I'll say as far as uh as far as you know good to now no that's great um uh thanks for for sharing those we can go ahead and wrap up I think really

the last thing I want to say is that if you enjoyed this conversation you enjoyed our content on ugc more broadly and you're either building in the space or are eyeing it in some way you know as an investor or a big Studio or a brand or or whoever you are please reach out um you know we at novic with David in particular um would be thrilled to chat and see we can help we work with a bunch of Studios Brands um teams in and around the industry um all the time and would love to see if we can help you out in this this crazy new world of of ugc gaming um I'll leave a link for reaching out to us in the show notes uh but also I mean I recommend too just paying attention to our content I'm I'm guessing if you're listening to this episode most of you are probably signed up to novic digest but if you're not you know you're missing out on a lot of great content that that David is writing he even published a piece uh I guess it'll be like a week ago when when this um when this episode comes out um but

definitely make sure to to sign up and and see that but also David um I know you're sharing insights um um elsewhere too uh for those who are listening that want to get the the maximum Insight uh out of you where should they be paying attention yeah LinkedIn appears to be my jam these days is I would I given my generic name I would look for David Taylor novic to find me as you'll probably see there are millions of David Taylor out there in the world doing really important work yeah your LinkedIn game is very strong definitely recommend um checking David out on LinkedIn um well awesome this has been a lot of fun David so thank you for hopping on and I look forward to continuing to learn from you and the months and years ahead thanks for having me Aon [Music] if you enjoyed today's episode whether on YouTube or your favorite podcast app

make sure to like subscribe comment or give a fstar review and if you want to reach out or provide feedback shoot us a note atod podcast nov. or find us on Twitter and Linkedin plus if you want to learn more about what navic has to offer make sure to check out our website www.nic.edu or contact us to learn about our wide-ranging Consulting and advisory Services again that is www.navicenthealth.org [Music]