Unity, a 3D development environment, game publishing platform, and mobile monetization provider that powers the technology behind about half of games published globally today acquired “app economy business platform” ironSource for $4.4 billion. Key to the deal according to Unity CEO John Riccitiello: synergies around more data that will make ad targeting better.
“More data is better,” Richitello told me today. “And a diversity of data means we’re not dependent on any one data source.”
Good ad targeting drives game monetization, he added. And successful game monetization means that Unity’s core customers, game developers and publishers, not only do well, but also stick with the Unity platform.
“If you don’t have a great business to go with a great game, you don’t have a great game because you don’t have the resources to make it,” Richitello says.
The deal is massive for the mobile adtech space. Billed as a merger, shares of ironSource will be swapped for 0.1089 shares of Unity. Total value is $4.4 billion, which is up almost 75% on ironSource’s 30-day average, and as part of the deal, two major Unity shareholders, Silver Lake and Sequoia, are investing an additional $1 billion into the combined company. In addition, Unity is announcing a $2.5 billion stock buyback upon closing of the transaction.
The combined adtech impact will be significant. Just one measure: in a ROI Index ranking the best mobile ad networks for 2022, Unity Ads received 20 mentions in various categories. ironSource surpassed that at 23. Combined, the two still won’t come near to competing with giants like Google or Meta/Facebook, but they’ll rank well against mid-tier titans like Liftoff, AppLovin, Digital Turbine, and others.
ironSource brings components to game monetization that Unity doesn’t have. Critically, those include a mediation platform which sits between ad buyers and sellers. Unity doesn’t really have a competitive equivalent, and it’s a major factor in winning more advertising business. This is essentially the technology that mobile adtech giant AppLovin bought from Twitter in 2021 for $1 billion (and then shut down in favor of its in-house mediation product Max).
In addition, ironSource brings multiple data sources to Unity, which should help in ad targeting. Failures in Unity’s targeting software caused significant challenges leading to a massive stock price dip in May of this year, so this is much needed. And finally, Richitello said, ironSources’ long-tail app publishing solution, Supersonic, that will merge will with Unity’s set of customers.
All of that translates to the language Wall Street likes best, Richitello said.
“This is one of those peanut butter and chocolate mixes where we’ve got the customer that they need, they’ve got the solution we need, and we see strong synergy in that. So three strong synergies driving a really strong trajectory on what makes the company valuable to Wall Street, which is profits.”
Richitello says the acquisition fuels Unity’s growth from a creation engine that also had monetization capabilities for game makers and app publishers which helped them grow to a platform that seamless blends those capabilities.
I asked how close Unity intended to integrate creation and monetization.
“Very,” he said. “Now that doesn’t mean that I’m going to surface return on ad spend tools for a C# coder.”
Rather, this will bring data to developers and designers and analysts and marketers, showing them how a game works, what is popular, what gets used, what kinds of players enjoy it the most, and which ads work best.
“They have the same set of data,” Richitello says. “They’ve got the same understanding. They’re learning the same things in real time … so the key here really is bringing these things together to yield the benefits of both. So through a very iterative process, the game gets better. The digital twin application gets better. The user acquisition gets better and better in terms of targeting and success rate … and it creates a virtuous circle.”
I asked Richitello whether Apple’s App Tracking Transparency (ATT) which has cost Facebook perhaps $10 billion in lost revenue, was behind any of this.
He says no, but adds that more data makes ads better, and that Unity is in a great position to get first-party data — which isn’t covered by ATT and is therefore a major competitive advantage in the new privacy-focused advertising landscape.
Not all industry analysts see it the same way.
“This merger is a direct result of Apple’s App Tracking Transparency (ATT) privacy framework,” Mobile Dev Memo’s Eric Seufert says, noting that the stock prices of Unity and ironSource have fallen by 61% and 80%, respectively, from before Apple launched ATT until now. “ATT clearly isn’t exclusively responsible for these declines, but it certainly played a role.”
Ultimately, the goal of the merger or acquisition is better service for customers, Richitello told me.
“We think we are in the business of helping our customers make better content and get a better business outcome through better targeting. And if they’re on the supply side, you know, higher CPMs [cost per thousand impressions of their ads]. And if they’re on the demand side, a better return on ad spend. We think those are measurable, we think this combination improves all of that on behalf of our customers … and sometimes we don’t always know exactly how we’re gonna win when our customer wins, but time and again, we’ve won when our customer wins.”