Citi Sees No Evidence of Engagement Decline Following Roblox's "Vigilante" Ban

Citi analyst sees no evidence that a "vigilante" ban is hurting engagement on Roblox, despite two recent negative headlines, including a lawsuit from Louisiana's Attorney General and press reports of a banned creator who targeted child predators. The analyst believes the litigation is limited to one state and the ban has not slowed engagement, maintaining a Buy rating and $152 price target on Roblox shares.

In a recent development, Louisiana Attorney General Liz Murrill has filed a lawsuit against Roblox Corporation, alleging that the gaming platform facilitates child sexual exploitation. The lawsuit, filed in Livingston Parish, seeks restitution, civil penalties, and injunctive relief to implement effective safeguards for child users [1].

Roblox, an interactive online gaming platform launched in 2006, has faced long-standing criticism over child safety. The platform allows users to communicate in real-time and has nearly 82 million daily active users, with over 6.4 million experiences within the system [1]. The lawsuit claims that Roblox lacks meaningful age verification, does not sufficiently limit adult interaction with children, and allows sexually explicit games and groups to thrive [1].

The lawsuit comes amid fresh controversy following Roblox's crackdown on "vigilantes," players who try to catch suspected predators. One such figure, a YouTuber known as Schlep, was banned from the platform after receiving a cease-and-desist letter [1]. Roblox has defended its actions, stating that some vigilantes were simulating inappropriate conversations and steering users to other platforms, creating an unsafe environment [1].

Despite the lawsuit and the controversy surrounding the vigilante ban, a Citi analyst remains optimistic about Roblox's engagement levels. The analyst believes that the litigation is limited to one state and the ban has not slowed engagement, maintaining a Buy rating and a $152 price target on Roblox shares [2].

Roblox has made a series of sweeping updates to its policies in response to recent concerns, including restricting all unrated experiences to developers or those actively working with them. The platform will also limit social hangout experiences to ID-verified users who are 17 or older and will use a new tool to automatically detect and remove violative scenes [2].

The analyst's stance reflects a broader trend in the gaming industry, where companies are increasingly under scrutiny for their handling of child safety. However, the analyst's confidence in Roblox's ability to maintain engagement levels suggests that the company is successfully navigating these challenges.

References:
[1] https://www.hindustantimes.com/world-news/us-news/roblox-child-safety-lawsuit-louisiana-ag-liz-murrill-makes-massive-sexual-predators-claim-amid-vigilante-crackdown-101755204255950.html
[2] https://www.engadget.com/gaming/pc/roblox-cracks-down-on-its-user-created-content-following-multiple-child-safety-lawsuits-193452150.html