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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Roblox allows users to build fantasy worlds that defy real-world rules. One short seller thinks its investors are doing the same.
Hindenburg Research has published a report claiming that the $27bn Roblox, a venue for making and playing online games, is making it too easy for young users — more than one-third of whom are under 13 — to encounter toxic content. Despite the grisly array of sexual and violent content Hindenburg set forth, investors shrugged. The company insists safety is paramount: in a single quarter, it argues, users uploaded 205bn pieces of content and each of them was “reviewed”.
The debate is now a tech-sector staple. Facebook owner Meta Platforms and short-video app TikTok have long claimed that offensive content is the exception rather than the rule and that they go above and beyond to protect youngsters online. Nonetheless, harmful content recurs. Meta and Roblox both say artificial intelligence will help to filter out bad content and help gauge users’ real age. Of course, they would say that. It’s a boon to investors too: algorithms are cheaper than people, and complain less.
If that’s not enough, what is? Legislation would help. A US bill that passed the Senate in July would introduce a “duty of care” for social media groups used by children, but such policies easily get snared in disputes about what constitutes child-unfriendly content. Enactment looks unlikely. Britain, typically less squeamish about free speech, has passed a law already, though it has not yet been implemented.
It is not clear that investors worry much about this at all, based on share price performance. They’re not completely unaware. A majority of independent shareholders in Meta called for a yearly report on child safety at the company’s annual meeting this year, though founder Mark Zuckerberg has the deciding vote. About one-third supported a similar proposal at Google parent Alphabet.
Investors should care about numbers. They might pay more attention to Hindenburg’s separate suggestion that Roblox has also been fast and loose in the way it talks about its “daily active users”. For now, even that has made no dent. The shares are now more expensive than they were before Hindenburg’s report.
The unfortunate takeaway is that while capitalism can build many great things, it makes a terrible nanny. Not for the first time, shareholders have been asked if they are worried about tech companies moving fast and breaking things, and they have answered no.