Even after laying off over a thousand employees At the start of the year, game engine and monetization developer Unity has yet to see the “profitable growth” it was looking for. Today, the company reported a 16 percent decline in year-over-year revenue (down from $533 million to $426 million), contributing to a net loss of $126 million for the period ending July 31, 2024.
Unity leaks are nothing new, but their persistent presence was what prompted an ill-advised “Runtime Fee” policy introduced in late 2023 that was altered for Unity 6 users after a mass revolt by developers. The good news is that it is losing less money; net losses decreased by approximately 35%, from $193 million in 2023 to $126 million.
Unity's Grow solutions haven't actually grown
Some of Unity’s revenue decline was expected, as the company announced it would end strategic partnerships and professional services that had proven residual to its operations. Surprisingly, revenue from Grow Solutions (Unity’s app monetization division, which houses what was once IronSource and TapJoy) fell 9 percent year over year to $296 million. In a letter to shareholders, newly installed CEO Matthew Bromberg cast the news in a positive light, saying the division had seen consistent quarter-over-quarter growth, meaning it could make up that gap in the months ahead.
Create Solutions, the main hub for the Unity game engine, saw revenue growth despite the fight over Runtime Fee. That division’s revenue increased 4 percent year-over-year to $126 million.
If developers don’t abandon the project en masse and can accept Unity 6’s new pricing, revenues could continue to grow.
The losses at Grow Solutions were enough for Unity to adjust its revenue guidance to $1.68 billion to $1.69 billion, down 2 to 3 percent from its previous forecast. Bromberg told shareholders that the guidance reflects the company’s “cautious approach” to the division’s “recovery.”
“It will take time for investments in fundamental product improvements to translate into sustainable increases in performance,” he wrote.
Unity's Path to the Future
In a post-report earnings call with investors, he elaborated on that recovery, saying the company needs to focus on its machine learning and data infrastructure stack to improve ad and monetization performance. He hinted that the company hopes to make fundamental improvements to its offerings, not just pursue incremental upgrades.
The contrast between Grow Solution and Create Solutions in this corner is something of an indictment of Unity's growth-focused business strategy under CEO Riccitiello, whose understanding of the video game market seemed so hyper-fixated on mobile monetization that he at one point called developers who didn't think about monetization ahead of time “fucking idiots.”
While investors will continue to keep an eye on Grow Solutions (which, for better or worse, will continue to outperform its game engine division), developers will likely be watching for improvements in Unity 6 that justify sticking with the platform.
During the earnings conference call, Bromberg stressed to analysts that Unity plays an important role in the gaming ecosystem… but if confidence in the company wanes, that role could diminish.