AppLovin offers to buy Unity Software in $17.5 bln deal(reuters.com)
reuters.com
AppLovin offers to buy Unity Software in $17.5 bln deal
https://www.reuters.com/markets/deals/applovin-offers-buy-unity-software-2022-08-09/
85 comments
> I guess Zuckerberg’s idea to buy Unity at certain point doesn’t sound that bad now. Clearly he wanted it for the game engine technology and not to build another ad revenue source. Kind of ironic how things play out in the long term.
Not sure I follow that logic.
Not sure I follow that logic.
There are some Zuckerberg emails exposed as part of some subpoena process where he describes why Unity was a valuable asset to build Meta's AR/VR business. He goes on a lengthy argument about why owning Unity will create a value flywheel that could accelerate Meta's business by doubling down on Unity's engine as a core technology for building games and other AR/VR experiences: https://sriramk.com/memos/zuck-unity.pdf
We don't know what would have been the outcome since this never happened, but he saw Unity as a valuable core technology, so is reasonable to assume (whether you like Zuck or not) that Meta would have probably invested some serious money in making Unity (the engine) better.
Now that we are past that, we are looking at a company that can't grow its game engine business anymore, so they have started to invest in app/game monetization. But likely at the expense of being less focused on improving the game engine.
So the logic here is that Unity under Zuck (who is ironically the king of ad revenue models) would likely have thrived as a game engine. Instead, Unity as an independent company is now seen as nothing else than adware leverage.
We don't know what would have been the outcome since this never happened, but he saw Unity as a valuable core technology, so is reasonable to assume (whether you like Zuck or not) that Meta would have probably invested some serious money in making Unity (the engine) better.
Now that we are past that, we are looking at a company that can't grow its game engine business anymore, so they have started to invest in app/game monetization. But likely at the expense of being less focused on improving the game engine.
So the logic here is that Unity under Zuck (who is ironically the king of ad revenue models) would likely have thrived as a game engine. Instead, Unity as an independent company is now seen as nothing else than adware leverage.
I would 1000% live in a world where Facebook bought Unity. Ignoring how shitty they are otherwise, they could let Unity be Unity and remove the distraction of monetization from a game engine company.
Alas, Unity leadership (CEO) had delusions of world domination and here is where they find themselves. I’m sure Facebook even made a prelim offer behind the scenes and Unity scoffed because they thought they would be a $50b company.
Alas, Unity leadership (CEO) had delusions of world domination and here is where they find themselves. I’m sure Facebook even made a prelim offer behind the scenes and Unity scoffed because they thought they would be a $50b company.
> they could let Unity be Unity
Like they let whatsapp be whatsapp and instagram be instagram?
With current market incentives we should expect these companies to become less benevolent, not more.
Like they let whatsapp be whatsapp and instagram be instagram?
With current market incentives we should expect these companies to become less benevolent, not more.
I'm far from a frequent user of either, but Instagram and especially WhatsApp don't seem to have suffered terribly under Facebook. Instagram has obviously changed, but it would have changed as an independent app too. What's particularly "Facebooky" about its evolution?
WhatsApp feels exactly the same to me. Do I just have a short memory?
WhatsApp feels exactly the same to me. Do I just have a short memory?
Not the companies suffer but the users.
Facebook would use Unity to get more user data just like they did with WhatsApp, Instagram and Oculus
> they could let Unity be Unity
Some Oculus users would disagree with you.
Some Oculus users would disagree with you.
As much as gamers critique Meta's handling of Oculus, Oculus would be dead/gone by now if not for the acquisition. Meta has been dumping fuel/cash on Oculus to keep VR alive and the VR experience has mostly improved over the years.
Yeah, there's no way the Quest would even exist if it wasn't for Meta's multi-billion VR money bonfire. The whole industry would be poorer without an affordable standalone roomscale VR unit.
An independent, gaming-centric Oculus probably wouldn't have survived 2016 when HTC Vive shipped a much more advanced product than the Rift.
An independent, gaming-centric Oculus probably wouldn't have survived 2016 when HTC Vive shipped a much more advanced product than the Rift.
AppLovin is a suite of developer tools plus an ad network. By your definition of adware, Facebook is an adware company. Google too.
Given the level of anti-trust scrutiny aimed at Facebook, there's little to no chance they would receive approval to acquire Unity. Facebook probably would have invested the most money into future development, but they've also traditionally been the most hostile to third-party developers. Any value that Facebook can capture for itself, it will. I've been a Unity fan for years partly because they did seem intent on remaining independent.
I think the combination of Unity and AppLovin is smart. Unity has a tools business that needs more long-term investment and stability to compete against Unreal. Read the latest Unity threads here on HN, which devolved into Unreal and Godot love fests as soon as people smelled blood in the water. AppLovin is a revenue and profit machine but needs somewhere to invest its excess cash flow. Unity has the vision and AppLovin knows how to execute.
Given the level of anti-trust scrutiny aimed at Facebook, there's little to no chance they would receive approval to acquire Unity. Facebook probably would have invested the most money into future development, but they've also traditionally been the most hostile to third-party developers. Any value that Facebook can capture for itself, it will. I've been a Unity fan for years partly because they did seem intent on remaining independent.
I think the combination of Unity and AppLovin is smart. Unity has a tools business that needs more long-term investment and stability to compete against Unreal. Read the latest Unity threads here on HN, which devolved into Unreal and Godot love fests as soon as people smelled blood in the water. AppLovin is a revenue and profit machine but needs somewhere to invest its excess cash flow. Unity has the vision and AppLovin knows how to execute.
People do define Facebook and Google as Adware companies…
I don’t think Unity would be so hard for Meta to replicate and open-source… destroy Unity business model and make the game engine of choice one that by default integrates with Meta platforms.
This makes more sense. I had not heard of AppLovin until this post, but it seems clear from their solutions that a majority of their revenue comes from providing ads in games, or providing ad campaigns to those wanting to promote a game they built. And with Unity merging with ironSource that could sink a lot of their revenue.
This comment somewhat understates the importance of Unity. It's used in something like 1/3 of all mobile games, at least on Android. It has much more than a foot in the door.
>the ironSource deal
Unity merges with IronSource 397 points 27 days ago: https://news.ycombinator.com/item?id=32081051
Unity merges with IronSource 397 points 27 days ago: https://news.ycombinator.com/item?id=32081051
"AppLovin"
Who? It just highlights the parlous state of the current economic structure when some adware outfit is a 'peer' of one of the premier game engines.
Who? It just highlights the parlous state of the current economic structure when some adware outfit is a 'peer' of one of the premier game engines.
Unity announced a month or so ago that they were going to merge with "IronSource" -- a company famous for shoveling malware that was blocked even by Microsoft's Defender software.
This AppLovin offer is almost a step up from that.
This AppLovin offer is almost a step up from that.
It just highlights the parlous state of the current economic structure even more then
Check out the AppLovin financials[1]. Even if you've never heard of them, they have strong revenue growth, line of sight to high profitability, and a diversified revenue stream. Their revenue in 2022 projects to be triple that of Unity.
[1] https://s27.q4cdn.com/966411597/files/doc_financials/2022/q1...
[1] https://s27.q4cdn.com/966411597/files/doc_financials/2022/q1...
They are one of the most prevalent players in the space. Dismissing them kinda shows a lack of knowledge in the app/ad nexus, which is pretty relevant. Involved in promoting, publishing and monetizing games.
I am not sure how the continuation of micro monetization in mobile apps shows a large economic peril for the industry. Gamers have been voting with their wallets for stuff like this since 2011.
I am not sure how the continuation of micro monetization in mobile apps shows a large economic peril for the industry. Gamers have been voting with their wallets for stuff like this since 2011.
It's the largest player in the mobile ad space behind Google. Not a household name perhaps, but a name well known to engineer and biz dev alike, within the mobile space.
That's interesting, I hadn't seen this version of "perilous" before but I like it.
I'm using it for 'dire', 'desperate' more than 'perilous', though when your ad agency makes more from your products than you do, you could also say the economic structure is in peril.
Reminds me of McLovin
How did unity go from mobile game development darling to being acquired by an adware company?
They grew too big, too fast and the majority of their income was reliant on mobile ads — which were demolished by Apple’s “Do Not Track Me” popup.
So, they’re desperate.
So, they’re desperate.
Not being all that profitable. Maybe their business model was too nice.
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>How did unity go from mobile game development darling to being acquired by an adware company?
Fortnite.
The unimaginable runaway success of Fortnite took Epic from "market entrant" status to "dominant industry leader". It allowed them to pour hundreds of millions of dollars into Unreal development, and enabled them to finally release the engine under a freemium model to indie devs. That, (combined with the iOS ad-pocalypse) has led Unity to a long slow decline in developer share ever since.
Fortnite.
The unimaginable runaway success of Fortnite took Epic from "market entrant" status to "dominant industry leader". It allowed them to pour hundreds of millions of dollars into Unreal development, and enabled them to finally release the engine under a freemium model to indie devs. That, (combined with the iOS ad-pocalypse) has led Unity to a long slow decline in developer share ever since.
> The unimaginable runaway success of Fortnite took Epic from "market entrant" status to "dominant industry leader"
The Unreal engine has been around for over twenty years now and has been considered one of the top mainstream engines for over a decade. I'd hardly call that a "market entrant".
As another commenter pointed out, Unreal went freemium two years before Fortnite anyway.
The Unreal engine has been around for over twenty years now and has been considered one of the top mainstream engines for over a decade. I'd hardly call that a "market entrant".
As another commenter pointed out, Unreal went freemium two years before Fortnite anyway.
They released Unreal 4 as freemium more than two years before Fortnite became a battle royale and took off. The latter has definitely fueled continued investment in the engine, but it was Unity that forced them to adopt the pricing model.
Is the Epic engine that much better?
Yes, generally. It's what many AAA games use.
imho yes. I work in the industry and it has more depth and more solid. Blueprints are awesome, it's a node based scripting editor which allows visual programming. Unity is nowhere near that https://docs.unrealengine.com/5.0/en-US/blueprints-visual-sc... It's completely possible to build a whole game using nothing but Blueprints.
The whole Unreal engine with the editor and such is powerful toolset and you can tell it's an engine geared toward professional game designers and artists, basically whole studios, rather than programmers. Unity is really fun to play with if you are a single indie dev. Also it's much better for mobile development. You can do all with Unreal engine too but it's "meant to be" for FPS/TPS games and anything other than that is not harder just you need to "fight" the engine sometimes.
And the Unreal engine is open source. Well it's like open access because there are some very strict rules and limitations around it. But at least it's good for personal use https://www.unrealengine.com/en-US/ue-on-github
The whole Unreal engine with the editor and such is powerful toolset and you can tell it's an engine geared toward professional game designers and artists, basically whole studios, rather than programmers. Unity is really fun to play with if you are a single indie dev. Also it's much better for mobile development. You can do all with Unreal engine too but it's "meant to be" for FPS/TPS games and anything other than that is not harder just you need to "fight" the engine sometimes.
And the Unreal engine is open source. Well it's like open access because there are some very strict rules and limitations around it. But at least it's good for personal use https://www.unrealengine.com/en-US/ue-on-github
Blueprints may be awesome for prototyping, but I have interviewed numerous lead and principal level engineers who worked on big Unreal games and the first thing they mention about Blueprints is that they aim to convert them to native code the moment they can.
Most of game dev is prototyping though. This isn't too big of a problem. Converting well written bp to c++ is pretty easy.
Yeah I agree. Just personally I love visual programming and wish there were more advancement on the field. And Blueprints is one of the better solutions available now.
I would label it "different". Unity can target a wider swath of devices from a perf point of view, and in general is much more lightweight. It's also easier to customize and strip of components you aren't interested in.
The downside of course is that it's not a master of anything, and Unreal has great showcases to demonstrate that.
Unity isn't going away, devs aren't going to magically switch to Unreal for the above reasons. Additionally the transition is massively disruptive for a business built around Unity. You don't just magically become Unreal experts as a team by reading a few tutorials and building a couple of prototypes. Actually shipping a game cross-platform requires a huge amount of technical experience to optimize and work around issues that each brings.
The downside of course is that it's not a master of anything, and Unreal has great showcases to demonstrate that.
Unity isn't going away, devs aren't going to magically switch to Unreal for the above reasons. Additionally the transition is massively disruptive for a business built around Unity. You don't just magically become Unreal experts as a team by reading a few tutorials and building a couple of prototypes. Actually shipping a game cross-platform requires a huge amount of technical experience to optimize and work around issues that each brings.
There's pros and cons. But the direction of unreal seems extremely positive and the direction of unity seems very negative. Unreal's providing significant updates with a pretty clear roadmap and lots of content being made available to indie devs for free.
Unity is arguably getting worse and seems to lack a cohesive strategy. Last I checked, which was a few years ago, the engine doesn't have functioning networking feature (online multiplayer). They used to, but they deprecated it before failing to launch their new one. There's other stories in a similar vein.
You can of course make it work with third party plugins but it's not a good sign of engineering quality.
Unity is arguably getting worse and seems to lack a cohesive strategy. Last I checked, which was a few years ago, the engine doesn't have functioning networking feature (online multiplayer). They used to, but they deprecated it before failing to launch their new one. There's other stories in a similar vein.
You can of course make it work with third party plugins but it's not a good sign of engineering quality.
Unity is currently valued around 15B. 17.5B is an embarrassingly small premium, especially considering how down the tech broader tech market is. You have to think Unity will shortly be worth more than 17.5B.
Unity shareholders would get 49% of the combined company, if they don't screw up the merger a game tech + ad tech combination might be worth than either alone
> if they don't screw up the merger
This is a really crap deal for shareholders. They'll go from owning a $15bn company, to owning half of a ~$30bn company, but with all the risk of the merger failing or failing to live up to promises, which, surprise surprise, is the norm.
This is a really crap deal for shareholders. They'll go from owning a $15bn company, to owning half of a ~$30bn company, but with all the risk of the merger failing or failing to live up to promises, which, surprise surprise, is the norm.
Or going up in value plus they can cashout at any point.
That’s bull market thinking. The stock could just as easily continue sliding down.
They’re like 27% down from their IPO price two years ago. I don’t think their business has deteriorated so drastically that 17.5B would be attractive. I could be wrong though.
Yea, they've spent a lot of money over the last few years on questionable acquisitions (Weta for multiple billions, seriously?).
They are making a big push into their game services division, which is more than ads now: matchmaking, lobbies, dedicated servers (Multiplay acquisition), etc. They also aren't trying to only target Unity for some of these. Multiplay in particular runs a lot of Unreal games, or at least they did (such as Apex Legends).
Unfortunately I don't see a world where these services move the needle at all for a giant behemoth of a company like Unity.
They are making a big push into their game services division, which is more than ads now: matchmaking, lobbies, dedicated servers (Multiplay acquisition), etc. They also aren't trying to only target Unity for some of these. Multiplay in particular runs a lot of Unreal games, or at least they did (such as Apex Legends).
Unfortunately I don't see a world where these services move the needle at all for a giant behemoth of a company like Unity.
Apex Legends on PC and consoles is using a modified version of Source engine, although the mobile version is using Unreal.
The game's engine is irrelevant to the multiplayer backend in this case. https://unity.com/case-study/apex
Huh, how would the market being down enable Unity to command a higher premium?
Unity’s value decrease is mostly (solely?) due to market conditions. That means that their underlying business is the same as it was before the broader market downturn, which means their value should increase as market conditions improve. Unless they need to sell now, their value should increase in the future.
Counter: Unity's prior price (as opposed to value) increase was mostly (solely?) due to market conditions.
They barely get more than a billion/year in revenue while burning over half that amount. Paying nearly $20B for that is a huge leap of faith with regards to their future potential and hardly a sure thing. The stock market valuing them at that price during a period of zero interest rate with blinders on for risk is not really a valid stamp of proper value. The fact they agreed to sell at that price to a malware company might indicate as such too.
They barely get more than a billion/year in revenue while burning over half that amount. Paying nearly $20B for that is a huge leap of faith with regards to their future potential and hardly a sure thing. The stock market valuing them at that price during a period of zero interest rate with blinders on for risk is not really a valid stamp of proper value. The fact they agreed to sell at that price to a malware company might indicate as such too.
Unity is announcing their Q2 results today after market close.
If it's a disappointment, the company could easily be worth a couple billion less tomorrow morning. And then AppLovin's deal might sound more interesting to Unity's shareholders. That's probably why AppLovin timed this announcement like this.
If it's a disappointment, the company could easily be worth a couple billion less tomorrow morning. And then AppLovin's deal might sound more interesting to Unity's shareholders. That's probably why AppLovin timed this announcement like this.
I hope Unity gets a good deal here, but..."AppLovin"? Seriously?
It is definitely the most cringe-inducing company name that I've seen in a while.
But you have to admit, like "GoDaddy", it's memorable, even if it's for the wrong reasons. From a marketing perspective, it might be a plus. Better than "AppTec" or the equivalent which would be forgotten instantly.
But you have to admit, like "GoDaddy", it's memorable, even if it's for the wrong reasons. From a marketing perspective, it might be a plus. Better than "AppTec" or the equivalent which would be forgotten instantly.
I can only imagine this will hurt the engine more and more.
Only if you mind ads in your game editor.
Fun story, I left my unity game running a test in editor over night, accidentally. When I came back in the morning, my harddrive was full. The reason? Unity logging the same telemetry error over and over because it was not allowed to phone home.
I have happily switched to unreal.
I have happily switched to unreal.
Is that really what people are afraid of? Why would they do that? They want developers to put ads in their games certainly, but I don't think they want to alienate the devs with ads in the tool. That seems silly
My initial reaction was nah, but on second thought, I'm not so sure. Most indie devs will produce nothing and generate no revenue / buy no seats. But they may purchase stuff on the unity asset store. I could see ads finding their way into the editor that way.
Not that this has anything to do with applovin though
Not that this has anything to do with applovin though
Good point, I hadn’t thought about it from that angle. I could actually see that rationale, don’t agree with it but could see how greed could take them there.
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AppLovin Market cap is roughly ~$14B and Unity is ~$15B.
This sounds more like a merger - AppLoving is offering shares which would be worth 49% of the combined company.
Unity provides the Game Engine, AppLoving provides the ad/payment side - it could work.
This sounds more like a merger - AppLoving is offering shares which would be worth 49% of the combined company.
Unity provides the Game Engine, AppLoving provides the ad/payment side - it could work.
This is basically the same as their previously announced deal with IronSource, a malware/adware company.
Both are terrible for consumers/developers.
Both are terrible for consumers/developers.
> Both are terrible for consumers/developers.
Unfortunately they don't get to vote on it.
Unfortunately they don't get to vote on it.
But they do:
1. Consumers vote with every dollar they spend (or add they click).
2. Developers vote with both with every dollar they spend on software, and every monetization strategy they select to earn dollars from customers.
There's a ton of industry structures I don't like. (I won't list various companies I don't like, b/c that would distract from my core point that they do have healthy economics from customers who do like their products.) Existing market structures are usually the result of some form of consistent action on the part of market participants.
So what would a better industry structure be, for customers, that would consistently make money for developers?
There's a ton of industry structures I don't like. (I won't list various companies I don't like, b/c that would distract from my core point that they do have healthy economics from customers who do like their products.) Existing market structures are usually the result of some form of consistent action on the part of market participants.
So what would a better industry structure be, for customers, that would consistently make money for developers?
The amount of developers that either 1) don't care about their users having to deal with ads or spyware or 2) actively want the monetization and grubby data features offered by these companies or 3) are too overinvested and simply can't switch to another engine, likely far exceeds the amount of developers who both could and would reject Unity for this. Especially when considering a lot of the types of products that Unity is used to pump out; the type of passion projects which would be likely to have a developer who would take a moral stand are likely an insignificant minority overall.
I'd like to be proven wrong on this in the future.
I'd like to be proven wrong on this in the future.
Well, except that AppLovin is a (non-malware) ad tech company. So I mean, at least there's that.
But the play is more consolidation that anything. A large swath of mobile games use Unity, and a large swath of free games monetise using AppLovin. The Venn Diagram of these two is nearly a single circle.
But the play is more consolidation that anything. A large swath of mobile games use Unity, and a large swath of free games monetise using AppLovin. The Venn Diagram of these two is nearly a single circle.
I'm not related to IronSource but this is some serious mischaracterisation of them...
They made an SDK to create installers for Windows that was used by 3rd parties with nefarious means. Said SDK/toolkit has been discontinued for years as well.
Hardly makes them a malware/adware company...
They made an SDK to create installers for Windows that was used by 3rd parties with nefarious means. Said SDK/toolkit has been discontinued for years as well.
Hardly makes them a malware/adware company...
Applovin..The company you build after watching Superbad while high too many times I guess
The only dream I have from these horrendous merger and acquisition offers happening with Unity is that the new corporate overlords open up the core engine like Unreal.
This seems like two countries fighting over who gets to control what ideology gets distributed through the Unity advertisement ecosystem.
Unity is in a decent position to be a world dominant company as ar/vr arrives if it can avoid being just yet another vector of ad spam.
Does this include ironsource or did that not happen yet?
They agreed on a merger, but it hasn't happened yet. The AppLovin acquisition could preempt the Iornsource merger.
That is why we can't have nice things.
This is AppLovin playing offense to avoid the emergence of a stronger competitor and instead become that stronger competitor.
Unity is not as strong in monetization technologies but it’s a desired asset since it has already a foot in with game developers.
Unfortunately building a game engine is not as profitable as building adware.
I guess Zuckerberg’s idea to buy Unity at certain point doesn’t sound that bad now. Clearly he wanted it for the game engine technology and not to build another ad revenue source. Kind of ironic how things play out in the long term.