Unity Software loses $5 billion in market cap as privacy workaround fails

Posted:
in iOS
Unity Software offered advertisers a workaround to avoid losses from Apple's iOS 14 App Tracking Transparency, but it didn't work and company shares are now down 37%.

App Tracking Transparency
App Tracking Transparency


Apple's App Tracking Transparency (ATT) lets users opt out of being tracked by advertisers as they use apps, and that change is expected to mean Facebook alone will lose $12.8 billion in 2022.

ATT came as Apple also replaced its IDFA, the Identifier for Advertisers framework, which previously enabled companies to identify users enough to target ads to them. Apple has instead now offered advertisers an alternative framework which it says helps them get the information they want, but without affecting user privacy.

Unity Software, however, believed that it could work around ATT in part by monitoring websites to see when users visited them, instead of using their iPhones to track where they were going.

According to MarketWatch, this Pinpointer ad product of Unity's didn't work. Consequently, its flawed information led to buyers reducing their ad spending.

The result is that shares finished down 37% at $30.30, the company's worst figures since its September 2020 IPO when shares were $52 each.

However, MarketWatch quotes analysts who say that while it was Unity Software's Pinpointer product that was the chief reason for the drop in share price, the system has now been fixed.

"While the core issues are now resolved, it will take time to retrain the machine learning algorithms and win back ad spend that migrated away early this year," said Morgan Stanley's Matthew Cost. "We also believe the guidance includes a secondary impact, as engineers have been redeployed to fix these issues were forced to delay their other projects (many of which would have contributed incremental revenue) until later in '22/'23."

Unity Software CEO John Riccitiello told CNBC that it was fixing the issues, and said it had reduced its financial guidance because it is going to take time to address the problem.

"We brought our guidance down, and what that's about is [a] self-inflicted wound," said Riccitiello. "We did some things on the advertising side of the business that reduced the accuracy of our models."

"It's going to take us a couple of quarters to fix," he continued, "and we're going to have slower growth for a couple of quarters while we fix that."

Previously, firms including Snap and Facebook were reported in December 2021 to be attempting to use a loophole to bypass App Tracking Transparency. More recently, Facebook has implemented a hiring freeze, reportedly in part because of the lost revenues caused by ATT.

Read on AppleInsider

Comments

  • Reply 1 of 2
    p-dogp-dog Posts: 116member
    Yay! The loss of billions could not have happened to a nicer bunch of guys.
    watto_cobra
  • Reply 2 of 2
    MarvinMarvin Posts: 14,755moderator
    According to MarketWatch, this Pinpointer ad product of Unity's didn't work. Consequently, its flawed information led to buyers reducing their ad spending.

    The result is that shares finished down 37% at $30.30, the company's worst figures since its September 2020 IPO when shares were $52 each.

    However, MarketWatch quotes analysts who say that while it was Unity Software's Pinpointer product that was the chief reason for the drop in share price, the system has now been fixed.

    "While the core issues are now resolved, it will take time to retrain the machine learning algorithms and win back ad spend that migrated away early this year," said Morgan Stanley's Matthew Cost. "We also believe the guidance includes a secondary impact, as engineers have been redeployed to fix these issues were forced to delay their other projects (many of which would have contributed incremental revenue) until later in '22/'23."

    Unity Software CEO John Riccitiello told CNBC that it was fixing the issues, and said it had reduced its financial guidance because it is going to take time to address the problem.

    "We brought our guidance down, and what that's about is [a] self-inflicted wound," said Riccitiello. "We did some things on the advertising side of the business that reduced the accuracy of our models."

    "It's going to take us a couple of quarters to fix," he continued, "and we're going to have slower growth for a couple of quarters while we fix that."
    Unity's revenue grew since last year though so it seems like companies are using tracking as a scapegoat for having a bad business model:

    https://d18rn0p25nwr6d.cloudfront.net/CIK-0001810806/e209e375-81fb-4ee0-a030-797f3ef1c7f9.pdf

    Unity revenue 2021 = $1.1b, net loss $532m.
    2020 = $772m, net loss $282m
    2019 = $541m, net loss $163m

    Buying Weta for $1.5b probably had more impact than tracking. ATT affected Facebook/Snap by about 10-15%. Unity would still have made a huge loss.

    In-game ads are usually terrible and point to low quality match-3 games. Maybe if they partnered with a company like Valve and sold discounts to decent games they'd have better click-through rates. It's likely that mobile gamers have other game platforms and would buy discounted games for them. Or just find better ways to generate revenue than ads.
    watto_cobra
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