Game engine maker Unity expects $30M hit from Apple's App Tracking Transparency
Unity Technologies reported earnings on Tuesday, and while overall guidance for the coming year is better than expected, the company anticipates Apple's new ad targeting rules to shave $30 million from its annual revenue.
The estimated $30 million reduction in overall 2021 revenue remains unchanged from an appraisal Unity presented last year, reports Venture Beat. That figure is now expected to be offset with a $50 million bump in year-end guidance.
Unity generates income from developers who use its game engine to create titles like "Fall Guys: Ultimate Knockout," "Ori and the Will of the Wisps," and "Oddworld: Soulstorm." Subscriptions make up a sizable portion of the company's intake, but advertising also plays a significant role in buoying the bottom line.
In the first quarter of 2021, the software firm notched revenue of $234.8 million, up 41% year-over-year. Unity sees an addressable market of close to $29 billion across games and entertainment, including TV commercials and animated films, the report said.
Apple's App Tracking Transparency policies prohibit developers from accessing a user's Identifier for Advertisers (IDFA) tag without asking consent. When opening an app for the first time in iOS 14.5, users are presented with an option to allow IDFA tracking. The feature, which is used by advertisers to track people across other apps and the web, is not enabled by default.
Touted by Apple as an important user privacy tool, critics say the requirement to obtain ad tracking permissions will dissuade users from participating and thus hurt businesses reliant on ad revenue. Unity is one such company bracing for impact.
While Apple has yet to release official statistics on ATT adoption, a recent analysis from Flurry revealed only 4% of daily users in the U.S. are allowing apps IDFA access.
The estimated $30 million reduction in overall 2021 revenue remains unchanged from an appraisal Unity presented last year, reports Venture Beat. That figure is now expected to be offset with a $50 million bump in year-end guidance.
Unity generates income from developers who use its game engine to create titles like "Fall Guys: Ultimate Knockout," "Ori and the Will of the Wisps," and "Oddworld: Soulstorm." Subscriptions make up a sizable portion of the company's intake, but advertising also plays a significant role in buoying the bottom line.
In the first quarter of 2021, the software firm notched revenue of $234.8 million, up 41% year-over-year. Unity sees an addressable market of close to $29 billion across games and entertainment, including TV commercials and animated films, the report said.
Apple's App Tracking Transparency policies prohibit developers from accessing a user's Identifier for Advertisers (IDFA) tag without asking consent. When opening an app for the first time in iOS 14.5, users are presented with an option to allow IDFA tracking. The feature, which is used by advertisers to track people across other apps and the web, is not enabled by default.
Touted by Apple as an important user privacy tool, critics say the requirement to obtain ad tracking permissions will dissuade users from participating and thus hurt businesses reliant on ad revenue. Unity is one such company bracing for impact.
While Apple has yet to release official statistics on ATT adoption, a recent analysis from Flurry revealed only 4% of daily users in the U.S. are allowing apps IDFA access.
Comments
Apple should partner with these guys and go nuts on 3D rendering hardware.
https://www.theverge.com/2020/8/24/21399611/unity-ipo-game-engine-unreal-competitor-epic-app-store-revenue-profit
"Unity admits it’s never made a profit since the very beginning"
From their annual report:
"Our revenue for the years ended December 31, 2020, 2019, and 2018 was $772.4 million, $541.8 million, and $380.8 million.
We generated net losses of $282.3 million, $163.2 million, and $131.6 million for the years ended December 31, 2020, 2019, and 2018, respectively"
Making game engines is not a very profitable business model. Epic makes most of its revenue from Fortnite, 97% according to the following:
https://www.msn.com/en-us/sports/esports/epic-v-apple-trial-documents-reveal-new-financial-information-around-fortnite-s-success/ar-BB1gkqjS
https://www.gamepressure.com/newsroom/fortnite-we-know-epic-games-revenue/zd3208
Epic game engine revenue is only around $100m per year. Companies that make engines would be better off being supported by a big company that make revenue elsewhere. Unity is valued around $23b despite making no profit.
Again, Apple needs to take gaming seriously. Create a killer game engine that fully supports Apple Silicon(imagine that!) and buy a 1st party game studio.
Epic makes about 97% revenue from Fortnite. If Apple can develop a Fortnite killer with their own engine they can take out Epic altogether. Get rid of that tumor for good!
Shows that their store revenue is a good grower too.
2018: engine = 124/5628 = 2.2%
2019: 97/4221 = 2.2%
2020: 100/3582 = 2.7%
More accurately, 97% of Epic's revenue comes from everything except their engine, primarily Fortnite. While the store revenue is growing, they get 12% of that. The store is also growing because they are using the Fortnite earnings to pay for exclusives and free games.
Social gaming is a big revenue driver. Roblox, Minecraft, Fortnite, PUBG, Call of Duty Multiplayer, GTA online.
They make money from microtransactions though. The Apple Arcade business model seems a bit more respectable. If they had a social gaming platform, it would strengthen Apple Arcade.
I was going to suggest a game like Oceanhorn turned into an Animal Crossing type game, they built the second one on Unreal Engine:
https://www.unrealengine.com/en-US/spotlights/switching-to-unreal-engine-cornfox-bros-is-moving-mobile-gaming-forward-with-oceanhorn-2
In that video, they describe the game engine like a camera for a film maker where the film maker doesn't want to build the camera. They want access to the source code and it has to be platform independent. That would be a big undertaking for Apple. Amazon did it with Lumberyard, branched from Crytek's engine.
The engines that are out there are pretty bad quality but it makes sense in light of how hard they are to build and maintain and how little revenue they make, combined with the requirements for open source.
Their market cap is $23b, that's a steep price to pay and the engine could be much better than it is. They'd probably want to use Swift as the coding language too.
Ah yes, just simply build an Unreal Engine killer and a Fortnite killer, that’s easy. Lol. You realize how many studios have tried to take on Fortnite already? You realize UE has been in development for 25 years?
Also, if anyone cares about gaming on the Mac/iPad/iPhone, you don’t want to “get rid” of UE — it’s the most advanced cross platform game engine and you’d be cutting out a huge number of games that get published for Apple’s platforms and would simply be available on all others instead. Great idea.