1. Great second quarter. @Unity’s overall revenue grew by 80%, the Create segment by 17% and the Grow segment by 157%. The Create segment contains the games engine, tools for content creation and partnerships. The Grow segment is made up by various tools to gain new users (user acquisition, UA) and to monetize those users by selling ads.
2. Ironsource acquisition completes AdTech portfolio. The Grow segment as described above had some AdTech solutions. But the portfolio was not as strong as it could have been or should have been. That is where Unity’s acquisition of @Ironsource comes into the picture, which closed last November. It added various AdTech products. The most important additions that came with Ironsource were UA tools for advertising apps (“cross-channel marketing tools”, in effect, a DSP-like functionality), and a monetization product (expanding Unity’s SSP-like capabilities).
3. Ironsource also bumps up revenue. With Ironsource also came a significant amount of revenue – explaining the jump in Grow revenue. Let’s take a quick look how results would have looked had Unity not acquired Ironsource. By my estimate, Ironsource made around $765M in revenue last year. (SEC data are not available for the full year due to the acquisition.) If one subtracts one quarter of that from Unity’s 2Q revenue in the Grow segment, it would still have increased by 14% – a very respectable number, particularly given that the gaming industry is as challenged by the overall economic uncertainty as are advertising and media & entertainment in general.
4. Unity is not just games anymore. Unity is widely known as a gaming specialist, but at this point, that has become a bit of a misnomer. As Luis Visoso, Unity’s CFO, explained in the earnings call, 30% of the Create segment are now “industry” clients, Unity parlance for anything that is not games. Diversifying out of a gaming monoculture opens up new revenue streams, makes the company more resilient against disruptions in that market and also opens up a vast new reservoir of non-game, brand advertisers. (No word on how much “industry” clients contribute to Grow segment sales, but one would imagine, at least potentially, it could be as significant a share as in the Create segment.)
5. Beating estimates, stock flat. Revenue exceeded analyst forecasts, and yet. the stock was essentially unchanged. Perhaps that was because Unity cautioned that the gaming market remained challenging, with longer sales cycles, and that China in particular was soft. Still executives had an optimistic outlook for the second half of the year.
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