Report: Roblox inflated user numbers and downplayed child predator presence to investors

Update (10/9/2024): Roblox Corp. released a statement in which it "rejects" the claims made by the Hindenburg Report, and alleges the firm "neglected to accurately report" on several parts of its business.

For example, it argued that Daily Active Users are defined as a player that logs in and visits Roblox on a "unique, registered account on a given calendar day." As such, DAUs for a specific period "is the average of the DAUs for each day during that [time]."

This method, it stated, "better reflects global engagement on the platform compared to a method based purely on a calendar-day cutoff."

At the same time, Roblox Corp. acknowledged its DAUs "are not a measure of unique individuals accessing Roblox." It suggested any potential bot or other fraudulent accounts "may contribute, from time to time, to an overstatement of DAUs."

As for the allegations related to child safety, the company stressed that "every day, tens of millions of users of all ages have safe and positive experiences on Roblox, abiding by the company’s Community Standards."

"Safety and civility have been foundational to Roblox since the company’s inception nearly two decades ago. [...] We take any content or behavior on the platform that doesn’t abide by its standards extremely seriously, and Roblox has a robust set of proactive and preventative safety measures designed to catch and prevent malicious or harmful activity on the platform."

Roblox Corp's full statement on the Hindenburg Report's findings can be read here.

Original story: [Content note: This story discusses allegations of child sexual abuse.]

A new report from research firm Hindenburg Research claims Roblox Corp. is lying about player metrics for its titular game, and gives more detail on its previous alleged issues regarding child safety on the platform.

Hindenburg investigates unethical business and financial reporting and accounting irregularities. Since its founding in 2017, the firm has consistently exposed alleged fraud and corruption, and its findings have been used in financial crime cases.

Roblox Corp. has continuously operated at a loss for several quarters (across several years), and Hindenburg noted Roblox's core US market may soon saturate. As such, it believes Roblox Corp. has posted "pumped up" user metrics to present a stronger image and boost its stock.

The firm claims the developer has two separate sets of books that count users and "consistently overstate" the amount of players on its platform by 25-43 percent, and engagement hours by 100 percent.

This indicates players are making multiple accounts that are counted as multiple users instead of a single individual.

For example, Roblox Corp. may use "people" when referring to Daily Active Users (DAUs), which Hindenburg notes can imply each DAU is a unique person. But in SEC filings, those DAUs are called "not a measure of unique individuals accessing Roblox," and said such investor metrics are not independently verified.

A former Roblox employee further backed up those claims by revealing players may create multiple accounts for different games or to avoid their main being compromised. Roblox Corp. acknowledged this in a 2023 SEC filing, saying it "cannot accurately estimate potential duplicate users."

Other ex-staff argued that Roblox can track users with alternate accounts. However, they alleged the finance group effectively shut out the data team's more accurate reporting to post their own numbers to investors.

"They hire their own reporting groups to own the pipeline, to report and calculate these numbers," said a former data scientist. "But finance is the one that ultimately gets reported to Wall Street. [...] And finance is the source of 'truth.'"

More of Roblox's belittled issues are coming to light

Hindenburg also investigated claims of sexually explicit material on Roblox that is easily accessible to children—sometimes with the explicit intent of luring minors into abusive situations.

Roblox is allegedly home to predators looking to take advantage of younger players. It has reportedly been a longstanding issue for years and sparked concerns over child safety.

Earlier this year, a Bloomberg report claimed staff became more vocal to leadership about these concerns after plans to address the issue were allegedly turned down. However, Roblox Corp. disputed the report, and stressed players "have a safe and positive experience" in Roblox "every single day."

Hindenburg's research reiterated "scores of abuse" and child safety scandals on Roblox that has been previously reported over the years. Those stories have included young players participating in sex games on the platform, being solicited for (or sent) sexual content, and sexual videos made in-game.

The firm created several new Roblox accounts of different ages to determine if the platform's improved its safety measures. It claims there is still is no upfront screening to avoid making accounts named after specific sexual predators, and that 900 players had usernames referencing or inspired by Jeffrey Epstein.

Further, it alleged that in-game chatrooms have no age restrictions, and nearly 40 Roblox groups had members openly soliciting sexual favors and trading child pornography. Moderation teams allegedly took action against some groups, but they were not fully banned from the platform.

Using an account it made for a 9-year-old child, Hindenburg alleges it could access several player-made games that had no age restrictions, meaning young players (which make up 21 percent of the community) could easily access them.

The firm further alleged several instances of entering those aforementioned chatrooms and witnessing users solicit sex from minors.

Hindenburg deemed Roblox's safety settings "ineffective," and that it was possible for users to get around parental controls through making their own or creating an alternate account without those restrictions.

Hindenburg's report raises questions for Roblox investors

In the end, Hindenburg concluded Roblox Corp. "has misleadingly inflated the claimed number of 'people' on its platform and their level of engagement for years."

"At the same time," it stated, "the company has cut moderation costs in an attempt to appease Wall Street, while endangering kids with a platform that exposes them to illicit content and facilitates pedophilia at scale."

Hindenburg's full, extensive report on Roblox's inflated player numbers and the alleged lack of proper player moderation can be read here.

Game Developer has reached out to Roblox Corp. for comment, and will update when a response is given.