I wrote for Naavik about Unity’s ad business struggles and how AppLovin has pulled ahead in mobile advertising. Read the full article here.

Why I wrote about this

In hindsight, AppLovin’s moves with its internal game studios and Adjust look ingenious. With Unity’s latest results out, it was a great timing to look at what sets apart Unity and AppLovin.

The gist of it

Unity’s financials make one thing clear: its ad engine has stalled. Grow Solutions revenue declined year-over-year, and the company remains unprofitable overall. At the same time, AppLovin’s advertising business is better than ever, delivering rapid growth and best-in-class margins.

The root cause is execution in a post-ATT world. When Apple’s privacy changes weakened user-level targeting, ad networks were forced to rely more heavily on their own data. Unity’s targeting stack suffered a major setback after flawed data corrupted its models, forcing a painful rebuild at exactly the wrong moment. AppLovin, by contrast, improved its Axon algorithm and captured shifting advertiser budgets.

Unity expanded aggressively across multiple fronts, including engine tooling, multiplayer, and VFX. It then merged with IronSource in a bid to bulk up in ads. The integration proved messy, slowing decision-making and eroding momentum. Meanwhile, AppLovin stayed concentrated on one core mission: making its ad platform better every quarter.

Meanwhile, AppLovin built a data moat. Through acquisitions like Adjust and MoPub, and the rapid expansion of MAX mediation, it built a system spanning measurement and supply aggregation. That data now feeds its targeting models. Unity, despite controlling the dominant mobile game engine, has yet to translate that position into any advantage.

Unity rejected AppLovin’s merger proposal and instead chose IronSource in 2022. In hindsight, tat cost shareholders tens of billions dolalrs. Today, Unity is rebooting its ad stack with Vector and new leadership, but it is playing catch-up.

Key takeaways

  • In advertising, data + algorithm execution is everything. ATT raised the bar, and AppLovin cleared it while Unity tripped.
  • AppLovin doubled down on ads; Unity diversified and got distracted.
  • The IronSource merger looks, in hindsight, like a costly mistake.
  • Unity’s engine dominance has not translated into a meaningful data advantage. Unless that changes, Vector alone won’t close the gap.