Metaverse “Drummer” Unity: Crazy expansion, suspense still exists

When the popularity of the Metaverse gradually cooled down, some companies and institutions that claimed to be “Foundation Builders” began to speak out intensively, trying to justify the name of the “Metaverse”.

Among them, Unity is arguably one of the most active players.

At the 2022 Augmented Reality World Expo held in June, Unity CEO John Riccitiello endorsed the Metaverse in a high-profile speech: “The Metaverse is a new generation of Internet characterized by always real-time, 3D-based, highly interactive, highly social and persistent. Stablize.”

Zhang Junbo, President of Unity Greater China, also frequently stated in media interviews: “In the future, the Metaverse will penetrate into all aspects of life, and the scale will be thousands of times that of the game industry. Unity should not be just a tool for a small number of game technical talents. It should assist ordinary people to better participate in the creation of the Metaverse.”

As a “shovel seller” in the Metaverse industry, why does Unity, which occupies half of the game engine market, support the Metaverse?Perhaps there is the original intention to drive the industry upward, but also the “selfishness” of diversified income generation.

01 On the side of the apple, it grows rapidly

Unity’s history dates back to 2004. Three young people who love games made a game called GooBall in a basement in Copenhagen.

It is said that because they deeply experienced the difficulties of independent game development, and faced with hundreds of thousands of dollars in licensing fees from their predecessors such as Unreal Engine, the three young people came up with a bold idea-to popularize game development engines and turn to Unity. Development of version 1.0.

In the history of Unity’s growth, Apple has always played an indispensable role, and even said that the two have been deeply bound for a long time.

At the Apple Worldwide Developers Conference in 2005, Unity was released as an extension tool on the Mac side, and at the same time won the MacOS Best System Graphics Design Award. With Apple’s endorsement, Unity received investment from Sequoia Capital and moved its headquarters from Copenhagen to San Francisco .

Time came to October 2007, a new generation of iPhone was born, and Apple officially entered the mobile era, but the new product still lacked a handy game development tool. Just a year later, Unity officially supports the iOS platform, and for a long time it was the only game development tool available for the iOS platform.

In 2010, Unity’s registered developers had reached 100,000. In the same year, it supported Android, which was just two years old, and successively added support for PS, Xbox and other platforms. Compared with the rival Unreal Engine, Unity’s agility on the mobile side is much higher than that of its opponents. Unreal Engine only supported iOS at the end of 2010, and support for the Android platform will wait until 2014, leaving a rare time window for Unity.

Metaverse "Drummer" Unity: Crazy expansion, suspense still exists

By the end of 2021, more than 70% of the top 1,000 games on the App Store and Google Play are made with Unity, with an overall market share of nearly 50%, and the second-ranked Unreal Engine is only 9.68%. Well-known games including Hearthstone, Glory of Kings, Honkai 3, and Genshin Impact are all developed through Unity.

The rising star Unity has quietly defeated veterans such as Quake and Unreal Engine, and has an absolute right to speak in the game engine industry. The incentive does not exclude the element of luck, but it also has some inevitability.

Among the mainstream game engines currently on the market, Unity is the only general-purpose engine that is not developed based on initial game products, and has no burden on multi-platform support. At the same time, unlike the lawsuits between Unreal Engine developer Epic and Apple, Unity maintains a harmonious relationship with Apple, Google and other channels.

Compared with Epic’s strong game company color, Unity is more like an Internet platform, which is a favorable factor for its rapid rise, and also lays the groundwork for later commercialization.

02 Betting on advertising, disappointing revenue

Compared with its outstanding performance in market share, Unity’s commercial performance can only be said to be unsatisfactory, and its market share is far from being converted into revenue and profit margins.

According to Unity’s financial report for the first quarter of 2022, revenue in the first quarter was $320.1 million, an increase of 36% year-on-year, and a loss of about $171.2 million in the same period, accounting for 53% of revenue. Unity simultaneously lowered its forecast for fiscal 2022, predicting revenue growth of between 22% and 28%, which is not as good as 44% growth in 2021.

To sort out the causal logic in the middle, it seems necessary to answer what is a game engine and what is Unity’s main revenue channel?

Before the emergence of game engines, game production had to write code from scratch, which was not only inefficient, but also involved a lot of repetitive work. Game engines provide developers with a set of reusable frameworks, which modularize common codes for developers to call, and then “build” games like “building blocks”.

From 2007 to 2012, Unity’s energy was mainly focused on market expansion, when the entire mobile game market was still on the eve of its outbreak. In 2013, former EA global CEO John Riccitiello joined Unity and was appointed as the new CEO of Unity the following year. Subsequently, Unity Ads was officially launched, trying to share in-game advertising revenue with developers through the built-in advertising system.

Metaverse "Drummer" Unity: Crazy expansion, suspense still exists

Under the leadership of John Riccitiello, Unity’s business model has gradually been established, forming the current three major revenue sources, namely development solutions, operational solutions and strategic customization solutions.

Among them, the development solution mainly provides a creation and development platform to developers, and the profit model is paid subscription, including products such as Unity Pro, Unity Plus, and Unity Enterprise; the operation solution aims to help developers monetize game content, such as Unity Ads, Cloud hosting services, etc., Unity can take a profit cut from it, or charge a monthly service fee.

The spoiler this time was Unreal Engine.

In 2014, the market share of Unreal Engine was as low as 3%, and Tim Sweeney, the soul of Epic, was forced to sound the clarion call: UE4 engine is officially open source, and developers can get all UE4 tools, all functions, and availability of all platforms for free , full source code, complete projects, sample content, regular updates, and bug fixes, and only charge 5% of the copyright fee for works that earn more than $3,000 per quarter after the app is released.

As a result, Unreal Engine’s market share is not high, but it has captured the hearts of many large development teams; Unity’s advertising division is certainly topical, but for many big game companies, advertising is to some extent tantamount to sacrificing users Experience, in the end, Unity Ads’ customers are mainly long-tail games. Although they occupy half of the game engine, their revenue is not as good as a mobile game with millions of active users.

03 Crazy expansion, water storage and fish farming

Unity’s business model is not lacking in logical self-consistency. As long as the number of developers is large enough, profit is only a matter of time, and the possibility of brewing other revenue methods is not ruled out.

Therefore, Unity has a deep love for the “Metaverse”. Once the concept of “Metaverse” is implemented, the service objects of the game engine will no longer be limited to game products, buildings, automobiles, industries, smart cities… Anything that requires 3D Content scenarios will be Unity’s target customer group.

In the days when the concept of the Metaverse was popular, Unity quietly completed the transformation of its identity, gradually transforming from a game engine to a “digital productivity tool”.

An important milestone is 2020. The previous Unity did not lack mergers and acquisitions, and successively included Multiplay, Vivox, deltaDNA, etc., but they were all to strengthen the capabilities of the game engine itself. After 2020, Unity’s mergers and acquisitions are getting faster and faster, and the spearhead is directed at the Metaverse.

In 2021 alone, Unity has acquired 3D data processing software Pixyz, vegetation and natural environment generation software SpeedTree, remote desktop and streaming media provider Parsec, artificial intelligence audio chat analysis platform Oto, film and television special effects company Weta Digital… At present, many The product has been incorporated into Unity’s development solution, hoping to once again outperform the opponent in the layout of Metaverse technology.

Metaverse "Drummer" Unity: Crazy expansion, suspense still exists

On January 24, 2022, Unity announced the acquisition of Ziva Dynamics, whose core technology is to create the most realistic 3D character dynamics by mimicking the physical properties of soft tissues such as muscle, fat and skin. At the same time, the deep learning model is used to train various creatures and characters, and the ZivaRT plug-in is used for real-time expression driving. Then Unity put the dynamic promotional image of the Ziva virtual human on its official website, and bowed into the battle for the “virtual human” application.

Is Unity, which is expanding wildly on the Metaverse track, accelerating in commercialization? On the earnings call in the second quarter of 2021, some analysts asked similar questions, but the response given by Unity management was: The strategic priority for the next year or two is not to raise prices, but to allow more users to use Unity.

As Unity CEO John Riccitiello said: “The Metaverse will release large-scale real-time 3D content demand, which will drive the company to continue to grow in areas other than games.” Zhang Junbo, President of Unity Greater China, also said: “If the game market is It is a trend of steady linear growth, then the non-gaming market is growing exponentially.”

Compared with increasing prices and income, Unity is still adhering to the strategy of storing water and raising fish. Especially under the east wind of the Metaverse, if it can serve as a “digital productivity tool” for creators in the era of virtual and real symbiosis, the market prospects waiting for Unity are by no means comparable to the game market, and it will also help Unity maintain high growth in the next few years. Momentum, and then continue to tell new visions and new stories to the capital market.

04 Path dependence, suspense still exists

As far as the current market structure is concerned, Unity is very likely to get the first move of the Metaverse, and the integrity of its products and ecology may exceed that of its old rival, Unreal Engine.

For example, the number of developers of Unity has exceeded 1.5 million. In addition to games, it has gradually realized the coverage of construction, automobile, retail and other scenes; Unity Assest Store provides thousands of free or paid material plug-in collections, which help save developers. Time and energy; Unity Connect is looking for suitable positions for game, artist, XR developers; Unity’s developer community has a lot of scarce resources such as Q&A, explanation documents, etc…

The uncertainty of the Metaverse is also an indisputable fact. It may take three to five years, or it may not be able to land in ten years. The suspense left to Unity still exists.

On the one hand, there are multiple external pressures. Not only has Unreal Engine seen a window of opportunity in the Metaverse, but some uncommercialized self-developed engines are also eager to try. Among them, Epic, which holds platforms such as “Fortress Night”, frequently holds concerts in the “Metaverse”, links with well-known IPs such as Marvel, and also extends the scene to the fields of architecture, film and television, and live broadcast. Even if the layout is not as aggressive as Unity, the depth and breadth are not lost to Unity.

What’s more, in the understanding of the capital market, Unity has been bound to the Metaverse. Unity completed two rounds of financing in 2016 and 2017. The background is the boom in VR. It is said that 70% of VR and AR content were developed using the Unity engine at that time; the IPO process of Unity in 2020, and the Metaverse The rise of the company is so closely related that Unity’s stock price is directly linked to the popularity of the “Metaverse”.

Another aspect is internal path dependencies. Unity’s commercial capabilities have always been the object of criticism from the outside world, and a large part of the reason is due to the weak advertising business. However, in the 2022 Q1 earnings report, John Riccitiello reiterated his confidence in the growth of the game advertising business at the performance conference: “TV has about 18 minutes of advertising per hour in prime time, and the average game player currently only sees 4 minutes of advertising per hour. advertise.”

Metaverse "Drummer" Unity: Crazy expansion, suspense still exists

Subsequently, Unity announced the merger with the mobile advertising platform ironSource. Unity’s game engine and editor, Unity Ads, and Unity Gaming Services will be integrated with ironSouce’s Supersonic, LevelPlay, and game analysis services, respectively, to create a game that can cover the full life cycle of the game. , the entire category of games and the huge platform of the entire upstream and downstream links, thereby enhancing the profitability of Unity.

This is where the doubt lies.

Unity’s courage and courage in the layout of the Metaverse is admirable, but it is not the only choice for developers, and it has failed to come up with new and eye-catching solutions in terms of business models.

Ads are the most common monetization method on the Internet, but in the user experience of games and the Metaverse, immersion accounts for a considerable proportion. Are developers willing to sacrifice user experience to impose advertising? Different choices correspond to different market outcomes.

At least the game market has verified that the main source of revenue is still user payment. Even some games that use an advertising system will often launch paid and ad-free versions or functions. The survival space of game advertising is mainly concentrated in the long tail and Casual games with low willingness to pay. Will Metaverse users love advertising over experience?

Hopefully, Unity didn’t make a mistake this time.

Posted by:CoinYuppie,Reprinted with attribution to:
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