Adtech firm AppLovin is tearing it up right now, having posted monster financial results last week that led to a wild spike in its share price.
And last week, VC firm Konvoy predicted AppLovin’s next move: to acquire Unity, its competitor in ad mediation and once the subject of an unsolicited merger offer from AppLovin.
Some context: in July 2022, Unity announced a proposed merger with IronSource in a deal that valued IronSource at $4.4bn. In August, AppLovin tried to halt that deal with a merger proposal of its own, which would have combined AppLovin and Unity into a new entity with an estimated market cap of $35bn.
Unity rejected the offer a few days later, and AppLovin officially withdrew its offer of a merger in September. Since then, though, plenty has changed.
Unity’s whole runtime fee fiasco, which was partly motivated by IronSource management’s desire to ‘kill AppLovin‘, has weakened its position significantly and led to an exodus of Unity execs. Meanwhile, AppLovin has never looked more dominant.
So Konvoy says the time’s right for a deal. “If AppLovin acquires Unity, it can offer a complete package that incentivizes developers to integrate a variety of tools and products that provide AppLovin with first-party data,” it said in a recent blog.
“With the stronger revenue and profitability of AppLovin’s monetization solutions, they can lower prices for the Unity game engine and analytics to encourage developer adoption (and stickiness). “With more first-party data enhancing the effectiveness of their monetization tools, the reduced costs for game development create a powerful flywheel effect, encouraging even more developers to engage with its ecosystem.”
But several adtech experts we asked said an AppLovin move for Unity feels unlikely at this point. Investor, adviser and Mobile Dev Memo owner Eric Seufert told us: “AppLovin already attempted to merge with Unity – Unity’s board rejected the merger proposal, and I think they’d do so again. I don’t think it’s realistic that AppLovin could or would even want to acquire Unity at this point.”
“My sense is that a more appropriate acquirer for Unity would be either a large, scaled social media platform or a company that operates a portfolio of gaming assets.”
Craftsman+ CEO and cofounder Alex Merutka, also an early employee at AppLovin, agrees. “Moloco or Liftoff should merge with Unity if they want to increase competition against AppLovin. Also, AppLovin will not buy Chartboost – never going to happen. Moloco could buy Chartboost but not sure how helpful it’ll be at this point…”
“AppLovin has already won the mobile mediation game,” Merukta continued. “No one is going to usurp them. They don’t need to buy Unity. They instead should and are focusing on their ecommerce business. Even if Unity, Liftoff, and Chartboost all teamed up, they still couldn’t take out AppLovin mediation at this point. So the truth is AppLovin doesn’t need to make a move at this point, they can wait for the right time then make their move if they want to”.
Mobile game ad consultant and one part of Two and a Half Gamers Felix Braberg also has some thoughts on Konvoy’s proposal. “AppLovin already dominates the mobile mediation space – about 80% of mobile impressions are handled on MAX – so acquiring Unity for LevelPlay isn’t strategically necessary to access more developers. AppLovin has also established itself as the second-largest UA partner after Google, making Unity Grow less essential for increasing UA reach.”
“The key here is data,” Braberg continues. “All advertising runs on data, and the one unique data source Unity holds that AppLovin lacks is IAP data directly from Unity Engine users. This purchaser data has long been the holy grail in mobile, yet Unity has so far chosen not to leverage it in its UA campaigns. It’s safe to assume that accessing the Unity IAP data would see Unity users leave the engine in such droves that it would make the runtime fee incident look like a morning stroll. So why would AppLovin buy Unity? I can’t seem to find a good reason.”
