Hindenburg, the firm that accused Adani Group, now claims Roblox inflated user numbers by 42%; details here
By Sunita Iyer | First Published Oct 9, 2024, 10:00 AM ISTRoblox, the widely popular online gaming platform known for its extensive user base and immersive virtual worlds, is facing serious allegations of inflating its daily user statistics.
Roblox, the widely popular online gaming platform known for its extensive user base and immersive virtual worlds, is facing serious allegations of inflating its daily user statistics. The claims come from Hindenburg Research, an activist short-selling investment firm, which has accused Roblox of overstating its user numbers by as much as 42%.
This is the latest in a series of high-profile reports from Hindenburg, which previously shook global markets with its January 2023 report accusing India's Adani Group of stock manipulation and improper use of offshore tax havens.
is a $27 billion online gaming platform headquartered in San Mateo, CA.
The company was incorporated in 2004 and is led by founder and CEO David Baszucki.
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In its report on Roblox, Hindenburg alleges that the platform has been misleading investors by artificially inflating its daily active user count. According to the firm, Roblox has been counting alternate (alt) accounts and bot activity as part of its user base, a practice that distorts the true number of unique users engaging with the platform.
Hindenburg claims that Roblox is fully capable of differentiating between individual users and bots or alt accounts, but deliberately chooses not to in its official reporting.
Insiders have cashed out $1.7 billion in stock since the company’s 2021 direct listing.
In the last 12 months, insiders have sold ~$150 million in stock, including ~$115 million by CEO Baszucki personally.
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Our research indicates that is lying to investors, regulators, and advertisers about the number of “people” on its platform, inflating the key metric by 25-42%+.
We also show how engagement hours, another key metric, is inflated by an estimated 100%+.
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Our findings show that the company’s reported number of “people” regularly matches Roblox’s reported Daily Active Users (DAUs).
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The report states that while Roblox does not claim daily active users (DAUs) are unique individuals, it presents the figures in a way that can mislead investors into thinking they represent real, human engagement at much higher levels than is actually the case.
To substantiate its claims, Hindenburg hired a technical consultant to monitor the activity of the top 7,200 games on Roblox. The results of this analysis reportedly show that the average daily engagement for unique users was much lower than Roblox had publicly reported. Moreover, the analysis uncovered "zombie" engagement hours caused by bot activity, which could artificially inflate Roblox's average engagement numbers.
Given these definitions, we believe Roblox intentionally conflates “people” with DAUs, consistently inflating the reported number of people on its platform.
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Multiple former employees told us that Roblox does internally track single users with multiple accounts, referring to the process as ‘de-alting’.
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forums detail how users regularly have dozens of alternate accounts to “farm” for goods on Roblox, avert bans and increase their follower counts, among other reasons.
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's 2nd most visited game, Blox Fruits, was dominated by traffic from Vietnam, a geography where we found numerous Facebook groups, including 5 with between 50,000 and 117,000 members, advertising and soliciting tools to run 20+ Roblox tabs at a time via bot programs.
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In addition to inflating the number of “people” on its platform, we also suspect Roblox massively inflates a second key metric, “engagement hours”.
The company reported an extraordinary average of 2.4 hours of engagement per day per user in 2023.
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In addition to the alleged financial misrepresentations, Hindenburg's report raises significant concerns about Roblox's efforts to protect children on its platform. According to the researchers, fake accounts created to mimic children were quickly exposed to sexually explicit content, raising questions about the adequacy of Roblox's content moderation and child safety measures.
The platform, which boasts a large user base of children and teenagers, has faced criticism in the past for not doing enough to prevent harmful content from appearing in games or chats. These new findings could intensify scrutiny from regulators and parents alike.
To better understand the company’s reported engagement, we hired a technical consultant that monitored the top ~7,200 Roblox games across ~2.1 million Roblox servers, collecting 297.7 million rows of real-time player data.
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Further analysis of play times found numerous games in which obvious bot accounts remained in-game for more than 24 hours straight.
Our representative sample flagged millions of ‘zombie’ engagement hours that can majorly skew Roblox’s reported “average” engagement.
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We think can and should report its internal estimates of de-alted and de-botted metrics so that investors, advertisers, and regulators can be better informed about the actual number of “people” on the platform, and their genuine level of engagement.
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is compromising child safety in order to report growth to investors, per our interview with a former senior product designer:
“If you’re limiting users’ engagement, it’s hurting your metrics…in a lot of cases, the leadership doesn't want that.”
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Core to the problem is that Roblox’s social media features allow pedophiles to efficiently target hundreds of children, with no up-front screening to prevent them from joining the platform.
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The conversion rate of incremental new daily active users to paying users has been in steady decline since 2020.
Roblox is now expecting advertising to drive incremental growth, pitching advertisers by claiming ~79.5 million users spend 2.4 hours per day on the platform.
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Overall, we think Roblox has adopted the Silicon Valley approach of ‘growth at all costs’, whether by misleading or outright lying to investors about its key metrics or by opening its platform to dangerous predators and illicit content unsuitable for children.
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Roblox has forcefully denied the allegations put forward by Hindenburg Research, dismissing them as "simply misleading." In a statement released following the report, Desiree Fish, Roblox’s chief communications officer, argued that the report was driven by Hindenburg’s financial interests as a short seller and was not a fair reflection of Roblox’s business model or results.
“We totally reject the claims made in the report,” Fish said in a statement to The Verge. “The financial claims made by Hindenburg Research are simply misleading. The authors are, admittedly, short sellers and have an agenda irrespective of the substance of Roblox’s business model and results.”
Roblox's response is an abject failure to address the two core allegations in our report, including:
1. Evidence that Roblox has been systematically lying for years about the number of people on its platform and their genuine level of engagement.
2. That the platform is a… pic.twitter.com/Tj2KiANOnI
Hindenburg Research has previously influenced markets with its reports, most notably in the case of the Adani Group, which saw a dramatic $150 billion loss in market value following Hindenburg's accusations of financial misconduct.
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