“If people were to think back on the past year and what their best memory was, they’re probably doing something novel and unique with other people,” says Rec Room CEO and cofounder Nick Fajt. “Games give people the possibility to create a new memory with another person.”
That, Fajt says, is Rec Room’s purpose. The online game launched in 2016 as a virtual tool for people to enter into “rooms” and socially interact with one another via customizable avatars. It is an effort to add social interaction back into social media.
“[Social media] is not very social. You’re scrolling through an algorithmic feed rather than interacting with another person,” he says. “At Rec Room, we wanted to make it more like interacting with another person — and people really needed that during COVID.”
Initially launched as a VR-focused startup, Rec Room reached unicorn status in 2021, valued at $1.25 billion after a $100 million funding round. As a free app that lets players create custom virtual “rooms” and games across devices, its user base climbed during the pandemic, as lockdown pushed people to virtual connections.
Communicating around accessibility
To reach such a level, Fajt explains, the company had to remain steadfast in its mission to connect people and help them make new friends or stay in touch with old ones. Part of that included the decision to expand to non-VR platforms in 2018, allowing users to play on Xbox, PlayStation, iOS and PC.
“Being on so many different devices allows us to remove friction in a positive way,” Fajt says. “When you want to hang out with your friends, you don’t think about connecting your phone with their Xbox. You just really want to connect with that person and you don’t care what device they have.”
“We’ve always strived to get the technology out of the way and just help the human shine through to make it feel you’re interacting with this person as though you’re in the same room,” he continues. “The community in VR was very exciting and very animated but it was relatively small, and in 2018 it was clear it was going to take a long time for this community to develop.”
Fajt credits that philosophy and messaging as the catalyst for its rapid growth. In 2020, Rec Room’s revenue increased 566% and reached more than 25 million lifetime users. According to The Wall Street Journal, the company has more than 1 million monthly active VR users and activity has grown more than 600% across devices.
Most of the platform’s users are Gen Z, with primary players between the ages of 13 and 16. According to Fajt, the growth is largely driven by word of mouth and earned media.
Like the user-generated gaming behemoth Roblox, Rec Room’s business model allows users to pay real money to buy virtual currency to spend in the game. But what sets Rec Room apart, Fajt says, is its accessibility for both users and creators by not requiring them to have knowledge of computer code to create custom games.
That fact, as well as the spirit of connection fostered on the platform, has invited users of all ages and backgrounds to join, many of whom have approached the game in innovative and creative ways, Fajt says.
For instance, unexpected use cases in the past 18 months included teachers instructing classes on Rec Room, therapy groups hosting meetings, people going on dates, having family reunions and, in some instances, weddings.
Thus, over time, the perception of the platform has changed from being a place to play games to being a place to hang out with others.
The credibility of virtual connection
For all its success in convening users, Rec Room does not position itself as a replacement for in-person connection. Rather, it portrays itself as an enhancement, Fajt says.
It is a notion Gen Z understands well, but that older generations must learn to accept in order to truly understand the appeal and power of gaming, he notes.
Fajt asserts that, for Gen Z, virtual friendships made in the gaming environment are equally important as those made in the physical world, and it is a lesson that has guided him in his decisions for scaling Rec Room. According to Fajt, validating the credibility of virtual connections helps dispel misconceptions of gaming.
“A child today is using a video game to explore the internet. It reminds me of the early internet, and what it is to [adults] now,” he says. “We’re on another internet-sized opportunity where a bunch of behavior changes are happening.”
“Most of the knocks against gaming are generally [grounded in the belief] that they’re very isolating,” he continues. “What Rec Room and many other games are striving for is the notion of ‘why can’t we have that meaningful human connection in the digital world?’”
Formerly part of Microsoft’s mixed reality and holographic operations, Fajt refrains from referring to Rec Room as a “metaverse.” But he recognizes the idealism is the same — the merging of digital life with physical.
But he notes the gaming industry must remain focused on delivering on what users want to do now, such as AR and VR, while the world inches closer to platform agnosticism and the prospect of a metaverse.
Communicating through gaming
In the meantime, Fajt says Rec Room continues to double down on its efforts to normalize virtual connection, and he believes brand communications and marketing professionals should begin to establish a presence in the gaming industry if they have not already done so.
“If you’re a brand, you have to have a presence on Twitter and Facebook. It’s inevitable because that’s how you reach people,” he says. “Over the next five to 10 years, you will see games reach the same status.”
“Brands will have to have a room on Rec Room because that’s the medium [where Gen Z] will expect to be reached and will want to experience a brand,” he continues.
Some brands have already hopped on the platform. Earlier this year, cosmetic brand Soap & Glory made its own room designed to appear as a spa set in the clouds within Rec Room. According to Fajt, users were invited to join the room and chat about why they love the brand. Those who participated in the virtual spa unlocked a discount code that could be used in the online store.
“Those sort of engagements are very native to the platform and authentic for that demographic,” he says. “[It’s something that] helped [users] understand what the brand cares about and what they stand for.”
And that’s what Fajt hopes all brands will begin to do with virtual reality.
But skepticism surrounds Rec Room’s momentum as investors fear it may not sustain growth when people return to in-person events. Prior to the pandemic, Rec Room had only a third as many active users, the company told The Wall Street Journal, and other brands such as Roblox and pandemic unicorns such as Clubhouse have slowed expansion in recent months.
For instance, Roblox’s total daily active users grew to 43.2 million in Q2, but year-over-year growth slowed to just 29%, compared to 95% in Q2 2020.
Fajt maintains that, nonetheless, the new way of gaming is the way of the future.
“If you’re investing in the community, you’re never done,” he says. “So many dynamics take place as the community scales.”