A look at Unity (U)

Got interested in this company after its huge acceleration of rev growth after IPO. Took initial small position to evaluate further. Here is a whole bunch of raw notes from my research.

Last 3 Qs:
Revenue Growth 35% → 42% → 53%
Create Rev Growth 24% → 38% → 47%
Operate Rev Growth 53% → 62% → 71%
NRR 133% → 142% → 144%

Not a gaming company - a gaming PLATFORM.
Dominate platform for creating & monetizing mobile games.
Gaming is land (Create) and expand (Operate).
Leader in AR/VR [… but is still nascent].
Expanding out of just gaming, to industry-based solutions (film/tv, auto, architecture, marketing). [Only 8% of high end custs so far.]
Operate segment is usage-based or rev-share. [Mostly driven by ads.]
One of only pure plays on Metaverse digital worlds.
Drives many multiplayer games, even ones built off platform.
Sticky platform - difficult to switch.

Duopoly vs clear leader (Unity vs Unreal).
Common industry perception is “Unity for ease, Unreal for quality”.
Clear COVID bump [… but what happens to mobile from here? I feel that “return to normalcy” might affect PC/console more than mobile, plus COVID may help give AR/VR a needed kickstart.]
Operate is gaming only; needs more “usage-based” on non-gaming clients. [Forma, just released Dec-20, starts to expand this.]
Create segment is seat-based, doesn’t scale.
Very muted guidance gives pause, after prior Q4s always gave clear 20%+ seq bumps.

Will be clear winner now with mobile, and going forward with VR/AR and metaverse. But lots of moving parts with this company, and future after COVID is unclear, so need to see how the next few Qs play out before moving this up in conviction. For now it’s at the ‘barely in my port’ stage.

Criticism, thoughts, insights greatly appreciated!


===== Company

Platform for interactive real-time 3D content (RT3D). Set of solutions to create, run and monetize interactive 2D/3D content.

A bit like Coupa and Elastic - built a platform with engines/libraries/SDKs, exploits partners to extend it in 3rd-party ways, and acquires the better ones to expand platform.


  • Game developers & architects
  • Architecture Engineering Construction (AEC)
  • Auto designers, manufacturing
  • Film/TV makers and animators
  • Brand creatives


  • 2D/3D real-time content
  • mobile, tablet, PCs, consoles
  • AR/VR

53%+ of all mobile games
1800+ R&D team
Downloaded more than 5B times per month in 2020


  • Unreal Engine (Epic Games / Tencent), esp for high end console/PC games
  • Valve Source 2
  • Roblox
  • Godot 2D/3D engine (open source)
  • … wide variety of small mobile frameworks


Mobile = League of Legends, Hearthstone, Age of Magic, War Robots, Jurassic World Alive, Arena of Valor (Tencent), Honor of Kings (Tencent), Warlords of Aternum, Guns of Boom, Last Day on Earth, Tacticool, Royal Blood, Monument Valley, Flappy Bird, Crossy Road
PC/Console = In the Valley of Gods, Ori and the Will of the Wisps, Oddworld: Soulstorm
AR/VR = Beat Sabre (VR), Pokemon Go (Mobile AR), Dr Grordbort’s Invaders (Magic Leap AR)

Blizzard, Volvo, Skansa, Baobab Studios

S-1: https://www.sec.gov/Archives/edgar/data/1810806/000119312520…

===== Overviews

S-1 Review @ Meritech


1.5M monthly active creators, in 190 countries
3B monthly downloads to 1.5B unique devices
3379 empl;
Based in SF, w/ 44 offices w/in 16 countries


Create segment

  • tools for content creators
  • priced per-seat, per month
  • 3 pricing tiers - Plus, Pro, Enterprise

Operate segment

  • platform services to grow and engage user base
  • can be used in any game, not just created in Unity
  • enables monetization via ads, in-app purchases
  • other tools like engagement analytics, multiplay, P2P communications
  • priced via revenue-share (take rate) or usage-based


  • Powers 53% of top 1000 mobile games on Apple/Google
  • Over 50% of all games (PC, console, mobile)
  • 93 of top 100 game dev studios are custs
  • 1.5M monthly active creators
  • Pro users actively use - 4.9h/day in FY19, 5.1h/day in FY20
  • 716 custs w/ TTM ARR >$100K, avg ACV $190.5K
  • Owns 40 US patents, 8 int’l patents, 79 applications

Platform captures and analyzes end-user behavior and app performance data ; ~ >50B in-app events per day across 20 diff platforms.

US 24.4%, EMEA 37.6%, China 13.5%, APAC 18.5%, Other Americas 6.0%
EMEA and China both grew ~300bps YoY, US shrank

S-1 Review @ S-1 Club

Founded 2004
Used by 53% of top 1K mobile games
Used by 50% of games across platforms
Used by 93 of top 100 largest game studios by revenue
CEO Riccitiello brought in in late-2014, ex Electronic Arts

2019 Revenue 541M +42%

  • Operate Revenue +59%
    Custs>100K are 74% of revenue

$NER rising 133% → 142%!!!
TAM 29B (Gaming 12B + Other 17B)


Main competitors:
Epic Game’s Unreal Engine

1.5M creators per month used it
1.5B devices per month download content

Other markets beyond gaming

  • Skanska (one of world’s largest construction company) going interior mockups, 2D/3D logistics.
  • Volvo has 30+ creators using for R&D, design and marketing.
  • Filmmakers an use to make virtual characters w/o motion capture. Disney used to shoot Lion King.
  • HK Airport used to design buildings & plan complex scenarios & simulations.

“Metaverse” - highly immersive virtual world powering real-world interactions
… worlds like Fortnite, Minecraft, Roblox


Create Solutions

Set of features to build games quickly and efficiently. Supports all platforms: IOS, Android, Windows, Mac, Linux, PS4, XboxOne, Oculus, PSVR, tvOS, AndroidTV, ARCore, MagicLeap, MS HoloLens.

Upfront subscription cost over 1-3yr terms. Personal and Student plans are free, or pricing tiers Plus, Pro and Enterprise at $399, $1800, $2400/yr/seat.

  • Unity Pro
  • Unity Enterprise
  • Unity Plus
  • Unity Personal
  • Unity Student
  • Art Engine
  • Forma
  • Granite
  • Reflect
  • MARS (Mixed & Augmented Reality Studio)

Operate Solutions

Priced on usage-based and revenue-share, to allow developers to grow, engage and montetize their user base.

  • Personalized Ads
  • Contextual Ads
  • Unity Ads - ad network for mobile games
  • Unity IAP (in-app purchases) - sell digital items or upgrades in-game
  • DeltaDNA - player behavior analytics
  • GameTune
  • Multiplay - multiplayer games
  • Build Server
  • Vivox - voice or text chat
  • Cloud CDN
  • Simulation
  • GameSim

In general, Unreal thought of as high-end of market, Unity as low-end. [Not sure that is true, but do know Unreal is the ‘better fidelity’ option if going for hyper-realistic.] Unity owns mobile, but is moving towards Unreal by improving 2D/3D engines. Now powers AR/VR games, like Pokemon Go, Jurassic World Alive.

S-1 Breakdown from Macro Ops


  • Invest in product innovation
  • Grow existing gaming custs
  • Grow new gaming custs
  • Grow beyond gaming
  • Grow across global markets

S-1 Review by Aaron Bush @ Master the Meta:

  • 22 diff products – 50% gaming focused, 35% agnostic, 15% non-gaming
  • growth through vertical integration
  • new frontiers in AR/VR, AI, non-gaming
  • 50% marketshare, $542M rev in 2019 seems like a low take rate for value added
  • 50% of revenue going back into R&D, from 56% of workforce
  • 60% of revenue is from Operate, likely mostly ads
    … will Apple’s IDFA plans pose a threat? unknown

Opportunities in Create side for better, scalable monetization, esp non-gaming.
For gaming, Create + Operate segments are land and expand.
Majority of custs use Create’s free tier.
55% of custs>100K use both Create & Operate (seems low).
Only 8% of custs>100K are non-gaming.

Common industry perception is “Unity for ease, Unreal for quality”.
Majority of Operate is ads; deltaDNA & Vivox are <10% of revenue.
Unreal added live services offering (no ads yet).
Working on ad solutions in AR/VR.


  • Non-gaming needs to hit land-and-expand. Can Unity build Operate products for non-gaming.
  • Create cannot scale with per-seat fixed cost.
  • Unreal doesn’t charge, instead has royalty-based model. As of v5, it is free to license until $1M in revenue, then 5% royalty fee.

Unity Deep Dive (Value Hive podcast w/ Aaron Bush, 9/18/20)

Unity deep dive (Chit Chat Money deep dive, 10/1/20)

CEO joined 2014, was from UA.
Creator focus in mission and mgmt.
Sexual harassment suit against CEO - Unity is denying and defending. HR head was involved, no longer there.
Mgmt/Insiders 16.7% ownership, Sequoia Capital & Silverlake 38%

Difficult to switch platform
Sticky w/ services

AEC - Partnering w/ AutoDesk - good for AEC market
Automakers - used heavily across company, architecture, design, marketing
Film industry - replaces green screen and live-motion

The Mandelorian used Unreal Engine, change scene/background in real-time

Unreal Engine changed pricing
You don’t pay for it until $1M in game revenue

Pickaxes for metaverse
Developers going to be sticky

next 2 years will see new Xbox, Playstation, SwitchPro
higher end systems,
60% is in operate, adjacent markets outside gaming aren’t using that

Duolopy w/ Unreal Engine (not top dog??)

Chit Chat Money - Chris Seifel on Unity (Dec-20)

Used for >50% of mobile and 60% of AR/VR games

Short term - Gaming monetization
Mid-term - AR/VR, gaming and other
Long-term - Metaverse

Duopoly, difficult to switch
Metaverse will start in mobile?

Unreal is C++, Unity is C#
Roblox is no-code environ

CEO from COO/President of EA, owns 11%
Resigned EA over performance after a lot of M&A acq
Tried to acquire TakeTwo at EA
Joined board in 2013, CEO in 2014
Sexual harrassment lawsuit against CEO from VP of Recruitment after she was fired
Pivoted Unity away from just gaming
Not going towards royalty rate like Unreal

Moat - difficult to switch, mobile & AR/VAR leader
Want to see better monetization

Invest Like the Best Podcast

Matthew Ball - The Future of Media: Movies, the Metaverse, and More

Gavin Baker - on Metaverse
39:47 - 46:13

  • Metaverse = connected virtual worlds that people will spend a massive amount of time in
  • AR/VR likely to be the interface, why Facebook bought Oculus
  • Video games are becoming a social platform
  • Roblox and Fortnite starting to become this, hosting social events


Unreal vs Unity

Both have great 3D, Unreal best fidelity
Both have 2D, Unity has larger focus & tool-set
Unity has better VR
Both do AR but Unity more mature
Both do multiplayer, Unreal integrated, Unity coming
Unity has better mobile

Unreal Engine 5 licensing change (May 2020)
Pricing was 5% royalty on engine
Now no royalties on first $1M of revenue, then 5%
Games in the Epic Store are 12% flat royalty (no engine)

Epic Online Services released - free suite of tools to enable multiplayer features – in-game friend lists, matchmaking, lobbies, etc.

Unity vs Epic from S-1

8B hours of gameplay per month
1.5M active creators per month
8k apps/games each month, over last 6mo
716 custs >100K TTM ARR
… 60 of those outside gaming

Gaming Trends


U is a great company but they only guided 29% growth for next quarter, even with a beat they may only grow at sub-40% level which implies a significant slow down. Any thoughts?


1 Like

I am an industry veteran of video games and worked in the field for about 12 years before burning out and needing to switch to a less stressful work life balance. I ran my own games studio for about 3.5 years of that time as well. This was from 2001 till 2014 or so. I witnessed the rise of mobile gaming from when it was an interesting side note to now being over 50% of the market for video games.

Here is a handy chart to visualize the rapid growth of mobile gaming:

Unity is by far the dominant PLATFORM as stated. Simply because it is easy to use and adopt. The price points make it the ideal tool of choice for smaller (non-console) teams of which there are thousands all over the world and growing daily.

Console games make about 25% of the remaining market and desktop games the balance 25%. Of the consoles the highest selling console at the moment is the Nintendo Switch which is a lower resulution console based more on it’s highly enganging brands and gameplay mechanics (think mario and zelda) than it high end graphics. It is in the middle of it’s life cycle so still plenty of growth left despite the imminent launch of the latest PS and Xbox. So Unity has a comfortable foot hold in this space as well. Although it does have higher end capabilities they are definitely not as the same resoltion as what Unreal can offer. Incidentally, PC games are also a good mix of AAA and casual.

Having used both engines in production I can say that Unity has many more avenues for growth in the VR/AR and commercial/industrial design spaces than Unreal. Unreal is mainly designed to be an amazing First Person Shooter engine. Although it has been used for many other things, the best parts of the engine are really made to make this specific genre of gaming shine. And for good reason because the highest selling console games (Call of Duty and the like) are all First Person Shooter type games.

Coupled with what will be a massive rise in smart phone adoption in the developing world the scope for mobile game growth is still large. Consoles require specialized equipment and much higher budgets to get into so the growth is still capped by being largley an entertainment tool of the middle and onward income classes.

Mobilge games have the advantage of mostly being free and monetizing through in game ads and in game items you can purchase. Unity has an added growth engine by running and owning it’s own ad network that most mobile games would tap into. Unity gets a hefty slice of that - which is the primary monetization tool of mobile games.

The biggest potential ahead though is the VR/AR space which is quickly taking up steam with the rise of advanced processing and the democratization of VR tech. The Occulus is a great VR machine but cumbersome and hard to take with you or utilize for long periods of time. As this tech becomes more mainstream, the platform that will take it to the next level is your mobile phone and not a fancy headset. This is something all game developers are quite well aware of and prepared for. In that sense Unity is well poised to be the dominant developer platform both for it’s reach and adoption on the dominant delivery platform.

Also the multi-verse idea that is discussed by Muji is that of connected worlds. Think massively multiplayer games within massively multi player games. These types of experiences don’t need high end graphic wizardy. Indeeed the most popular multiplayer worlds are things like roblux and minecraft. All considerably lower resolution than your current AAA (console) level fare.

Unity is a smaller position for me at 3% but I’m slowly adding on dips because I see that the long term potential and tailwinds are there.

Also as phones become more powerful graphics processing units, Unity has always scaled up to meet the potential so I think it will also develop lock step with the capabilities of the phones.

The global mobile games market in 2019 was 152 billion.
In 2020 that grew to 166 billion.

Some other interesting statistics:
Estimated Market Share of Mobile Games of Global Revenues
2017 – 46%
2018 – 51%
2019 – 54%
2020 – 57%
2021 – 59%
Take away: Immediately this does not scream hyper growth but this is the share of the entire industry. 10 years ago this was inconceivable to imagine. The trend is showing extremely positive for mobile games to continue the dominance in the industry especially as mobile is set to grow much faster than console. Obviously as the barrier for entry is lower.

What are the Current Trends in the Mobile Game Industry?
Cloud Gaming
Augmented Reality Gaming
Cross-Platform Play
Blockchain-based games
More Hyper Casual Games
Competitive multiplayer mobile games
Take away: Unity has a foot hold in all of these.

Types of Games Users Play
Puzzle – 57.29%
Arcade- 55.60%
Racing- 31.31%
Card- 15.44%
Board- 14.09%
Simulation- 13.72%
Take away: None of these are graphic intensive games. In fact a large part of the mobile games market is made up of middle aged female players. Think Candy Crush and Hidden Object games. They don’t need high end graphics. The console market is much narrower in reach.

Top 5 Countries by Revenue in US Dollars and Players
United States of America (209.5 Million Players) – $36,869M
China (586 Million Players) – $36,540M
Japan (32.20 Million Players) – $18,952M
Republic of Korea (12.4 Million Players) – $6,194M
Germany (13.43 Million Players) – $6,012M
Take away: What happens when India starts to see massive adoption of smart phones? It’s coming.

Key Monetization Methods
In-App Ads
Rewarded Ads/Videos
In-App Purchases (Various elements like coins, diamonds, energy, boost, & so on)
Paid Apps
Ingame Brand Placements
Take away: Unity owning it’s own ad network and the revenue in it is a sneaky tailwind that will grow nicely.

All in all I think it’s definitely one to watch.

Hope this was helpful!


Small correction I meant to say:
The global games market in 2019 was 152 billion.

And not:
The global mobile games market in 2019 was 152 billion.

Mobile was still more than 50% of that.

Thank you Muji and Noserider - great posts!

As a long-term gamer and an IT professional, I also found this TechCrunch article on Unity quite useful in terms of considering Unity as an investment:


I currently have a small-to-medium sized position in Unity and building up on pullbacks.


I like Unity, but have been waiting to see how the conference call on Feb 4th goes. As Zoro pointed out, their most recent quarterly growth benefited significantly due to pandemic stay at home orders.
“Tough comparisons” seems to imply the revenue growth rate will slow from 53% back down to somewhere in the 40s.

Long term the reason I am bullish is the opportunities for expansion beyond gaming into other commercial verticals. Currently 10 of the top 10 auto makers already use the platform for 3D modeling. The subscription is seat based. In classic “land and expand” mode, Unity’s revenues will increase with an excellent 144% dollar based net retention rate.

The CEO said this,"
Beyond gaming, we began to focus on new verticals just a few years ago. We’re growing into new verticals like industrial, automotive, architecture, engineering, and entertainment, rapidly solving more and more customer problems and identifying more and more use cases. And while we’re gaining rapidly in these sectors, we are also examining new industries to enter and expand.

Let me give you a few examples. Toyota worked with Unity to create a mixed reality system for diagnostics and repairs for their dealerships and service networks. This was a high-stakes decision because repairs have a big impact on brand perception. Toyota used to manually tag 20,000 pictures to ingest them into a learning algorithm, a process that took about 200 hours.

Toyota turned to Unity to build accurate 3D models of the body and engine compartment. This reduced Toyota’s workflow time to 30 minutes, a 400 times reduction.

Valerio Dewalt Train was invited to build on the design of a 36 story, 390 foot tall Bell Tower and Bell Park Office Building in Denver, Colorado. This was a complicated project because the location and the size of the tower mattered to city planners.

Valerio deployed our architecture product, Unity Reflect, to geolocate the building on site and develop an augmented Reality digital twin. By using Reflect, Valerio Dewalt Train built a prototype in less than four weeks and won the bid with the city.




Can you post a link. I would like to get on that conference call.


Not the link you’re looking for but there’s growing coverage over on SA for Unity, in this case alongside Crowdstrike and Ncino…



Hi Qazulight-
Here’s the press release info. https://investors.unity.com/news/news-details/2021/Unity-Ann…

Highly recommend using the Borsa earnings call app to access. Thanks again to the person on this board who shared the app.


Hoping to add a few more supporting details here from my research that helped me decide to open a starter position.

  1. Joachim Ante is a co-founder and has been the CTO since the company’s founding. Oh and he’s only 38 years old! How great is that when a co-founder is the long-term CTO? This adds an extra level of trust for their sustained innovation going into the future. David Helgason is another of the 3 co-founders and still a member of the board. Two of three founders still active, thumbs up.

  2. Their mission is “to enable more people to be creators.” Love it: short, simple, descriptive, and makes sense.

  3. Large inside ownership. Some of the largest holders are from investment firms but they are also on the board.

  4. Create Solutions grew 45% YoY while Operate Solutions grew 72% YoY. I understand the COVID tailwinds for the Operate Solutions but I view Create Solutions as having COVID headwinds and it still grew 45% YoY! Granted this is only 31% of their revenue versus 60% in Operate, but still impressive to show that all aspects of their business are growing.

  5. Huge amount of cash ($1.76B) with no debt.

  6. That share donation that Muji mentioned was to fund a Unity Social Impact division. They focus on 3 pillars: 1) Education and Economic Opportunity for All, 2) Sustainability, 3) Health and Well-being. I can get behind all of these because they are lasting needs, not just what is popular to support at the moment. That shows long-term thinking versus near-term brownie points in my book.

All-in-all I became impressed by this company as I looked deeper. Thanks to Muji for reinitiating my interest in Unity.

Soon-to-be-long U 2%