Roblox (RBLX) looks like it’s tearing down the engine that made its platform so profitable.
The gaming company altered its recommendation algorithm to favor experiences with greater long-term retention over viral, highly monetized titles
And younger players are being steered toward newer and older “evergreen” titles that earn less money per hour of play. Roblox implemented the strategy to garner more investor faith. Wall Street is treating the situation like an emergency.
Roblox shares closed down nearly 27% at $35.60 on July 31, their worst trading day on record, helping shave off $9 billion from the company’s market cap. Second-quarter bookings rose 8% to about $1.56 billion, but Roblox expects third-quarter bookings of $1.58 billion to $1.65 billion. Wall Street had expected roughly $1.77 billion.