Unity's $81 BILLION Opportunity: The Mobile Gaming War Nobody's Talking About 🎮

Hello everyone and welcome to Pixels and Profits. Today we will deep dive once again into Unity, a company in transition and hopefully with a much brighter future ahead. We are in the midst of a fairly extensive restructuring and with several recent announcements, especially regarding Vector. Some people in the industry view this as a cautiously optimistic reason to get really excited again about the company. So joining me today for this discussion we have Matthew Contraman our regular pixel brother. We are also down one pixel brother to those. So Brian Pegengh had to recuse himself for our discussion today for I don't know various reasons. I don't know not to be disclosed maybe. I don't know. And we're also joined by Josh Chandley who is co-founder and CEO COO of Wildcard Games and more importantly one of the industry's best experts on mobile ad monetization and UA who can speak very deeply to Unity's ad side of the business. For anyone who hasn't caught

our podcast discussion about app loving, you should definitely catch that. But welcome guys. Glad to have you guys on with me today. Yeah. So I think we'll kind of structure the discussion maybe high level. We can go over the financials, big business segments and performance. I'll cover create. Josh will jump in for grow and then we can just kind of from there just have a conversation on what we're seeing maybe future drivers, future outlook, things like that. But go ahead, Matthew, if you want to take it from here, feel free to jump dive right in. Yeah. So, to bore everyone with numbers as quickly as possible, let's give the Unity in 60 seconds or so. Um, for those that don't know, I mean, I'm assuming everyone listening to this knows roughly what Unity does, but they are a software platform. They have two key businesses, as JK said, create and grow. Create is a mostly the game engine. There's some other stuff like multiplayer software

and stuff, but you make games with create and then you grow and monetize them with grow. the names are very very fitting unlike most companies where the names are meaningless. Um to kind of size the company and the scope of where they're at in 2024 they generated 1.8 billion of revenue roughly one-third create 2/3 grow so and total revenue declines 17%. This is where it all gets a little funky and we have to do a lot of, you know, butternifing of the numbers, so to speak, because they've been restructuring their business after being highly acquisitive and making some bad acquisitions. They bought the VFX business, uh, Weed Digital, which who was that? That was Peter Jackson's business, right? And they basically had to wind that down and write it off to zero. They were getting paid for that. They weren't making any money on it. So when you take all that out and you make all these adjustments to the business, um core revenue, which excludes about 90 million in 2024, um that that's kind of what's at stake

here. And core revenue is actually growing. Core revenue grew 3.7% in Q1 and with create up 9% and the grow up 2%. So when we take out all the stuff that they don't want, the company's now growing again. And that's an important point in terms of profitability. Um, you know, we can look at GAP metrics all we want. They look ugly. Net income really doesn't matter except for one call out that I'll call out in a second, but on an adjusted EBIDA basis and if you know, again, if you're not a finance dork, adjusted EBITDA is effectively your pre-tax cash profits and that's a really good measure of health of a business, especially you know, now I'm an M&A and that's all we look at as adjusted EBIDA because that's the core earnings that are acquirable by a potential acquirer. And we can talk about why that might be important for Unity in a little bit. But um adjusted EBA was 390 million in 2024, which was down from 450 million in 2023, but margin was roughly flat. Um actually

up a little bit, 21% versus 20%. So they're maintaining their margin even with, you know, negative operating leverage, which is encouraging. And in Q1, margin actually went up to 19% versus 17% in the year ago quarter. The only call out I'll make on on the profitability is the stockbased compensation. What that means is you pay people not with cash but with stock. A lot of tech companies do this. And I will never be the person that says that SBC is bad outright because you need to retain talent. There's a point at which it becomes excessive. Uh in 2024, Unity's SBC was 26% of revenue. I don't think there's necessarily a hard or a soft line that says above X is a bad number. It's more about your cash flow and do you generate enough cash flow to be able to buy back stock and offset generation a dilution, excuse me. But to comp that against Apploven, obviously Apploven is is a direct competitor to Unity in the ad side. They're much larger, but their SPC was 8% of revenue in 2024. So, you

know, not it it it's something to watch as as the business grows. And obviously, if they scale the top line and keep headcount flattish, obviously that works itself out, but that's something to watch. And then lastly, on a free cash flow basis, because at the end of the day, cash rules everything around me. That's the only thing that matters in the end of the world. They generated 286 million of free cash flow in 2024, which is up from 179 million uh the year ago in 2023. So, I would say overall the the fundamentals of the business are starting to inflect positively and improve. And that's been kind of priced into the stock. The stock is up 24% year-to- date. It's trailing Apple 11, which is up 78% year-to date. over the last 12 months, Unity is up 46% and app is up 386%. So, um, with that, I think I'll pass it to JK to talk about Create. Yeah. But before we jump into Create, I wanted to ask you a little bit about some of the financials that you mentioned. So, is kind of like my takeaway is that fundamentally the underlying business is viable and it's

great to see Unity at least being operationally profitable and starting to turn around some of the loss on the Creed business. you said that that the core part of the create business is actually turning positive now. Um, and and when we look at like the net loss, which I think you you mentioned was like664 million, looks bad. And then to your point, I I wanted to just kind of dive in a little bit more in terms of like the the reconciliation between uh the net loss and positive EBIDA of 390 million free cash flow 286 million. And you mentioned SBC, but I also wanted to ask you about some of the other parts of of that which is like the non-cash expenses, the other non-cash expenses like I think there was 49 million in depreciation amortization also 214 million in workforce reduction expenses and and then and so I guess one question there would be when we see some of these non-cash expenses like one-time expenses

um does that also lead to us kind of um reaching a conclusion that we maybe we don't need to worry so much about that net loss and then when we see some improvements in some metrics such as improvements in accounts receivable reduction in inventory capex fell 47% to I think 29 a.5 million from a capital efficiency perspective given gross margins 83% and now free cash flow margin of 15.8% relative to 12.4% 4% for industry comps. Can we conclude that from an efficiency perspective they're getting the job done there? Uh so so I guess those two questions overall yes. Okay. I think the one thing I would call out so amortization and restructuring these always get you know it raises a broader question around what is actually a one-time thing when

you're analyzing companies I think what people try to do when they adjust e you know to get to Ebbit from net income is provide a cash flow proxy and that's why something like amortization comes out because you so amortization of intangible assets is the biggest chunk of that DNA. Y that's you know either stuff they software IP they already invested in and now they're just getting the value out of it or they bought the software IP in an M&A and then they have to account for that over time but the cash was already paid. So because the cash is already paid I don't know if you're like a soccer fan or if people like pay attention to like European soccer but they go through the same stuff like they have all these like rules around amortization versus like the cash flow and how they have to maintain profitability. It's the same concept. The cash is already out the door. You just have to account for it because of the gap accounting rules in a certain way and you have to account for that over the useful life of that asset. And that's why that's there. Restructuring is one that I sometimes don't like to take out when I

look at companies, especially if they're companies like Cisco's notorious for this. Like anyone that follows kind of the Jack Welch GE model of, you know, we lay off the bottom 10% 5% every year or whatever. If you do that, well then restructuring is not a onetime expense because you're doing it every year, right? And so I do think that like in this case it definitely is one time. They did a big cut, right? They did that, you know, the deeper surgery. But I do think that's also a question mark that a lot of financial analysts kind of look at and say, well, is this really a one-time thing that we should take out or is this um more of a structural ongoing recurring expense that we should not take out? Right. Josh, did you have any um any comments on on the overall picture before we dive into create and grow specifically? Yeah, but it's really about the balance between those two at a high level. I find that one of the interesting pieces of I guess transition debt that they have is that like I I view this as like

Unity is not an engine company in my mind. uh Unity is an ad network at this point and yet so much of the the activity whether it's the restructurings or the divesture of bad assets it's all around things to do with the the engine still and I I think that's really interesting because it's not where the future revenue growth is of the company it's not where like I mean right now I believe Matthew it's like twothirds of revenue comes from grow there's no direct data but probably a lot more than 23 third of the the actual profit like the EBIT that comes from grow. Um and if Unity is going to grow like itself to like 3x revenue, almost all of that revenue growth is going to come from Unity Grow. Um and so I think it's a really interesting position they find themselves in where um they're they're restructuring the past to create the future um but they're in completely

different segments. Um, and so it's just an interesting distraction or like a challenge, I suppose. I think we should circle back to the business model of of create. Um, and maybe I don't know if we want to go into that just now if you wanted to go deeper into that first JK, but you know, it's it's an interesting parallel when you comp them directly to uni uh to Unreal to Epic, right? You know, and and I I worked on this when I was working with Matthew Ball several years ago, and even then we had the same conclusion that uni Unity's pricing model fundamentally limits its end market growth. They can never fully capture the TAM of gaming, the metaverse, immersive experience, whatever term you want to call it. Whereas Epic can fundamentally scale its business with the growth of those end markets because of their pricing model. Right? That's why Unity has the ads business because they realize that a subscription business doesn't fundamentally grow with with their end

market. The caveat being that well, you know, on on on the downside, there's a lot of developers that won't accept that business model. They like the predictability of the subscription model and the fact that if they scale one game, you know, they pretty much are, you know, it becomes a negligible cost for them overall, right? I mean, if if you get a game that reaches nine figures, 100 million of of lifetime revenue, you know, the cost to develop that on Unity is probably, you know, a small line item. I mean, JK, you have much better insight into the P&L of a studio at this point, but and Josh, you too, but like I have to assume that you're not spending 10 figures on on Unity to build a mobile game. So, you know, it's it, you know, for a small team. And so I just whereas if you're on Unreal and you're paying whatever the commission is, even if you're, you know, you're paying 30% at the high end or even 10% at the low end if you hit some of those thresholds, you know, a 100 million game is generating 10 million for for Unity at at 10%. Right. So, uh,

and or for Epic. And so that's that's kind of the, you know, the the challenge that they face in scaling the the the engine business. Yeah. Uh and I I think though that what you just said is why Unity is going to be so durable on the mobile side. Um because on mobile margins are tight. Yeah. Uh and it is entire it's not entirely it's not fair. It it is largely driven by performance marketing. Um, and if your LTV is 10 bucks and your competition's LTV is 10 bucks and Unity is taking two cents from them, but Unreal is taking a dollar from you, who's going to bid more on UA, who's going to scale? Um, the when when essentially your cogs start to become like real um that that that's really material. Um and it makes it hard um for at huge

scale um uh companies to in my opinion really compete as cashefficiently as having an inexpensive engine. Um, so, so my personal perspective is just even though I understand that the revenue growth isn't there, that the durability and the stickiness of that, I think it's pretty compelling. Um, cuz you have a you have an inexpensive, widely supported um uh engine that that's pretty retentive. It's hard to switch. Why would you why would you um like what kind of like uh uh model tells you to move your game to a whole new engine or build your next game on a whole new engine and be that team that switches from Unity to Unreal. When your internal team knows uh Unity, it's less expensive. And I would say generally, maybe JK you disagree, I'm curious, but like the the overall mobile support for

Unity feels higher. I mean, I haven't worked with Unreal. I I do think mobile support could be a little bit better. Well, it depends, right? Like, I'm I'm coming from the perspective of being a small-time developer for for the for the moment, but hopefully being bigger. But um I think you're you're making a good point, Josh, because based on the pricing model, and I totally agree with Matthew's point, but this like if your thesis is right, we we'll get to the thesis um in in a in a minute, but like the point that Unity has this pricing difference and can use that as a way of entrenching mobile, I think is is a solid point. and just wanted to dive into your um the the thesis that you were stating about how Unity isn't really a game engine. And I I I think like your point there is really that if you look at the the potential upside or or TAM of ads relative to the gaming to

the game engine business and if you see what Apploven has done that if you could leverage create and the the engine side of the business to help synergize the ads business which to date they have not done yet but is a potential opportunity then you would see um create as more as a lever to help grow the growth side of the business rather than as something that you really need to optimize because where the real big bigger opportunity is is on the growth side. Is that a fair characterization of what you're saying Josh? Yeah I I I think you jumped to logical conclusion perfectly. I mean if if the engine can accelerate grow in the same way for instance Max accelerated Apple new way right um I mean what is I mean open secret you know what does max cost developers negative money apploven pays

you to use it because the data that they get is so valuable and so if the engine is free and they lose a third of their revenue, but the other two/3 triples. What does that do to the business? Right? Like um I was I was actually about to go there and say I wouldn't be surprised I was about to say I wouldn't be surprised that at some point they either stop charging for the engine altogether or do some sort of rebates like right now they need the cash flow whatever cash flow that engine business generates because the scale of the business but if grow triples I don't know I'm just hypothetical I don't think it's a likely scenario in the next five years but if they're super successful everything works and grow is a five billion run great business. They don't need to be charging for the engine anymore to maintain the core business, right? Or they can use incentives to lock you in. And so I think to to Josh's point exactly, you know, that that's a place where, you know, I do think that

if the business if they get the operating leverage on the growth side, they you know, it they open up a lot of opportunities to to how they want to manage, create, go to market. Um, and when I talk about the Unreal conversation, I fully recognize that it's Pandora's box and it's a can of worms and we're we're past it ever being realistic for them to change the pricing model there to a commission rate because part of the reason people use it is because of that and there's predictability and the cost structure, but um it's just an interesting conversation nonetheless. Okay. Uh and I I assume like the more interesting conversation for audience is going to be when we get to the growth side. But just to just to provide the full picture, I can deep dive now into create. And so we can start there. Now create as Matthew mentioned it was about a third of the revenue. I think more specifically it's $614 million in revenue for to Unity. However, this is a fairly significant revenue drop in 2024 at that 614 million revenue level from

2023 when it was 859 million. So, a fairly painful 28.5% decline in revenue. Uh, create now represents, as as Matthew stated, about a third of the revenue in more specifically 33.9% of total revenue in 24, but that's down from 39.3% in 23 and 51 a.5% in 2022. So, create has been a little bit of trouble. Um, many of us know why. And that not only has to do with the runtime fee sort of fiasco and loss of trust, but fundamentally even before runtime fees, I will say anecdotally, and Josh, you know, you feel free to call me out if you if you s saw something different, but I it did seem like even before then, there were increasingly more mobile game studios jumping over to Unreal from Unity. and especially on the HD side and you know this is something that you touched upon Josh in terms of mobile versus HD but certainly the HD side is much more advantaged uh to Unreal

relative to Unity than on the mobile side and I I know a number of folks I talked to a bunch of people on the tech tech leadership side and who are CEOs number of games stu at a number of game studios and they basically tell me Unity isn't really a viable option for them at least on HD side for for right now and hope hopefully Unity can be more more competitive on the HD side. So that's sort of the situation there. Um and but just to be fair, Matthew also mentioned that if you look at the core part of create that actually has turned around now and that's growing. Um and part of the the reason why um you know we're still seeing some decline is because the if if we're comparing apples to apples in terms of the the the the main engine business. We did have other parts of revenue being accounted for on the create side of the business. Matthew mentioned the closure of Weda Dig digital and there was a termination of a

a Weda FX agreement um that was responsible for like 99 million in Q4 of 2023. So um so comparing apples to apples in terms of create the decline is like more like 20% uh from 23 to 24 and then I think when if you were to and maybe the the number you mentioned Matthew in terms of that 3% is just looking at more more specifically the engine side of the business. So that's yeah so yeah in in 2024 the the strategic revenue so the core revenue from create actually grew 8% year-over-year. Um to put it in perspective, the non-strategic stuff was 367 368 million in 2023 and it was 81 million in 2024. So they're taking it all out of the business and I think most of that is expected to be gone this year as well. So um you know when you know the top line gets gets shrunk pretty quickly because of that. But you know again if you look at the bottom line

they didn't lose any operating leverage. They weren't making any money on that revenue. That's that's the bottom line there. Okay. So that kind of takes us to where we are today from a financials perspective and you know in but but in in terms of like a more recent update. Unity is now however claiming a strong victory with the launch of Unity 6 reported 43% of active users migrating over from the previous versions of Unity. And as we've mentioned a few times now, the that the core part of create, you know, and as a as a customer, I'm sure Josh and I are both happy that um that there's been improvements on that side of the business. But just to kind of recap some of the major changes that have occurred on that side of the business. So, as Matthew already mentioned, they've discontinued non-strategic create products. So, there has been a rationalization on the create product lineup, including what a digital um they're refocusing on core developer tools. There was the layoffs um 25% workforce reduction overall but um

certainly affected create to hopefully streamline operations and improve profitability and I can speak to a little bit more of the if what I felt was a necessity for that to happen uh a little later. Um, as you mentioned, Unity 6 was launched, which featured major performance, stability, and arguably multiplayer improvements, although I personally would submit that the net code strategy and execution is still a little bit of a mess. Um, they canled the planned runtime fee scheme and reverted to sub subscription only pricing. And what we've also seen is increased R&D focus on three areas: AI, product stability, and data analytics. And so um they also they've al you know one thing we don't mention is that there had historically been a lot of talk about Unity being used by non gaming uh industries and at least on that side that's up 50% year-over-year in Q4 of

24. Uh I would say those are the main things. 1.5 is 50% more than one. It's still not there. Yeah, I guess that's right. So, um, also probably just one a couple last things to note is that they have updated their editor terms for greater developer trust and transparency, which I'm not that worried about, but certainly a lot of people I talked to um did feel like the whole run runtime fee scheme was, you know, kind kind of a significant issue for them. And uh, finally, they shifted their M&A strategy to focus on integrating past acquisitions rather than going out and just looking for growth anywhere. So that's kind of like the summary of of some of the major changes made under kind of the new leadership regime. And I would say a lot of those things sound great and I'm glad that they've done a lot of those things. I'm sure Josh and I as customers are happy for all a lot of those a lot of those things. And so just kind of speaking now from the

perspective as one of their customers and as a game studio exec executive I would say that you know again a lot of good stuff a lot of meaningful improvements but just to also talk about some remaining concerns that I have and it'd be great to hear from Josh what what your perspective is as well Josh but I still do kind of gripe a bit about the lack of capabilities in the engine. So, render pipeline for me, not great. Probably should be integrated into a single feature. Probably should have some additional features and capabilities built into it. Same with net code. Um, I think net code has historically been a mess. It's been restarted like I don't know what, three, four times and the current version I'm not too optimistic about. Um, and so I think there's just like with in comparison to Unreal, the kind of capabilities and features that you get out of the box just are not the same.

and and you know I obviously it's you know not as um the economics are a little bit different for both engines but you know some features that you know we've personally had to recreate is a custom animation system custom character controller bunch of other tools where you know you just look at you at Unreal and you're like oh this thing in Unreal okay we're going to rebuild that in in in Unity so I think those are some of the things that are a little bit of a bummer still for for us as customers and And maybe the other thing that um I can bring up although you know I think a lot of people get mad at me when I when I raise some of these issues is from a culture perspective and I've talked about this before when we've discussed unity but it did seem that under previous regimes that there was a little bit of a kind of lacadasical work life balance culture. Uh please don't hate me. I'm just I'm just the messenger. Um, and I' I've spoken to to folks uh both former and

current Unity engineers who basically admit that that's an issue. I I think another issue culturally was just um kind of what was described to me is the inability to make hard decisions. And so you'd see multiple and separate initiatives rather than having um and you know that's why it was it was stated to me you've got different kind of like um you know different render pipelines and things like that is is because you've got different groups that want different things and um and so that was a little bit of an issue and kind of tying the culture back to SBC though because I do think that that's that's an issue from a financial performance perspective. I do kind of have a little bit of an issue with if and look I have nothing against work life balance. I think that's it's great that there are companies that offer work life balance but if you're offering that level of stockbased comp given performance and given a work life balance culture like

what are we talking about right like like I I I think if you're apploving yeah you guys deserve your stockbased comp. I mean, you guys have been killing it and you guys are doing, you know, a really great job, but like should should this level of of stockbased comp be awarded to a company that's not like a a hardcore kind of startupy type of company and more more just kind of turning the crank. I don't know to for me that part doesn't make sense. And um Josh, I I would add a lot of that to carry over from the prior regime. Okay. Right. And we talked about we haven't talked about Bramberg taking over and kind of the new regime and bringing new and by the way I don't I wouldn't say like like you know just to get Bramberg and other other like leadership guys in I think you you got to do it but I'm just saying like there's probably like look at JR's look at JR's pay package even even his exit package right like that was just sign me up for that. So there is a degree to which a lot of that is carryover from prior regime and okay

you can't close Pandora's box once it's open. Yeah. So JK I think a lot of what you said is exactly correct. I think it's one of the interesting like eccentricities of a of a game engine where it's an off-the-shelf product. And I think the Unity for Wild Card, we see it as kind of the the king of the 8020 rule where things that we don't care that much. Whatever Unity I care about that much, whatever Unity has built is great. But then there are a couple of things in our business that we do that really matter. Um like like JK, I don't give two shits about multiplayer. like I I'm not going to rebuild that. But there are some things that we have done to help us differentiate and develop faster and more efficiently that required us to I think take I guess what you would say non-standard approaches to Unity development where perhaps at another studio. Um for instance, we we operate

we have like five actively marketed games and we're trying to operate them with a small dev team. um the way we approach things like code interoperability and really pushing that deep. Why why would Unity build that so that you know you can have five games live and have features move around between those games? Um, I think it's reasonable, but like like all all offtheshelf products I feel like especially SAS products have this problem where you can only take them so far before you have to either build your own or like break open the side and shove in your own, you know, plumbing um to really get the most out of. Um, and so I think I would love for them to build me more things that I need, but I kind of accept that for the price point, the the service is really good. And um, I think the critical bar that the Unity

create has to pass is performance has to crush, especially on mobile, especially when you know where all the growth is. It's not in the US right now. Um, we we want to do really well on devices that have like a gig of RAM still. Um, but then every feature that you don't specialize yourself needs to be good enough that it doesn't trip over your your game. Um, if it can do those two things, I think that me that is like enough to entrench it. Uh, because it's it's already so inexpensive. It's already so well supported. Um, the fact now JK that you and I have probably both built custom pieces onto Unity means that a our switching costs are objectively higher and b now our team is specialized in an engine and that creates a switching cost. Yeah. And maybe one thing I could also just kind of highlight for the for the audience and and and is is that what I said was

true about how anecdotally a lot of the people I know were jumping over to Unreal, but I would say also more recently, I'm seeing a number of people jump back to Unity. And the reason why is they're like low-end device optimization. They couldn't figure it out. And like but then you know you you point to some Timmy games you're like look at these guys they did it. Yeah they're freaking you know 300 person team of some of the best tech guys in the world. They did it. So I I do think that that's one other caveat for some of these guys jumping over to Unreal is like if you do need lower-end device optimization, it's not still not that easy. And so that that would be a reason why I still think Unity does have the opportunity whether it's from that angle or from the uh pricing model angle to really kind of double down and entrench

mobile developers. Yeah, I I totally agree. Um and and to your point about like trust and transparency, I I think it's really interesting. I think that this scar tissue from runtime is still playing out in interesting ways. Um, personally, I think the data the I'm just going to call it like trust and transparency I think is the term you used. I I actually honestly I think it's a misstep. um the the amount of um backlash that they have received um from the the runtime fees. It was huge, but it was never really, at least to me, about oh my god, they're taking our runtime data. It was oh my god, they're going to charge us a lot more money. It's not clear how much they're going to charge us. It could take us below profitability cuz right now the market's

really bad for us. What the What the What the Basically is like what do we do? And so like if you want to scare a business, tell them they're going to have costs that could theoretically be like 5% of their revenue, but don't and then inject maximum uncertainty. Like if you if you want to piss off your customers, that's that's a powerful tactic. That has nothing to do with data. Um, yeah. Well, I do think for certain for for certain kinds of developers, right, for the hyper casual guys, low low RPO players, I think that the the the in the per install fees really really like turned some some people's economics completely upside down. Especially when they were going to count an app update as an install, right? Because every time you update it, yeah, that's but there was no commitment to that. There was no like this is the firm like to anything really. There was an announce like this is that kind of plan, but like you can say this is your plan,

but it's not actually your plan until you like make me pay it. That's until until I sign the thing, it ain't the plan. Um, so it it was very very weird. Yeah. So I I agree with you, Josh. like there was an overreaction but at the same time there were certain studios who like I mean you know imagine you just tell somebody okay I'm putting you out of business right now then of course they're going to freak out they're going to be like oh my god you run the you know you run the model and see what the impact is and you're like holy I went from having a profitable business to now we're going to have to shut down. Yeah. So, and and so I think like the messaging on that and the way that they they executed like the customer feedback for that was uh was probably not great, but at the same time, I don't really hold, you know, I'm not as mad at Unity as a lot of other people are. I'm just like, okay. I mean, people make mistakes. Let's let's move on. So, I I Yeah, I strongly agree. I wasn't

really that mad because I assumed there would be softening. I never assumed it would go away. That was a surprise for me. Um, but yeah, I don't particularly hold any ill. I know that there's a lot of that still in the ecosystem. Um, I I have this weird status of being a mobile game person in Seattle where there is no mobile gaming. It's all AAA console. Um, and so when you go to that space, there's there's a lot more negative feelings towards Unity. But realistically those customers are also their their least valuable by revenue. Um all their all their best customers are on on mobile. Um because those customers cross by and to grow. Um and that that's where you can have a really powerful grow like growing relationship. And to your point earlier, JK, um, if the if the create business can be something that helps the grow

business, the grow business grow, I don't like saying, but you know what I mean. It's grow square. Yeah. Yeah. If it can Yeah. If it can grow the grow, the market you want to double down on is mobile. Uh, and what you want to what you want to look at is is a model much more like um, Max and Apple app discovery, right? Where there's really high quality um, data sharing in exchange for that amazing price. I think they'd be crazy not to do that. Um, but if now the the grow team or the create team is saying, "We're going to give you all these trust and transparency tools that protect your data because it's yours." That isn't something Apploving would ever say. Um, there there's this like it comes across as though there's this immense fear of additional negative backlash. Um, whereas like Unity is the platform holder. Um, they have what,

like a 80% market share, 70% market share of mobile games engines right now. It's pretty high. Yeah, it's high. Yeah, depends on how you cut it. I think by downloads it might be higher. By revenue, that sounds plus or minus, correct? Okay. Well, I mean, well, they have all they're the predator. They have all the power. Why are they so afraid of us? Um, that gives them a lot of negotiating power to that point. And I know we haven't done a full dive on grow, but so maybe we table that conversation to after we discuss it, but you know, I do think that they should be more aggressive. They should be the big bad platform. Yep. And with all the changes that are happening in the market, if Unity launched an integrated, you know, distribution platform where everything's integrated and they have full visibility to data and advertisers have full visibility to data, that's potentially more powerful than what app could offer. I don't know.

I'm just speculating as someone who's not technical, but probably something to table until after we talk about grow. Yeah, I I think you're right on that, Matthew. And I also think that Unity probably underestimates how deathly afraid some game studios are of app. So they would want to do what they can to support Unity. I'll put it this way. If you gave them something that makes them more money, they won't care about sharing your data with you. Yeah. Because they'll make more money, right? Well, there's already data sharing that occurs. Like we talked about what data is not that is being sent back. If you're running EUA um with uh Unity or Apple 11, you're sending postbacks. Um this isn't like a binary do you get data or do you not get data? It's what's the quality of the data? Um how granular, how deep, which data. Um so it's not like this big high stakes thing. It's um about incremental benefit. Um, and so I don't think it's

something to to be afraid of. Um, like if if you're if you're an AP game and you care a whole lot about your um about having your your purchase data totally saved and it's only owned by you, well, you're not going to scale because you have to pass back purchase data to the ad networks to run those campaigns to scale in the first place. So like sharing your data is table sakes like this is happening. It's just how we do it. Um, and how how rich and how powerful that data is. Um, that's the that's the discussion and that's the advantage that Appleven has right now. Right. Yeah. I think it's more of a PR issue than anything else because I I think if people really fully understood everything, they would just relax. Yeah. Yeah. Should we dive into grow Josh? Definitely. But before we talk about grow, uh it's living in kind of an

apploven world right now. So it makes sense to talk about them first. Uh they look unstoppable. Apploving is like a black hole sucking up all the value for inapp ads. um thanks to their 75 80% market share in mediation similar to Unity's market share in the mobile engine. For the finance dorks like me who don't know all the technicalities of advertising, could you just give like the elevator example of what mediation actually means terms like that? Okay, let's let's not use the word mediation. Let's use the word auction. Apploving runs 80% of auctions on inapp ads and it also is the participant of those auctions. So when Unity wants to buy ad inventory from a mobile game, eight out of 10 times they go through AppLin. Um so Apploven sets the rules

for those auctions. They tell you how fast you're allowed to respond or if um you're too slow, you'll be cut off. um they define what data is passed back and they set fees. Um so the impact of having an 80% market share is that Axon which is their kind of tool that fuels app discovery uh technology that fuels app discovery is is the best trained model in in IAA in ad mod in like in app ad um ads um because they have such a huge market share app gets to charge they literally they charge other ad networks 5% for the right to bid on their inventory. So for 80% of impressions today on inapp ads on in-game ads, um if Unity pays a $20 CPM, like a cost per cost per mele, cost per thousand, the dev takes 19 and AppL takes one and

Unity is literally paying app for the rights to show ads. Um, and then Apploven's first party data is as much higher quality than what Unity receives back from the auction. Um, they say that they pass back um the same like data, but that's a convenient framing. It's not actually function. It's technically true, but it's not functionally true. Uh, for example, if you pass back the an ad impression happened and it had a $10 CPM, um, which means it was a penny. It was a penny. A penny was generated in revenue. um that penny um for let's say Unity that penny gets sent by an Apple 11 um server to the actual client like

the literal phone the phone um that the game that that earns the penny and then it gets sent to an MMP like apps flyier which has the the more than half the market share and then if the developer consents that revenue is then sent to Unity Um, so one that chain is super long. Um, and we've seen it break before in interesting ways in Unity's history. Um, but not only that, um, there's so many MMPs, they don't even all pass back the same data. One of the most important things that I believe apps as of today does not pass back, I could be wrong, but I don't believe they pass back ad type. that $10 one penny a $10 CPM one penny ad if that's a rewarded video that's a pretty low value user you know rewarded videos should be going for two to three times that in the US if that's a banner

ads you got a you got a multi-millionaire in your game um and you should target that player a lot more apploven gets to know those things and Unity doesn't that is an unfair data advantage Um, and so that's why I say they're like a black hole. They have this tremendous data advantage. And then for admonetized clients, like admonetized games, they tell you that you are not allowed to run adoras UA campaigns unless you use Max because that's how the technology works. And so in order for admonetized games to scale effectively they now have to move to apploven which means that applo share grows more which means that its advantages grow tighter and stronger. Uh how do you as unity grow overcome like that? That's the the big challenge that

they have. Um, that's a big ask, but there is a crack, a small crack in Apploven's um, armor, like a literal blind spot. I guess everything we just talked about is about ad revenue and ad monetization. And for every dollar of ad monetization that happens in mobile gaming, there's probably three to four of AP. Um, AP has good estimates. IAA is really hard to estimate. Um, so Apploven's ad revenue like loop is untouchable. Um, Max has given them omnipotence and incredibly uh powerful control. They see the data, they charge everyone for access um and or they they charge ad networks

for access and they essentially gate scale for other admonetized games behind using their platform. Um but they can only target what they can see. Um, and Apple 11 only consistently sees AP revenue when they cause the install. Hell, I mean, there's a lot of games um that don't even run UA, so there's not even a chance for them to to pass back um revenue. For instance, I don't think Marvel Snap is a client. So any any revenue from Marvel Snap is completely unttracked um by Apploven. Um so Apploven is only like really effective for AP based games because they have this massive volume. Um because they already own this ecosystem.

If somebody came in and they had special data of higher quality and and more breadth and depth, then ad 11 is just another ad network. And that's Unity's opportunity. And that's why I think they'd be crazy not to integrate the engine data. Um cuz imagine imagine if Unity had the advantage for IAP while AppL has for IAA. That's the upside. It's like can they will they? Um maybe it's harder than it looks like. You know, all these things this is this has been possible for a long time. you know, Unity ads came out in uh 2017, 2016. Um it's been a a while. Um it doesn't take 10 years or 8 years to to make those two things connect. So

perhaps they can't or they won't. Um I think it' be crazy. They should. And I I think maybe Unity doesn't realize that there are more game studios deathly afraid of app 11 than they are of sharing data with Unity. Like it's not it's not close. Well, yeah. Let's go back to the Unreal versus Unity discussion. A 10% change in your costs going from 10% of revenue to one or less. Uh that is a difference between being competitive and being not competitive sometimes in mobile. Um, and if AppL is sucking up all of the value because it has no competitors and so like if if app 11 is dominating all UA, they have every right and they should take more margin. End of story. Like that's fair. Um, if you if you like that is the that is the the the prize for winning. Um but for developers what

that means is um if historically a dollar paid into UA by an advertiser is.7 to the uh the admon client the person showing the ads if that 70 cents becomes 60 cents all of a sudden gaming clients start to feel a squeeze where there's more and more of that margin um going to one company. And I think the the reason gaming clients want to see Unity succeed is because if there's competition, that creates a balance and that improves our negotiating power. 100%. It's it's not Apple's ebit margin on its ads is 81%. Okay. 81% of every dollar of re 81 cents of every dollar of revenue they generate in ads is pure profit before they pay taxes. Just keep that in mind, you know, to

everything that you just said. Yeah. And I think that's um how is that calculated? That is not like the revenue, right? That is uh like the the ad spend and then their profit. So the dollar would be their share of the ad spend and then the 81% the 81 cents is the portion that they keep after their costs. I see. I see. I mean, it was only in the 40s, you know, a couple years ago before they hit this massive inflection point with Max and Scaled and just shows you the operating leverage that exists in this business. If if they can do exactly what you said, even if they can just become a a more viable alternative to AppL, right, and knock out some of the, you know, some of the monopoly power. And I don't mean I don't use the term monopoly negatively, but Apploven is a monopoly. You said it. They have 80% of the market share. Like that is a monopoly by definition. It's not I mean

you can say that they're competitive, but I wouldn't say it's malicious. They didn't do anything necessarily like wrong. They built the best platform and Well, okay. Well, hold on. Maybe from from a legal standpoint, it doesn't seem like they've broken antitrust laws. Yeah. Exactly. Right. But but but kind of circling back, you know, just, you know, it just showing what apploven look has done and what it looks like shows the opportunity for unity. Yeah. And and so a couple of takeaways that that I'm kind of uh reaching based upon uh your your take on this Josh is that one there is absolutely a data war and just the importance of data is so critical today is and I would say that now then based upon some of the announcements from unity for grow all eyes are on vector. So, what do you know about Vector? Do

you know anything? Can I mean, we've we've seen the the early announcements of how it's been fairly performant and um to the degree that all of that is real, like a lot of people are calling it vaporware, which I completely disagree with, but like if if vector does work, what would be the impact of that to to grow? I mean, vector is not vaporware. We know that already. Um I I've heard numerous first count uh first party firsthand accounts. There we go. Um of AP campaigns and people running AP campaigns where they've seen 15 to 20% uplift. Um that's great. Too bad on Max app 11 is 10x. Um so going from 1 to 1.2 isn't enough. Um, I think that there's good and there there there's bad. Um, it's unclear how, you

know, so yeah, I think Vector is showing a lot of promise. One thing we forget is that Unity grow actually has two ad networks. Unity and Iron Source and it's unclear um how much investment is being made into Iron Source and so I think the initial gains will probably appear muted because how much can you grow without hurting that other ad network until you start to really chip in and take away from Apple directly it it will be hard. Um, I think that Unity ads has always been a pretty solid ad I like an ad rorowass company.

Um I think a lot of people have been on either side um of iron source or unity for AP rorowass where both have been good and it can kind of depend and so I don't have any data on this but I wonder um on where where their strength is coming from. Um, in the wild card stack, we're definitely seeing a little bit of weakness um on Iron Source, but we're we're seeing a pretty good strength on on Unity. Um, it's too early to give really static data, but like low to mid double digit growth in share of voice, which is really strong. Um, but they're still very small. Um, Vector itself, I I feel optimistic, but there's a lot of ifs. You know, I think the approach is fresh. I think it's good that they're rebuilding the engine from scratch. Um, the the the leadership on

the team is phenomenal. The the leadership, the the the people are strong. the execution um is is like let's go back to talking about Axon 2. When Axon 2 rolled out, Apploven's opening move was to tank CPMs, stop buying everything and perform so badly that their um directions to Max clients like myself was to lean on Unity and other ad networks to fill the gap while they're not bidding effectively. So that's the Axon 2 roll out and the Vector roll out is 15 20% uplift almost straight away. That's pretty promising. Um it's just a first step, but it's pretty promising. Um and

so all the all the fundamentals of what we're seeing are if this was three or four years ago, this would be crazy. But it's not three or four years ago. It's today. And so, uh, how do they overcome, um, a 10x delta on max, uh, that's that's just an incredibly large challenge and we don't really understand what data sets they're going to integrate. um if they chose to if they were able to or chose to whatever word you want to use um integrate engine data I think that would be a huge advantage especially from just raw purchase signal um because then a very achievable outcome would be like what I would say is like fire and ice where apploven can

own IAA but it unity can take a big share of AP that's an amazing position to be um and they're not there today. And you can see how that story starts to like compound on itself where all of a sudden if Unity and Appven become more evenly mixed um and Unity gains scale, that will help their IAA business, their admonetized business. And if that grows, they can start to pull away clients from Max to level play again. And then that becomes a very interesting discussion too and it starts to show um that's that crack in Apple's armor. But those are just like a very long chain of ifs and and the um the company has a history of execution problems to be frank. So can this business execute? Um, are

they brave enough to say we're going to start doing things like passing back data? Um, because if hell if if again if grow became or if create became free globally and if the whole thing was just free um but they got perfect data access, it would probably net be a profitable move versus like their current status quo. Um, if they could turn the Unity engine into their version of Max, that would be a huge competitive advantage. What about other areas of data, Josh? Like what what if Unity also did an MMP business and a web shop business and got the data from those sources as well? It's unclear how valuable MMP data really is, okay, because it's it's so disperate. um like apps flyier versus singular um

versus adjust which is owned by um apploven. Mhm. Uh my personal understanding is that kind of two things one um Applvin who is hyperaggressive is not like non-consensually taking um adjust data and using it in their models as far as we know. And so if AppLoving won't do it, Unity isn't going to do it. Um, but second, uh, I don't think it's that unique. I think if you want to run UA with Unity, they already get to gatekeep those postbacks. Um, everything that almost everything that flows into an MMP flows right back out to the ad networks. Um, and I believe in some

MMPPS other than appsier which I'm an applier customer so I think it's the best platform out there but um for some I think sharing is just on by default. So if you plug in Unity, all your AP data just starts flowing to Unity and the only way to stop Unity from getting it is to stop running UA with Unity and accept the growth loss. Um, so buying an MMP doesn't really, in my opinion, doesn't get you this unique fresh like data, right? Um, from my perspective, I could be missing something, but that's um that's how I I see it. Um, there was one other source you mentioned, web shops. Uh, yeah, it's probably important revenue data. Um, that'd be pretty cool. Um, but I I'm I primarily operate an

admonetized business, so I don't fully understand the complexities there. Um, but I mean to that point, like is there any reason that Unity couldn't stand up an app store, right, with more privileged data than what the other app stores are giving you and other networks are giving you an AP, right? If they know who's spending, they could tell they could theoretically make that information available. We all, you know, we all had the huge storm when IDFAS went away, right? Unity has similar data, right? who is spending. You could go whale hunting again, right? It makes a lot of those business models potentially more profitable or viable again. And JK, you know, you could also because it's all unbundled now, right? App and Google are not the the only game in town, so to speak. And so they could stand up their own distribution platform with all the privilege data with competitive, you know, commission rates and pricing terms where they monetize it

on the back end with the other stuff that that Josh is describing. Is there is there a reason that that can't work? Is there a reason that that can't work? I guess is my question. Like I'm I'm not a technical person here. I mean, it's definitely doable. I think getting your app store onto the device is the hard part. Um, the ones that are the the highest scale that I'm aware of, they have that carrier relationship. And that's like a they don't have the distribution to do that. They don't have the distribution advantage to get there from my perspective. So maybe they should partner with Epic. Epic Epic. No, like Epic Epic's advantage is like Epic's advantage is download the Unreal, you know, the or the whatever the Epic Games mobile app store and we'll give you V-Bucks, right, for Fortnite, right? That's Epic's advantage. Or we'll give you credit for spending, whatever. I guess they could do that, too, right? They could say, you know, we've got

these launch partners and we'll give you $10 to spend for free if you download our app and create an account, right? I don't know. Yeah. Yeah. I mean, it's expensive. if it's a long-term investment. Um, I think if you can crush it with an ad network, who cares where the the revenue is flowing from? you just take um I think what's more important is to make sure that those data pipes wherever they are whether it's web stores um new app stores whatever it is is to make sure that you have a a highfidelity as firstparty as possible data pipeline because that means that you can define and maximize and make sure the data you're getting is clean and reliable. If you can accomplish that, then it's it's incredibly powerful. Um the having your own app

store outside of a few cases, I haven't seen it be um it would be a lot more difficult, right? Just because distribution things like that, I think web shop is easy. Yeah, but it's also it's also a race to zero, right? I mean like maybe I mean maybe I mean it makes it makes purchasing more accessible. Um I think that there's going to be you know somewhat of an increase in margins for for um purchase based games that may or may not just go straight back into the ad networks. Who knows? Um but what's really cool is um it's it's not a technology change. It's a distribution change. And it's really hard to understand is there more innovation that could come from the fact that now we've changed the relationship with our customer specifically around the monetization point. I'm really curious to see um what happens there over the next few years because the idea of well you're just

doing the same thing but in a different place now that's like v 0.1 um what happens when it's like well no now you can have a purch relationship anywhere now you can have a bit like a relationship with your customer anywhere that can convert immediately anywhere what does that unlock where will like western or eastern or whoever your your target market is, you know, where where will that find traction? Uh, I think that's pretty interesting. And that might make the app stores less less um less valuable, like alternative app stores less valuable. All right. Well, maybe we could wrap this discussion by just talking future outlook for Unity. what are what are your thoughts in terms of where they could potentially get additional growth or you know just your general thoughts in terms of how how they will be fairing in the next two to three years. Um well to that point I was going to ask Josh

about everything you just described right you know the the blind spot for apploving and unity's opportunity but we know they have execution issues had we have leadership now right they have had in the past and they have not necessarily done a lot to disprove that until they do right and so not saying you have to put a specific number on it but like what do you think the chances are of them actually being successful at doing it Right. Is it 20%, is it 5%, is it 50%. Because I think that changes how you think about unity going forwards. Yeah, I can confidently say that I have absolutely no idea. Um, and uh, the reason it's so hard is because of the number of like ifs in the statement. And um, I call them like ifs, but that's actually a horrible descriptor because ifs are binary. And like let's say they start passing back richer

data. That's a spectrum. Um you know let's let's say um they start passing back other data sets that they have because they have a lot of businesses um even add even Iron Source. Um that's a spectrum. Uh how how effectively can they connect for instance let's say a level play can they at all? You know, there there's so many like shades of gray. It's just the law of math and compounding. Yeah. If even if it's 99% success rate at each step, you do it 10 times and you're down to 90% success rate. Yeah. And so it's very hard to tell. And then how does that ultimately stack up against Apploven where I think with their the size of their their market share and their advantage? Is that something where Apploven is going to prioritize their market share and they will surrender margin to keep their market share or is that something where they're

going to surrender some market share? Um, I don't know. That's so many variables. And I think that what's going to be interesting is seeing um like over the rest of the year what happens with with Vector and seeing that story slowly slowly slowly zoom in. Um because like all I can really say right now is it's a coin flip. Um and as I say with my team, I say it's a coin flip when I have no idea. Um, and I it's unknowable. I I am cautiously optimistic. I'm actually feeling like Unity has like they have a lot to gain here and it's it's it's like there's I would say there's a very high ceiling and the the floor I mean they're close to the floor already. uh and so I think not not only from and

I understand that most of their their uh ability to grow revenue is going to be from grow. I totally understood I totally understood that on the create side there's some limitations but I also think that when when it comes to like new opportunities for them even like on the create side with AI and things of that nature and there's a reason why AI is like impacting game development last a lot of nerdy reasons we don't need to go into but like um and where why more production code has gone into like web developed applications and and more web SASbased companies But I will say like there's some technical challenges that will soon get addressed like the ability of um Gen AI to address uh languages that are statically typed and things of that nature. And I think like the AI has to go within Unity, right? Within the within the engine, I I believe. So I think there's going to be a lot of ways for Unity to potentially additionally

monetize create users which is you know marginally um better and to the to the extent that they can lock lock in and entrench mobile customers to the points that we've already discussed I think that's better and then if they do that and to the I think the main point you're you're subtly discussing Josh about sharing data but I think once they go whole hog into that I'm assuming but if they then I think we're really going to start to unlock more powerful opportunities on the grow side and I do think that from my perspective a lot of us are afraid of apploving we want unity to succeed and um and so there's that part and then finally I would say I don't know Matthew Brberg but it does seem like they've been executing better at least it's not like at least it's not as bad as before um I haven't done a check-in with some of the folks that I I have known there,

but you know, before it was bad. Before it was like, you know, the guys I knew were working three jobs and they're like, "Oh, yeah, I work at Unity, too, but whatever. I don't really care about my work." Things like that, like there were a lot of people I talked to like that. So, if they can fix that and just get like earn their stockbased comp, right? If they can get there, then I I think Unity has a lot of room to to to improve and grow. I I think the only two things, sorry, I was just going to say the only two things I'll say, and this is because I'm saying it from the stock market perspective, because that's the world that I live in here, the financial perspective, is when the stock was at like 15 bucks two months ago, I think everything you guys are saying is encouraging enough to say to get enthusiastic and and and take a flyer on a stock, right? say at that time to our personal to our personal group. I said bye bye bye. And you were not the only one. A lot of people were, but but it's up 10 bucks since then in two months. So

it's rallied a lot. The valuation is is by no means attractive anymore. You're looking at like 26 times EBA this year and like 20 times EBA next year. Even if you assume that that's a little bit sandbagging and they'll beat that, you're still looking at like high teens and 26 numbers. Valuation is always relative, but the lower you're buying in, the more room for error you have, right? And the more ifs, ands, and buts that are part of your investment case, you need more margin of error, right? And so as you push into those high teens, low 20s, ZBAT margin, buying on ifs, ands, and buts is is less is is tougher to swallow. And I'll just throw out, we didn't talk about their cap structure, but over the course of those high-flying years when the stock was in the $300 range, they're doing all that M&A, they issued a lot of convertible debt, which is all underwater, right? So, they're going to have to figure out how they deal with that as those come to maturity, but that's all going to be end up being very

dilutive as well. Yeah. I mean, I think that the the outcome potential is massive. I mean that we've seen comp you know businesses like applovin but also to um actually similar growth percentage probably from a smallest starting number companies like Maloco really really succeed in excel but we've also seen chart boost ad colony tapjoy and and moi I remember when I was new in the industry millennial media was huge Um overall there's been a lot of consolidation um and a lot of the big names are just totally gone now and a lot of those companies especially I remember chart boost was u super promising super hyped and if they can do a couple of things it would be massive uh the the the range of outcomes this is like a really interesting inflection point so what you're saying is Zingga

needs to buy Unity That would be interesting. Sorry, that was a That was a bad Zinga That was a bad Zinga chart boost joke. I'm sorry. That was when Zingga ran out of things to point to for growth. So, no, we're going to be we're going to be a content fortress, right? That was back when content fortress was in the lexicon bought chart boost. I'm sorry. I I'm making a bad joke. Yeah, I have no idea what's going to happen. Um, I would love as a as a, you know, a mobile game studio business owner, I would love to have more competition on the ad network side, but it really does have to be earned with performance. Um, so we'll see what the next year holds for us. Yeah. And to your point, like I think it really does come down to leadership, right? So I I think to me that's just the biggest question. There's there's a bunch of questions, but the number one question is can Matthew Bramberg can he drive performance in the business? I think

it's like you can just simplify it down to like Bramberg in my opinion. So, I'm cautiously optimistic. Um, sounds like Josh, you don't know. And Matthew, sounds like you're saying if you just look at the valuation and just look at it from a financial perspective, it's a little pricey is what you're saying. There's less room for error at this point. I mean, look, if they can execute, apploving is the is the high-end scenario. And that would be tremendous, right? Tremendously successful from here, right? If they can be as successful as we think they can and everything works and all of the ifs play out, you know, there there's no reason their margins can't look like Apploven's at scale because this is a there's a ton of operating leverage if they can triple quadruple the grow business by growing as as Josh laid out. But what are the odds of that happening? It's just it's hard to put a number on that at this

point. And so it's very hard to kind of value what that actually looks like. Um, you know, I think the other thing that maybe we wanted to talk about, but probably is low odds as well is would someone ever acquire Unity? I think the odds of Unity getting acquired have gone down a lot. I thought they were higher entering 2024 when they had fired JR and they brought in the temporary CEO to put lipstick on the pig. Yeah. You know, I thought that that was the time to sell it. And honestly, I thought that Xbox would have been the logical buyer at the time. Um, I don't think there's a logical buyer. I mean, you could look, Apple can afford anything, any of the large tech companies. Somebody about Apple, right? Like somebody had posted a rumor or I think Yeah, somebody posted a rumor. It's it's one of those rumors that basically is on the lines of somebody got a screenshot or something of like one of the corp dev spreadsheets from like Apple or someone and and Unity was on it. So, you Apple must be buying Unity. For those that have never worked in corp dev, if you're not tracking every single possible opportunity, you

know, in live time, you will not be in a position to act on it should it become a viable opportunity. Just because it's in a spreadsheet doesn't mean it's a viable opportunity. So like the same thing happened with EA many years ago with Microsoft. Like someone leaked out like EA is one of the 50 names that Microsoft's, you know, Xbox Corp dev tracks. Well, no There's only 50 like names that move the needle for Xbox. The same thing is true for Apple. there's only so many like acquisitions that move the needle for companies of that size, right? And so, um, like of course they'd be on a on a corp dev tracking spreadsheet. I think the question is is is there is is is there logic to an acquisition? And for someone like Apple, it's just never been their mo for large M&A unless they see the TAM is tremendously large. you know, everyone bered the Beats acquisition, but Apple created AirPods out of that. And basic I think even several years ago, I haven't seen the numbers recently because I've been out of that industry, but like AirPods was like a $60 billion

business by itself. Like they made a Fortune 500 company out of a $2.5 billion acquisition. Like that paid for itself, right? Like they'd have to be confident that they can see something similar for Unity. Um the same thing goes for any of those other companies. And I just don't know if that case is there. Um, so I I I don't know where I land. I just think the odds of it are very small at this point. I thought someone would have maybe bid for them when the stock was depressed and there was a lot of easy cost synergies to take out because they hadn't done all the all the trimming, but you know, the easy the easy cost cutting done. It's not as cheap anymore. The cap structure makes it difficult with all the possible dilution from all the converts. So, um, probably very low likelihood. I'd say less than 5%. knowing that someone's going to buy them tomorrow because I said that. All right. Well, guys, I think any other last point you guys want to make otherwise I think we've uh we've discussed this a fair amount. So, all right. Well, go ahead.

Go ahead. I was just going to say my my last thought was that I I really liked your point there that um JK that um a lot of it really comes down to to Bramberg and what they're willing to do and I would say like what they're willing to do um just to make Vector successful and to empower the guy running Vector and building that out, right? because I think their ability to succeed is kind of um critical to that company's future. Um because that's if the ad if the ad industry or the ad business shrinks and keeps shrinking, the the overall outlook for the business is so much worse, right? And and if he turns it around, that's when I would say give him his stockbased confidence. Yes. Not not in decline, not in sideways, but anyway, not going to do it now, but I could go dig up the employment agreement. I'm sure there's, you know,

incentives in there around that and whatnot. I'm sure. I'm sure. All right, guys. Well, for uh thank you guys, Josh and Matthew. Uh great having a new Pixel Brothers, new Pixel Brother on board with us. And for our audience, we will catch you next time. Thanks everybody. [Music] [Music]