Opinion: Why Meta Should Buy Roblox

2022 has gotten off to a very eventful start, but not in a good way. The stock market has officially entered a bear market, inflation has hit a 40 year high and Russia is attempting to takeover Ukraine. Headlines are starting to sound like a Call of Duty storyline.


On the topic of Call of Duty, and before sh*t hit the fan, Activision agreed to a Microsoft acquisition deal worth $69 billion. There has been a lot of debate on whether this was a good deal or not, for both companies, along with a lot of upset fans. Personally, I think it's a terrible deal in the short term for Microsoft but a no-brainer when looking into the future.


This brings up the question why would a giant company like Microsoft pay so much money for a video game publisher? Microsoft has a long history of acquiring video game companies such as Bungie, Lionhead, ZeniMax Media (Bethesda), Minecraft and many others. With their business model it makes sense.


What does this have to do with Meta (Facebook)?


Within the last year Mark Zuckerburg has decided to take a gigantic bet on the "Metaverse". In 2021 alone they spend $10 billion (NY Times, 2022). Zuckerberg has made it clear that this is the direction he is taking the company and as a consumer, I am all for it! As an investor... not so much, not in the short term at least.


Against common belief, I think the so called "metaverse" will be the future of the internet, it's just a matter of when. I would even argue that we are already in one, just not the one in the Sci-fi Ready Player One that most people think of.


In my opinion, video games will determine how quickly the Metaverse will gain widespread adoption. If Meta (Facebook) fails to capitalize on the gaming aspect, I don't believe their version of the Metaverse will be sustainable.


Video Games Are Here To Stay

The history of games are a very fascinating topic. Games have provided entertainment and social interactions for centuries. "Three billion people around the world play games, which makes gaming the largest category in the entertainment industry" (Microsoft). That is why Microsoft isn't afraid to bet big on the industry.


Meta has many of the tools, resources and capital they need to be successful in the next chapter of the internet however, it's lacking some very key component. Video games.


Yes they own a few smaller name games along with the most popular VR game at the moment Beat Saber. I also want to make myself clear, going out and buying any gaming company would not work. For instance, Meta to buy Activision would make no sense. Meta needs someone who has already pioneered, understands and has had success with implementing virtual reality.


Why Roblox Makes Sense

While just recently going public on the stock market, Roblox has been around for a while. Since their release in 2006, Roblox successfully made a name for itself offering a unique platform for gamers and creators alike. Roblox has also been one of the only companies to successfully integrate virtual reality.


Investors may have jumped the gun a bit to early on Roblox sending the stock price absurdly high, only to come crashing down in recent months. Recently, Roblox has run into many road blocks such as a copyright lawsuit that could impact up to 80% of the games currently available. Roblox as a company has also struggled with cashflow and guidance. As a growth company they are not afraid to sacrifice a few quarters or years to create a better user experience.


This is directly inline with what Meta is currently doing and Roblox may be Meta's missing puzzle piece. Roblox currently sits around a valuation in the low $20 billion since its recent crash, but at it's high in November 2021, Roblox reached over a $74 billion valuation.


Now, I have no idea what would be a fair value for Roblox and if there would even be a potential of selling and this is all speculation. But, with everything considered, I think Roblox is a great buyout candidate and would not be surprised to see a buyout offer.



References

https://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Microsoft

https://www.nytimes.com/2022/02/02/technology/meta-facebook-earnings-metaverse.html#:~:text=Daily%20Business%20Briefing-,Meta%20spent%20%2410%20billion%20on%20the%20metaverse%20in%202021%2C%20dragging,percent%20in%20after%2Dhours%20trading.