TWIG #320 Unity’s Fate, Fake Ads, Loot Boxes & GTA’s UGC Revolution

[Music] welcome to deconstructor of fun this weekend games number 320 where we give our game industry Insider takes on the top gaming news each week all right small group today so hi everyone I'm Jen donaho I'm the marketing and Publishing Zar on twig today we have Phil black monetization Zar Eric Crest strategy and investing zar Z it's cooler when it's a zar trust me yeah I think we're all Zars this week since mishka's gone he doesn't take founding Zar all right so here's what we got going on in this episode Hasbro digital keeps a monopoly go go going they had a really good earnings call for the year Amazon's Android store closes while Phil gives us an update on the epic's gam store is GTA going ugc our big topic a lot of talk on this one un need announces a new AI ad

platform called Vector Crest approves of the name while we debate if app Loven has something to worry about and then chest is gonna shock you with his take okay not at all you can probably guess what he's gonna say and then what is it like when your game flops or when your game makes two billion Phil's got some articles at the end there so first before we get into everything I think many of you know I'm a Star Wars nerd and what I saw in the news all over the place was Star Wars boss Kathleen Kennedy is planning to exit lucasfilm at the end of 2025 she came on board when we all started that era of you know Ray so episode seven plus everything has been in that era for Kathleen Kennedy I think many folks would argue it's not been the Great era although I would say Andor is pretty awesome I I do love a little Andor and I do love a little baby Yoda so Phil what do you think I'm just hearing some some

disputes about this I think CNN one of their reporters came out and said hey our source says nothing's happening yet still no word from Disney I don't know I don't know what this means for the games business you know all I know is that I want to see Star Wars back on top you know give give Star Wars a reprieve and I mean that from a games perspective too but it has been sad to if you follow Simon Pullman I believe on LinkedIn who's an entertainment lawyer I think he had an interesting take here Jen on like the model of an IP is which is that each entry in the IP either helps or hurts the Brand's Equity it's almost like a bank account which I thought was a pretty interesting model and there have been a lot a lot of debits against the the Star Wars IP I mean let's be real I mean the only thing that was actually good since she took over has the been Mandalorian and Ander right the rest has been absolute trash and and deductive from the franchise and the Andor numbers are very small very small Andor numbers which people get like we're talking

hundreds of thousands in terms yeah it's yeah yeah fan favorite but metric objectively her Reign has been pretty much of a failure although I love I love Mandalorian yeah yeah's pretty good the movie is like performed well I think from a fan perspective which is you know what I am really tapped into just having you know made toys back in my career and knowing the fans the fans just didn't really respond well to episode 789 so I don't know we'll see good take on that all right so let's do a little Shilling first chis I think you've gone to Mike Williams's class at San Jose State yeah for his Finance folks so I went and did a little marketing intro it was really fun to talk to a lot of Finance folks so a number of people reach out each week asking for advice and so I kind of aggregated a Google doc of just my advice and other people's advice I went into our Slack Channel and ask people to

help me out so I did a LinkedIn pose with my Google doc if anyone kind of needs something like this because you can't get to all of the people asking for help just you know go to my LinkedIn page or go to our job section of deconstructor of fund slack Channel and that way you can you know kind of get some of this Yoda advice for yourself or for other people so you can continue helping I'm no air sbot but you know I was trying to do something good for the community all right so so GBC subscribe to the newsletter deconstructor of fun.com we try hard to get everyone in every day there is something although for the party we did hit 500 people 500 RSVPs for the Sunday party I don't know how we're going to do it so pretty crazy Gabe Bladen on Twitter once said that twig was good after you get through the first 10 minutes of Shilling that was the feedback he gave us no no he said the no first 10 minutes of Shilling and apologies oh that was right that's what he someone Corrections no Corrections

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it's down from a high of 9 billion when it raised $300 million in November 2021 it was worth $4 billion in 2019 and it was worth $2.85 billion in 2017 so it it's been an interesting curve that almost mirrors the game industry but I don't know Eric is this a failure like where do you mark this in the history of of exits by my math if you look at it like if it was $700 million invested over that time about maybe 40% ownership maybe 50 maybe even higher a little bit maybe but that implies like a 7% kager for the last 10 years which of course the early investors were the ones that really made out the ones that invested at the $100 million valuation back in October 25 but 15 I mean but later stage investors are investing in sane valuation so the overall investor base had like a 7% kager which is like four points below the S&P which far less risk so no this

is not a successful you know unicorn exit at all I mean except for the very early folks when it spun out of Google and even then you know I'm sure I'm sure made people made money over time but yeah this is not the type of result that they had hoped for and by the way we still don't know if this deal is actually happening right this is still not been announced so yeah we'll see 3.5 billion not a big number for a company with that's raised so much money this looks like a light speed joint you know oh boy all right anyway yeah not not great but good for the founders good for my buddy Mike Quigley who left recently to join prize picks of all things yeah have I ranted about prize picks already on the podcast no go for it D my my 15-year-old my 15-year-old comes up to me in the head hey Dad can I get a prize piics account and I'm like what the [ __ ] are you talking about dude that's gambling he's like yeah you know I just want to gamble on the games you know these

parlays it's a no-brainer dude I can make money I'm like holy [ __ ] D these guys have been marketing to this audience it was like unbelievable like just the way he said it he he sounded like such a [ __ ] degenerate you know and I was like really upset I'm like no there's no [ __ ] way you're getting a priz pick accounts because evidently one of his friends dads has an account that they're using to place bets and he's winning and he's feeling really really good about himself God but I'm like dude this is a sucker bet first of all betting is sucker bets but parlays are the biggest sucker bet and then I find out like a few days later from a buddy who covers these companies this is an intentional strategy by prize pick and other companies in the space is that they've already captured all the [ __ ] whales out there so now they're going Downstream and marketing these parlays to kids basically you know and younger people to get them engaged and so they're not making as much revenue but they're getting a bigger audience and their growing their Tam in theory right

to collect to basically create the next level of degenerate gamblers for their [ __ ] site you know it's like [ __ ] the [ __ ] off okay like God I hate gambling I [ __ ] hate it dude it's so bad and it's just getting worse and worse and so what else can these kids do they're watching it on [ __ ] TV right they're seeing it on the NBA games they're like watching the lines happen the announcers are talking about it dude this is just not good dude absolutely not good not good not oh anyway sorry I don't know if you listen to like Scott Galloway like Prof G who talks about this all the time which is young men's Brains are not really equipped to fight the addiction of gambling addiction and so that's why he goes after Robin Hood he goes after all of these bedding sites because it just the addiction the dopa hit is is there for this stuff and I'm there and so this is part of the problem part of the problem is that I have this disease there is no doubt if I go to Vegas and I start [ __ ] doing blackjack my eyes be

become double the size like [ __ ] saucers I am [ __ ] lunatic like I will stay up all night long drink myself into Oblivion and and [ __ ] gamble well I'm not tell you lots of money and it's [ __ ] pathetic it's pathetic I but I haven't I haven't even touched it in like over a decade but I mean it's bad it's bad for there are people out there that are far more susceptible to this [ __ ] and I'm like one of them right it's like [ __ ] that dude [ __ ] that and if my son becomes a [ __ ] degenerate gambler because of prize picks hell's gonna be pay I'm coming after you quickly so don't [ __ ] with my kids D moving let's go to uh Monopoly go so congrats to Hasbro digital for a stellar year so Hasbro's gaming business od's digital and licensed Gaming revenue increased by 22% year-over-year to 471 million almost a fourth of that is Monopoly go Bringing In $112 million so you do the math on that and like

Monopoly go is still cooking even you know a couple years into this what is the math on this maybe 10% 20% of gross I it feels like that's a really low number for having one of the biggest mobile hits of all time that scaled the quickest of any mobile game of all time like you only get 100 million I know you talked about how easy licensing is Gen before like you just hand it out it's all margin right and not only that like you get all this uplift like they can sell the board game you know the mly go board game they're going to get all that Revenue they don't have to split that with SC all those few million dollars swi board game maybe maybe the board game sales go up I don't know there's this movie coming out if you remember too maybe there's something there yeah I don't know this just feels like this is the best you can do as a lens or is 100 million a year on the best hit of like the last 10 years 20 times more than any of their other stuff I mean you have to

add up all of the other things they have going on to hit to the was it 471 million I don't know one game just churning that out although what I will say is I don't remember what their slot machine business is but Monopoly slots in Vegas to your point Crest earlier brings in a lot of money as well how much do you think it brings in O I don't know I don't know maybe I don't know I would just flip this on its head right if if they've had May 10 to 12 years to figure out a game based upon Monopoly and they make the Investments to actually make the game themselves like wouldn't they be far better off than licensing it to scopely to build their by baby build they're building they're building right we know they're building open head count right now for no they do have teams that are building games and we will see you know the comp gets a little tough for them this year unless they can actually come out with some games that are successful because they had both from go as well as the balers gate game last

year right that they have a pipeline but yeah we'll see we'll see have a GI Joe game in development this is the thing is like what licenses are left you know yeah no D and D magic yeah Magic's still doing really well that's like the line share of the rest of their revenue right is Magic related so that should still Crank by the way [ __ ] Pokemon is hot hot hot right now like every 's going after the cards right now I think the TCG thing just unlocked this insane level of fervor around the thing my kids we were out like for two hours looking for Pokemon cards at [ __ ] Walgreens last night I was like my kids are old dude like it's like really ridiculous but anyway yeah it's really kind of like set the world Ablaze with Pokemon fever fory is watching videos for like an hour of some idiot collecting Pokemon cards all over like Los Angeles it's like dude what the [ __ ] you know anyway weird but

yeah so I'm basically their entire college fund is going towards making sure that they have the appropriate collection of Pokemon cards it's like [ __ ] [ __ ] pen right we're just we're going straight for the Pokemon collection they'll see the light then right this keeps coming around every every few years there's Resurgence in some sort of collectiable whether it's you know trading cards or pogs or remember fun co- pops is still kind kind of a thing and but no I think you're right that the mobile game just ignited a Resurgence in the physical collection of the cards as well all right so in a move shocking no one sadly Amazon has announced it will be discontinuing its Android App Store on August 20th of 25 this calls into question all of the other app stores fighting for survival Samsung Galaxy store anyone so or the Epic store like what the [ __ ] are they doing you know these guys are throwing in the towel

oh no actually Phil or Chris Phil you want to talk about the epic game store I I had some numbers come out so we have our usual year in review which epic's game store does you know steam does this as well they don't have to do this so it is really great to see them come out and like publicly publish data on how the store is doing and so what we can do is we can go back to at least 2020 when they started doing the posts so we can kind of put together a Time series of some key kpis and it gives us a lens into how epic is doing overall remember this doesn't to my knowledge include uh console it's just epic game store it's not just like EGS services or anything so it is it is predominantly it's just going to tell you PC I don't know if mobile is mixed in here I think it is so maybe that's one of the things that might explain some numbers if it's 2024 I when did the store launch we're g toine we're going to line that up a little bit more and that might be in the fine print but when we look at monthly active users there was relatively stable from 2023 to 2024 and

the reason the reason I laugh is only you know it's intense it's insane what they're up against trying to compete with Roblox but again like they need to grow like they need to grow like this whole strategy is predicated on them growing and not growing monthly active users or having relatively stable monthly active users is not a good sign we take a look at thirdparty Revenue share and so you can back into this number because they report the actuals it's down to its lowest on record in terms of the amount of third party Revenue that is composes the EGS total revenue that's not a good look either that's not the mark of a healthy platform when you have that I mean look this looks like Nintendo this looks like a like a Nintendo product almost you know it's it's all first party you look at the absolute number in terms of third party revenue and I don't think it's actually anything to chock up it's around 270 million that's a lot of money I don't think that's nothing I think that's still a sizable business it just isn't a large share of the overall Revenue like of course for is driving most of it and so I look at the top

titles and I would say the only thing that seems interesting here is that they've double down on a lot of like Eastern RPGs so genin impact is distributed through the EGS store and it's not distributed on Steam we see the same thing with weathering waves which I thought was another interesting strategy and if you remember Infinity Nikki was on the EGS store again so I don't know maybe they're cesing some sort of strategy here but I would say overall this is not a good look I think for epic or for EGS this is not moving in the direction they needed to move right now you forgot the most important graph dude the overall Revenue oh yes oh yeah I suppose I suppose that one matters that actually completes the story right like the Epic store has done maybe not what they wanted it to achieve but it's certainly done the thing that is most important to Epic right is to generate more Revenue right for them right so it's like the fact is that even though it's primarily a fortnite launcher and you're starting to see third party revenues decline the fact is that it's generating more Revenue I

think it's up to 1.1 billion right in 2024 so like I keep having these conversations with investors about epic generally speaking it's like you know what is this the like ugc and what is the store what does all this stuff mean for epic I'm like well the way they're doing it right now it's still all good for epic because it's building the ecosystem and keep people engaged with in their ecosystem but they're capturing all the [ __ ] Revenue right like they're not giving it away because third parties is not doing [ __ ] on this platform you know right now anyway they make care like personally right but the reality of it is for a business perspective this is all good this is all gravy for them right they can use all these third parties both the software as well as these ugc guys just to basically pump up their platform to bring people more in to play fortnite and and other games that are made by epic and that's really good for their business right I mean I think they could be doing a lot more right we've talked about this many times about the ugc stuff and allow people to actually monetize the games

they make on [ __ ] ufn but for the most part I think they're doing exactly what they want to do right they're generating more revenue and and taking money to the bank what what do you think they spend on the free games per year like I don't doubt that this is a positive p&l like there's no doubt about it right like I can't imagine they spend this much money and even just supporting fortnite the margin on fortnite over its lifetime saving whatever they would pay to steam and paying it to themselves like I can imagine like I'm sure it's extremely profitable just on that basis but like do you have any sense of what they're spending to pump up all this third party stuff like what if they just threw in the towel and said no more free games you know how much does that give them back a 100 million a year 200 million a year well I think the majority of the 40% that they're spending for content is a going to themselves right because they're the ones that are generating most of the engagement you know so the payouts that they're giving to third party is nothing right relative

to the the money that they're generating for themselves right I mean that's my understanding I don't correct if I'm wrong ugc payout or the other games that you would download on no ugc payout right it's based on engagement right so yeah the majority of the engagement is from epic games so they're not Distributing any of that but when I think about something like GTA remember we were talking about Netflix games paying what was it 50 million for the old GTA for exclusive like the thing that has generated so much value for EGS is when they gave away GTA right because they unlocked something then which is that GTA online is a live service game it's mostly been paid it's almost exclusively been paid it's a live service game and so you give that away you get all this lifetime value of people coming back to the store every time they launch the game right so if you get a single player game you only get X number of EGS opens right until you complete the game but if I give you a live service game I keep you coming back to the platform remember they had to give that away for free so I imagine they wrote a check right

they wrote a check for GTA and if Netflix is paying 50 million for first of all you can understand I think a little bit more about where Netflix was coming from if this was so successful for EGS but if paid 50 million for those old games how much does Epic pay for GTA online to give away GTA 4 we have no idea 100 million no so far so good I think this is actually kind of achieving what they wanted to achieve from the business perspective from the company but maybe not what they stated to achieve from the perspective of of having a successful third party they how about this let me just say it this way they are not completing with steam at all they are not competing with steam at all period end of sentence right they are getting [ __ ] killed by steam they have like less than 10% share of the PC market right but they're killing it on the sense of Engagement and fortnite's doing well and they're bringing people into the ecosystem and and so I think that is what will add shareholder value over time right all right so speaking of ugc and GTA

Rockstar Games is gearing up to make Grand Theft Auto six the next big metaverse platform question mark this is like a little bit you know rumor but they have been in discussions with top Roblox and fortnite creators as well as dedicated GTA content creators about the potential to create custom experiences inside the upcoming game according to three industry insiders with knowledge of these meetings requested anonimity in order to protect their business relationships these experiences would allow creators to modify the game's environment and assets to bring their own IP and potentially their brand sponsors into GTA's virtual sandbox so I when I saw this I was like well this is probably a big deal you know just in general that you can do more ugc I mean there's already a lot of modders in this community but on the brand integration side it's still a little bit of a challenge to bring in Brands to GTA Universe given you know the M rating

which you know brand safety as a lot of Brands like to say you're not going to see like a kids brand in here and then also the game does all these parody brands that are already inside of the game and so from that brand standpoint I I didn't think this was as big of a deal as it is just the idea of like a a ugc platform that's going to be out there competing with all the other ugc platforms I don't understand like on these calls and investors will ask about GTA and ugc and it's like always been the Dark Horse in like the ugc race like there's kind of been fortnite which is the teenagers you got robloxs getting the Young The Young Bucks and it's like okay where do you place GTA you know is this the ugc platform for adults if you remember there's this platform called core which I think Manore I I don't think I wonder if there're still be there's a heartbeat over there no I think they're gone gone okay rest in peace they tried hard but like how do you capture kind of this elder ugc element and GTA always felt like the leading candidate it I don't understand why they keep retreating from the

suggestion it seems awesome I'd lean into this H Tam all right wow wow you guys are just just pushing buttons right now right okay first of all first of all first of all his job is to manage expectations on Wall Street right and Strauss zelnick if anything he's not a gamer he doesn't give a [ __ ] about games he is a businessperson and what he's trying to do is manage expectations right on what can be accomplished with this ug I'm getting questions from clients this morning about this [ __ ] right so the fundamental problem with having a ugc systems is it is so [ __ ] expensive and challenging to build ugc systems right it's not like it just you unlock it immediately right and Rockstar as much as they are a creative Powerhouse they have no [ __ ] idea on how to build a system like this they don't have the people like the back Engineers they don't have a ux UI they don't have [ __ ]

[ __ ] anything and if you talk to anybody at Epic or Roblox it took them years and years to figure this [ __ ] out hell epic's been working on it for five years their system still sucks right it [ __ ] sucks like if you ask anybody it sucks okay the notion that [ __ ] Rockstar is going to create something like this to build a competitive system is laughable right now having said that right having said that I can understand why people are dreaming the dream you know one of my favorite investors that I'm not going to name but like this guy's been following this stff for a long time he's bulled up he's thinking like they could do like six billion dollars in revenue on their online thing like compared to like a billion or so that they've done before right he is a very very smart guy like one of the smartest investors I've had he's dreaming the dream drinking the Kool-Aid right but the reality of it is that ain't [ __ ] going to happen dude because I don't think they have the expertise cany build build the expertise can they build it up sure if they're

successful maybe right that happens over time it evolves that way but I think what zelnick is trying to do is say hey guys [ __ ] chill the [ __ ] out right you're we're not doing like $30 a share next year because we're gonna have this insane ugc platform that's [ __ ] beating up Roblox and ufn it's just not real realistic in my opinion anyway but it is a great platform to do it I would say and if they can pull it off it's going to be amazing and that might be something that happens five years from now or something but Jesus give them a break you know they got to get this game out first when do we think the game's coming out any any it's coming out October November right yeah like okay they they announced Borderlands 4 is in September I think that gives them a window of opportunity to sell as many shitty units as that shitty game is going to sell and then the real deal comes out right you know it's like throw out the bastard child right get that thing out and then we'll have the real star come out the year month later two months later I'm kind of surprised that

they would do them so close together because Borderlands 4 is I mean as much as you're calling it a bastard stepchild like a lot of people love that franchise but it's GNA do 80 to 90% of its units within the first month right okay they know that and then on top of it based upon the last Borderlands which was an absolute disaster right because they basically didn't do anything to innovate I don't think this game's going to be any different right but we'll see maybe I'm wrong okay so you think it's gonna make the year even though I think I heard he said probably it'll probably come in Q4 I mean I guess he always has to hedge his bets right with that game I it could come in Q4 like it would be March quarter potentially but I I'm I'm I think it'll come out in November okay okay October November okay so Chris I think you wanna you've got like two big things why don't you hit on those first one this is the really quick one the first one so there was a report out that was basically estimating the number of of combined shipments of the steam deck type thing so the the Rogue Ally Lenovo

Legion MSI claw and the steam deck itself I kind of estimating between 22 and 24 how many units they've done and for the record it's [ __ ] mice nuts okay it's less than two million a year it's nothing okay it was down almost 50% in 2024 so if anyone's like kind of like hanging on to the notion that steam deck's gonna like grow the PC market just stop stop it's a [ __ ] nothing okay just to put it in perspective PlayStation did like almost 20 million in one year versus 1.5 million right and people actually play their PlayStations right so that doesn't include the engagement metrics that I'm sure are through the floor on these six million units so just stop just stop talking about steam deck as uh kind of like the next coming and and and I will be happy all right all right I didn't plan on this to be a big [ __ ] rant podcast this time but holy [ __ ] dude

[ __ ] Unity dude and I'm sure all these [ __ ] are say oh my God Eric you're an idiot you don't understand what you're talking about you got this one wrong no I did not no I did not on this particular one all right so Unity announced their earnings and the stock was up like 30% right there was a whole lot of [ __ ] going on and I have to admit I have to admit I have to give bronberg some credit dude the guy absolutely did the look over there type strategy and it and it worked flawlessly so here's what happened they report earnings they actually did a reasonably good job in the seasonally strong Q4 right I'll give him that but their guidance was like well below consensus for q1 and so he knew that this was going to happen right like literally like q1 is down 15% year-over-year 15% margins like absolute [ __ ] business right compared to something like App 11 which is absolutely destroying it right and so the stock from the press release was down 10 % that is an acceptable

response to that earnings release okay but when they got on the talking points they started talking about this new platform called Vector right and this new platform called Vector is getting launched in the next few months and it is going to re revolutionize the growth segment of unity right so the stock just went through the [ __ ] Moon and it was up like 30% or something like that and I have to think that this is the dumbest stock move in recent history like this is really really really really dumb basically I think bronberg was throwing out this notion about Vector to offset the shitty guide for q1 right that is what good stewards of public legit companies will do right and he threw out something there that investors seem to get excited about and so you got to respect the misdirection it is pretty amazing that is like that is big Company CEO [ __ ] good stuff okay but as I said many times this is a hedge

fund hotel right this this stock the hedge funds are trading in and out of the stock constantly this an APPL it is like a [ __ ] mess of of shareholders this is not Fidelity tro like investing in the long-term prospects of the company these are like really fast traders that are going in and out of the stock so this was what was known as a technical short squeeze right so there are a lot of people short this stock right and so this like the hope of a new platform coming out just squeez the [ __ ] out of these shorts right and and that was the fundamental problem right okay and there also is a huge disconnect between the valuation of apple and unity clearly because app Loven is absolutely destroying it and unity is not so the notion is that this is like a free ride to invest on the less than zero percent chance that actually Unity pulls this [ __ ] off right so let's throw the money in because you're gon to make your money back all right there are a couple reasons why this will never work first of all the Chief Architect of this new system was Jim Payne who went from Chief product officer in August of

2024 to advisor skiing on the slopes of Aspen 5 months later right so the guy's [ __ ] out to lunch dude he ain't he ain't helping you this guy was a [ __ ] genius who created Max and he created mopb systems whatever dude this guy's gone Gonzo right and the second thing that's absolutely nuts is that iron Source isn't part of this transition at all they're like keeping it as a standalone product and letting it die on the [ __ ] right like this is [ __ ] up like they are completely sideline these were their Engineers not only that when they did the acquisition they were transitioning all the adtec [ __ ] the grow solutions to iron Source like that was their stated strategy now they're pulling all the [ __ ] back you know and sunsetting iron Source this makes no sense dude [ __ ] it the Israelis know what they're doing dude stop it right and not only that like even from a functional perspective if they're not investing as much into iron source that is Lion Share of their revenue associated with the growth

segment so if they're prioritizing that the revenue drag from that is going to be pretty significant right and the other most important thing is there is not one [ __ ] person in the entire deconstructor fund Community that's ever even heard of vector right Vector is total vaporware right it has completely not been proven not been tried right and so like we have no idea whether this thing is had so and I think fundamentally the problem I keep hearing about about Unity is that it's garbage in garbage out they do not have good data right so if they don't have good data they can't create a good system right and you can't get good data without a good system it's impossible right it's like the Chicken and the Egg thing so it's not much they can do to compete against appen at this stage of the game and then again they are hopelessly outmatched by app Len and not to mention like Facebook and Google right and I'm sure Adam at app Loven was like [ __ ] laughing out loud when they met they they announced the vector right it's like who are these guys right so I

just think App 11 is fundamentally so far ahead that they can't catch up why this may work Jim Payne in his femon tenure may have had enough impact to get this thing off the ground right and let them carry the torch nonsense that's not happening right I will say from a marketing perspective Vector is a [ __ ] cool goddamn name I'll give him that dude that's so much better than Max Adam eat your heart out dude Vector is dope absolutely dope I love it right whatever marketing genius came up with this [ __ ] they should get like half of the2 billion doll market cap that just they they just increased so technically axon 2 is the UA platform and Max is the mediation platform so it's Max and level play vector and axon too okay sorry yes no that's fine um number three I do still think that there are numerous people in the UA community that want app L to get knocked down a few notches right I I think they feel that App 11 is extractive of the overall

industry from a margin perspective like they are collecting the majority of the margin on UA and so they are will be willing to try new systems to see if they can get the return on investment that they are getting from Apple so there will be some kind of impetus to try the other thing that I think from a stock perspective if you are so inclined is that the early metrics actually might be good right because any new system will actually potentially have low hanging fruit however what's going to be really critical is scale and depth right and this may take a while to prove out as the system again has been not proven at all so like no one knows like if this thing is GNA work I guess another thing that kills me is that why would you spend so much Goddamn money on engineers in California in San Francisco you know like how much money are you throwing at these people to create this [ __ ] you know like it's like really there's not a better way of doing this I don't I don't well I don't know enough about this like

the technical side of it but yeah it's going to be a be a challenge well thank you for giving marketers credit for making a great name although that was pretty funny for me that you called that out so I was actually a little bit confused when I heard that name and it was like well but you already have iron Source like so why wouldn't you upscale or you know do a 2.0 or iron Source AI like why and I guess they're just trying to move away from the old business and you know they let go of the the folks that were that created that and were running it and maybe they're just trying to like completely Rebrand and say we have something brand new and we're building this from scratch but so here's what I thought was really interesting when I was reading about it you know quote Vector is designed to leverage data from across the unity ecosystem integrating self-learning artificial intelligence models that will provide deeper insights optimize performance and deliver better results for customer customer said Romberg so what exactly is

this magical data that the unity ecosystem is learning from so I I just did a little bit of digging because you know like not that I'm a privacy nerd but I was like hm it feels like going back to Google Maps and everything that Google gives us for free it's like you give up your data in order to get these free services so it does feel like there's a crap ton that they're pulling from so that privacy safe you know quote Unity ID is going to follow users across the unity ecosystem of 70% of the top 1,000 mobile games run on Unity 2.5 billion devices have Unity installed games and it's cumulative installs four billion Mau across half of mobile games you know this is Unity is the engine that has all of this with the unity ID so then you think about what iron Source brings programmatic demand access to 230k apps in the unity exchange which is you know the rtb at scale creative AI

they autogenerate thousands of AD variants from a single asset mediation from Level play manages competing ad networks in real time are they borrowing that data or is Vector going to learn from that data so it's a lot of data to train on I know you said garbage in garbage out but you know there is a lot of data in the system because of the unity engine and you know all of this is rolling out they said q1 so we're end of so there are starting to be some tests but it's going to be months and months and months before this learns enough to even have a hope of catching app loven's axon 2 so I think um it's nice that they're trying but it's going to be a while there's two points that need to be made here first point is this is that they do not collect data from the majority of their customers like the notion that if Candy Crush is using unity's engine that they're going to get the data from Candy Crush is a complete fallacy it's [ __ ] [ __ ] right

there's just no way that third parties are allowing them to collect data on their customers period end of sentence right even the company keeps saying this sure I'm sure there's certain companies that are doing that right like the small rinking Ops right and if that were the case honestly they've had access to this data for decades right so why is it now that they're finally like unlocking this it doesn't even make sense he actually said this in the CEO said this in his press release it's all [ __ ] right and the fundamental problem is what happened is that they zigged when they should have zagged right when Apple started doing idfa they assumed that that fingerprinting was not going to be allowed and so they zagged away from fingerprinting to find other ways of trying to identify and track customers data right and that was the wrong move app 11 went straight for fingerprinting and they won right and they built systems around that and built a [ __ ] huge moat of customers and access and data that has led them to the leadership

position that they have now and so now Unity is trying to get back to the fingerprinting as is Facebook is doing it as well and so like they are literally hopelessly behind is what the problem is right and so maybe this new system will help them get there and be competitive it's still unclear but it doesn't seem very likely at least at scale on a side note it just came out this morning and I just have read through it briefly but fuzzy Panda Research great name talking about naming fuzzy Panda reputable yeah exactly they they they wrote this like scathing like short report similar to the report that was written about Roblox a few months ago alleging that applean Corporation engages in unethical practices to drive its Revenue growth the report claims that appl's AI platform is involved in ad fraud by manipulating ad metrics employing deceptive advertising techniques killing small babies etc etc etc so

anyway it also highlights that the Apple's tracking of children and serving inappropriate ads to miners like they had to throw that in there right they had to throw some pity [ __ ] bullet in there right anyway this reminds me that the whole [ __ ] adtech business is a dirty business from the get-go right like this is a [ __ ] shitty business you know and so these guys will sell their mother's kidneys for a buck you know it's like no one is above board in this system right Facebook Google Apple like it's just it's it's gross right so anyway we will see what what happens with this apple and stock was down as much as 20% today because of this report I think it's much to do about nothing I think these are just normal practices of this shitty [ __ ] business but like we'll see we'll see what happens with this all right all right [Music] okay this podcast is brought to you by appsflyer in today's Digital World understanding your app's Journey from Discovery to download is more than just inside ful it's essential enter apps lier the leader in Mobile attribution

and marketing analytics that allows you to measure the full potential of your marketing efforts making every ad dollar work smarter with apps flyer that's your new reality dive deep into Data driven insights that reveal exactly where your users come from and how they'll interact with your app apps sler where your apps potential reach performance step into the future of game monetization with exola the premier partner for game developers seeking to expand their reach in Revenue exola provides a robust Suite of tools designed to enhance user acquisition manage subscriptions and streamline Payment Solutions worldwide unlock new markets and maximize profitability through their customize secure payment architecture and dedicated support team exola powering game developers to achieve Global success all right let's go to our next story which is also a little bit sad Warner

Brothers Discovery is closing three video game studios and halting work on the was it really highly anticipated Wonder Woman title I'm not sure if that was really that highly anticipated Warner Brothers is trying to boost profitability of its interactive entertainment division you might remember that the president David Hadad left a few weeks ago I think now and so the three Studios closed down are monolith Productions player first game in Warner Brothers San Diego and that is according to a memo that went to staff that was viewed by Bloomberg News so the cuts reflect and were're focusing on games division on major franchises like Potter Mortal Kombat Game of Thrones and DC Comics Batman obviously not Wonder Woman so you know it's it's kind of sad seeing this again I think a lot of people are blaming David zasloff who now came in in was it 22 and is running the company I I'm not sure we can put all of the blame there but yeah no it's it's

sad to see probably hundreds and hundreds of people losing their jobs at these three Studios so sorry to see them go I mean look I'm not going to comment too much on this but I would just say like you know when first AT&T and then now Discovery acquired Warner like the writing was on the wall right like they don't give a [ __ ] about interactive they don't know anything about interactive I don't know if you've ever met the discovery Guys these guys are like average age of like 80 you know and like they've been doing this [ __ ] for [ __ ] decades dude they are like Geniuses that's TV [ __ ] but they don't give a [ __ ] about video games right and so this was all inevitable right when these transactions happened you know Warner Interactive was always kind of a stepchild so yeah it's sad to see yeah all right Phil what do you got love in deep space if you remember we were covering this game a couple months ago this is from paper games which also did Infinity Nikki so the game is like this weird RPG gacha romance game like

they've added an interesting Suite of features that are definitely targeted at females it's a subg genre of dating Sims called OT games it there's now a period tracker in the game which I actually think is interesting like they're appying like the boyfriends will ask about your period which I think is interesting there's a whole breakdown on a website I was reading I mean look it look it you laugh now but look at the graphs in terms of singlehood look at the graphs of how much time people are spending single late to their you know 30s and 40s like there may be something here I think in like a long run play particularly for the West too yeah the I don't know if you heard about the the the young kid who sadly committed suicide because he fell in love with the chatbot and the chatbot was kind of pushing him to do that I do think the loneliness epidemic that we're hearing about is pushing people to more of these you know these

simulations whether it is chat Bots whether it's games and so I think you're right that as when I looked into dating Sims I don't know like a year ago they were one of the fastest growing segments in all of simulation category and so I I do think you're right now the period tracker that's that's creepy but yeah I know I think again like 80% of this revenue is in Asia right so be careful about I forget the actual split I'll bring I'll bring it looking at it right now I'm looking at it right now 12% in the US it's growing though it's growing small it's very small it's not a it's yeah Ma okay yes this is a China thing like 60% of the revenue is coming from China which like 200 million of 33 let's compare that against love Nikki next week I thought love Nikki did more business in America than what you're suggesting from this game which is which is fine I mean they are of different subg genres but well yeah one's a little bit more RPG right then by the way I I'm not suggesting that this type of game

couldn't do well in the US I'm just saying like take that with a grain of salt that the where it's doing the majority of its revenue is completely outside of Western Publishers uh target market yep that's fair all right well something that is crushing it globally is last war survival they just surpassed two billion in lifetime player spending on mobile so wow top five Revenue T1 in the last month when I looked that up you have Monopoly go Royal match robloxs Candy Crush and then you know last war survival pulled ahead of Pokemon TCG which is number six in white out survival is number seven so it's pulling ahead of white out survival you know definitely these ideas of these games that are more very very casual with the Deep monetization afterward seems to be working so Phil what did you see when you looked into it so I think there there's a ton going on in Forex I think

Joseph Kim and the two and a half gamer guys have been a really good job covering what's going on in the creative shift side I think there's the web store stuff too which needs to get a shout because Forex does so well when it comes to Web Store shares because there's a lot of direct distribution not like that it's highly competitive so like for instance if you're able to like optimize your spend using the web store you get more bang for your buck that's actually helps your power score it helps you you know take over the server so there's a lot of competitive pressure I think also to be on the Web Store I think the thing that I would push back to both you Eric and to Jen is like I think this hurts a lot of what you guys have been talking about so I looked into taxonomy Revenue which is given by sensor Tower as the strategy genre and then kind of filtering for what they call forx it's up from the depths of 2024 it's not quite where it was at its height in 2021 but it's on the upswing and this isn't the direction I would expect and a at World especially considering web stores which we were

just talking about that's not here so I would say that's one thing I'll park for Eric and for Jen the thing I keep trying to wrap my head around is like fake ads or even just implementing I would call fraudulent gameplay for the first part of the funnel has like been this LTV durable strategy and I feel like this just cuts at like everything brand stands for delivering the fantasy of the IP like we're materially frauding people with with what games are and I look at Forex and like this is what the genre has become now this it's successful and it's sustainable and like even when you look at Lilith which is what you know we're also looking at like that's been the hidden story of Lilith like we talk about AFK Arena it's all their Forex games that are really The Narrative for them so there's there's all this this stuff that's going on Forex which doesn't get a lot of conversation yeah the the thing I will say about this fake ad topic which comes up a lot is what the games are doing and gamer finery actually did a little bit

of a piece on this and that what they found is that half of the top 200 games are integrating these fake ads or these mini games as different parts of the game so they could either be an event they could be like eony there's like a little you know bug on the home screen that if you want to do the pull the pin you click on that and you can go and do those fake ads were they are integrated into you know the gameplay in in a different way and so I think that they are trying to mitigate that fake ad you know Feeling by somehow shoving it in the game somewhere like white out survival I think I saw that they do a fishing you know UA ad well there are fishing mini games inside the game and they come along every like two weeks you can do this like returning event that happens and I think that's the smart way to do it is well it's in there somewhere and it's not completely f but it still makes me feel really gross that that is

like the core of what's happening but I mean we're also seeing that that works so if it's working there is very little reason for people to stop which doesn't mean that it's right it just it is what it is sadly and you just said it earlier CR like UA is a dirty business look I think this is the strategy right basically casual gameplay with deep monetization design is what I said way back when when when idfa happened in Turkey is like this is it right they actually executed against it it took them a while right took them a while to come out with these games that did that what I think is happening is that they are selling the game with this casual gameplay like the runner [ __ ] um and that is yeah that is bringing in a huge audience and they're just picking out the 4X players because that game becomes a 4X game ultimately yep and they collect those people and so probably I would say that retention numbers are probably lower for these games than they have been in the past because they're

not targeting as specifically to this audience because they can't with ID but nonetheless like this is the strategy and games like first eony you know top war white out survival they're kind of like executing against us really really well right to bring people into these games and anecdotally like I played this game for a while right I might have said this already on the podcast and I apologize but yeah I played last war for a while and the game is amazing and actually the gameplay itself is What attracted me like this Runner style gameplay right but that gameplay actually takes a backseat once you get pretty deep into the game and then it becomes such a 4X game that I got my ass handed to me and destroyed and I'm like [ __ ] this like this sucks right so I stopped playing right and now I'm just the fodder for the masses of people that are continuing to play the game because they just keep taking all my resources time and time again the exact same [ __ ] that was happening when I back in the day with atam yeah so anyway this is the strategy right this makes sense right to

broaden the funnel as enough to capture the whales that are out there no makes sense I would point out that I think this harms everyone like I think there is this negative externality when you run fake ads which is that now the user doesn't know if the ad is truly what the gamepl is going to be down the funnel or not and you don't know which ad is fake and which one is not so I think it actually artificially raises cpis across the board if you have fake ads it makes users just more hesitant to engage with ads overall and I think that that harms the overall ecosystem and I'm surprised no one has cracked down on this like none of the UA platforms I guess to your point Jen like they are extending it into the game and so like now becomes a blurry line that makes a ton of sense to me I I would say the the the opposite direction here is like why aren't more genres doubling down on this this is what I don't understand where is Squad RPG on this like Squad RPG is like very similar it's been in the a genre where the [ __ ] are they showing up with fake ads so I think there's a huge

opportunity to do this with that particular genre I think yeah this RPGs in general the only like genre that's kind of declining these these days because I don't think we have have seen an execution that actually takes advantage of this so I think that is a huge opportunity like Lila did put match three into like AFK Arena like that happened once but it's not it I don't understand why the endless Runner like why does the endless Runner work for let let's say last war but not like Marvel Strike Force like I that that is another interesting question is like what is the fake gameplay you have to pair with these genres to like get this thing to work well they're in lives what the creatives are good for figure that [ __ ] out you know yeah that's what people yeah that you test that this is how creative Works in Mobile I think we've talked about this before but like this is the only thing that I can actually say Voodoo and these super [ __ ] hyper casual [ __ ] games have done for the business is created these type of gameplay that actually is attractive to a broader audience that can sucker

people into playing 4X games you know like they did a great job of of creating these type of games so good for them right so yeah now we need to couple it with RPGs and simulation games and bring get people into the fold you know yeah Philly you might remember the choice ads for Walking Dead Right For That Squad RPG we did those Choice ads and they were incredibly successful it led you to believe that you know do I let my dog die or do I feed it to the zombie or whatever horrible choice you have to make and the game did have a little bit of choice because in the story mode you did make choices and so that's how we kind of Justified the idea of having that happen in UA but could they have doubled down on that could they have made that like a deeper thing you know maybe so the one sent in summary of this whole podcast is advertising is a [ __ ] dirty business yeah it is like when I when I was at Riot and and I was setting up the mobile publishing I don't know how many people came to me and said we will not

allow you to do like fake ads and I'm like that's okay I have high integrity I don't you know yes we we agree we will not do fake ads because Riot was like we're not about that and it it was a like probably one of the top concerns of people at Riot and likely at blizzard too when you've got like the Integrity of these games and everyone knows what it's like in the UA sphere to create those crappy ads so I I know it's a thing all right all right one day we'll talk about OverWatch loot boxes once I get my tattoo once I get my tattoo done we can talk about it OverWatch are are the is it out yet loot boxes no is it happening just announced we're back baby mini celebration we go segment is like yeah they're cow toing to the market forces oh no creative Integrity creative no their creative Integrity is in shambles at their blizzard right now

[ __ ] Microsoft overlords as has corrupted their purity awful take awful take this is Swagger okay this is Swagger this is a team that like is striking back at Marvel Rivals and actually doing something interesting this is the OverWatch we were promised oh all right all right story compromising all the their morals the moral High Ground they're not selling the loot Boxes by the way just to be clear they're only earnable in game for now oh well that's different oh that's that's stupid all right all right thanks everyone see you next week and maybe we'll actually talk more deeply about it next time all right see you you did it you made it to the end of the episode as a fan of the show it would help us out if You' subscribe and leave us a review on the podcast service of your choice those stars and likes while a small action on your part mean a lot to us and help to grow the show more importantly

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