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AppLovin bids $17.5B to acquire Unity (axios.com)
150 points by marc__1 on Aug 10, 2022 | hide | past | favorite | 111 comments



AppLovin will be caught in up in an ad fraud scandal within two years. I can't share the data but we've stopped spending any money through them due to obvious fraud. Previously we were spending ~20k/day with them.

To be fair, unity isn't clean either. For over a month in Q1 of this year they had a whole lot of ads where the "x" button to close was actually covered by the ad, so ~50% of ads were being clicked when a user wanted to close them.


Isn't it standard practice to give the X button on ads a near-impossible-to-tap hitbox?

I'm amazed there's still so much money in mobile ads, as the games/apps that use them have become so obnoxious that I've got no desire to go near them any more.

It's moved on from 'annoying by somewhat honest' ads, to completely fake gameplay footage, and ads for real-money gambling in games that kids may be playing.

And the model of having thousands of short-lived/unprofitable games pushing ever more players towards the same few aggressively-monetised megahits doesn't seem like it should be sustainable.


> ads for real-money gambling in games that kids may be playing.

Exactly. The target demogrphic for these ads are kids with an Apple Pay account linked to their parents, who can be goaded into clicking on loud shiny ads.


Definitely not standard practice. There will always be bad actors, fraud, spam, etc, when so much money is involved. But most buy side systems are advanced enough to recognize bad actors and not spend money on them. So for any site/app that wants longevity in their revenue they will not implement shady tactics and they’ll earn high cpms.

Brands with real budget employ teams of people to avoid serving on the inventory you’re discussing. Nike blocks like 99% of available inventory.


Is it legally fraud of a ad SDK uses these kinda of tricks? I encounter these kinds of tricks in many of the games my daughter plays on the iPad and hate it immensely, but it seems everybody gets away with it ...

Are there any laws that should prevent these kinds of dark patterns?


I got Apple Arcade and it’s been great for my kids. I can limit what games get installed and they are free of this obnoxious crap.


Kindle FreeTime doesn't really offer much for limits except intended age but is similarly non-obnoxious.


I got Apple Arcade subscription for myself for the same reason. No ads, no pay to win mechanics, and some great games, too.


There are virtually no good games on Apple Arcade. Had it for a year, nothing but goofy cell-shaded 6 year old child's games with maybe three or four titles like Jetpack Joyride or Crossy Road to piggy back off. I can't imagine how an adult can enjoy what's in the Apple Arcade and I really gave it the benefit of the doubt.


Lego Builder’s Journey is an excellent game that can be enjoyed by adults.

https://apps.apple.com/ie/app/lego-builders-journey/id144163...

What the Golf is great fun for all ages.

https://apps.apple.com/ie/app/what-the-golf/id1415190483

Simon’s Cat is a fun puzzle game. Kids love the story and the puzzles are challenging enough to be enjoyed by adults.

https://apps.apple.com/ie/app/simons-cat-story-time/id153501...

Mini Motorways is sublime

https://apps.apple.com/ie/app/mini-motorways/id1453901000

Sneaky Sasquatch and Alba are fun RPG lite adventures that you can play with younger kids to help them navigate more complex game experiences.

https://apps.apple.com/ie/app/sneaky-sasquatch/id1098342019

https://apps.apple.com/ie/app/alba-a-wildlife-adventure/id15...

Assemble with Care is a lovely puzzle game about repairing with a nice narrative.

https://apps.apple.com/ie/app/assemble-with-care/id145049869...

There are more but most of these keep my kids coming back and it’s a way to engage with them that you don’t often get in other games.


Alto’s Adventure and Alto’s Odyssey are a nice duo for 5 minute breaks. Samorost series are old, but nice adventure games.

Mini Motorways and Mini Metro are nice tactical games to exercise the brain.

Fantasian is a fantastic game and has a great story.


Yes! I love Apple Arcade for this reason, too.


Especially because I only typically let them use it on the Apple TV and not a phone or iPad. They get to use a physical controller (DS4) and we can talk about their game as they play. So it’s less mindless and we can keep an eye on what they’re exposed to in game.


I would imagine that if something is deemed fraud, it's the ad-space buyer that is deemed the victim, as they're paying for clicks that aren't genuine interest, and not the user/viewer.

IANAL etc, but I thought it would be good to add the distinction.


It's not a dark pattern, because it doesn't really benefit anyone. Just destroys the signal by drowning it in noise so advertising becomes just a little bit dumber.


It benefits the app creator, and whoever is behind the ad serving to the detriment of the person doing the advertising. They get charged each time someone clicks that add.


> They get charged each time someone clicks that add.

Well, no. Not really. The client wants to buy an actionable contact with a real person at the end of the deal. The app creator can try selling counterfeit goods, but this trick only works once and the next time the client will demand payment on the basis of something other than clicks. (And this process has already happened many years ago; nobody charges per click in 2022.)


The person advertising has all the data they need to determine performance, just add statistics know-how.


OP didn't directly say such dark patterns are fraudulent. They said AppLovin was committing fraudulent activity and then that Unity uses dark patterns.


I installed pi-hole in my house just for this.


I configured my kid's tablet to use AdGuard's public DNS https://adguard-dns.io/en/public-dns.html

No more in-app ads.

Strange thing, I tried it on my FireTV to block youtube ads, but it didn't work. I wouldn't be surprised if the FireTV monkies around with user settings. The other explanation could be that youtube uses the same hostname for videos and ads, so the DNS blocking can't distinguish.

I ended up side-loading a 3rd party YT client that doesn't play ads. https://smartyoutubetv.github.io/


How much time did it take to research + install a Pi-hole?


I used a pi-hole, but wanted it to work outside my home as well. NextDNS uses many of the same blocklists, and I happily pay $20/year for it. Also has apps for devices that roam from the house.

https://nextdns.io/pricing


They try to make it super easy: https://pi-hole.net/ and I have no recollection of encountering any issues.

OTOH I am a software engineer working with Linux and network related stuff.

The issues comes later when some pages may break. When that happens you need to stop bashing your computer and add some URLs to the Pi-hole whitelist (or skip those parts of the web...). In my experience there has been few issues. Some enterprisey stuff my wife needed for work depended on some oracle tracking URLs that were blocked if I remember correctly.


Can you write exceptions for IPs within your network? I’d like to exclude our work laptops from filtering. Both laptops have static IPs on my network.

Reading more I could just change my devices dns settings to use what I want. A little more cumbersome and requires local admin on windows.


You can create IP based exceptions, or you can point those machines at another dns resolver. Either works.


In every comparable instance the company will provide a “make good” where they don’t bill you for that same amount on the next billing cycle.

My company didn’t because the US is a small fraction of the company and they aren’t too invested in spending time/resources here.


You have to report it and get the regulator involved to find out

If you just dismiss this as “kids games on an ipad” then everyone gets away with it

the reality is that the entire adspend industry is fraudulent or has a large component of fraud


Hard to definitely label it as a fraud, because from my experience mobile advertising SDKs tend to have a lot of bugs in their presentation layer, and not all of them may benefit ad provider.


> ads where the "x" button to close was actually covered by the ad, so ~50% of ads were being clicked when a user wanted to close them.

Even Android has patterns like these


This X being unavailable can be just incompetence. Esp on Android with all those slightly different screen sizes.

Recently i tried to run an app on an iphone mini but their layout was crap and both buttons on the first screen of the initial setup were on top of each other. Couldn't click either :)


Incompetence that for a curious coincidence advantages them and frauds both the user and the companies paying for ads.

For sure mobile screen variety isn't helping, but I don't believe that's the reason the X button doesn't work on ads.


I've seen many ads where the first "X" button that appears is fake, placed there to make you question yourself: "Well, the X is very small, it appears I fat-fingered it". It then becomes "real" after you switch out of whatever the ad opened and back to the app hosting the ad. It works on the second try, and that confirms your belief that it must have been your fault.


Well I've also seen my wife playing a F2P game and sometimes the ads either crashed the app completely or locked up with her unable to click on either the ad or close. When they worked the close button was available.

I'm not rich enough to play free to play games so I have no personal experience.


If you are spending thousands per day you should be backing out real time ROI/LTV which eliminates nearly all potential fraud.

The performance ad market moved from pay per impression to pay per click and then finally to pay per conversion years ago. Pay per conversion is the foundation of Facebook's lookalike audiences and Google's long-tail search campaign tools. When I see problematic campaigns these days it's usually because the media buyer hasn't set up their funnels/KPIs correctly.


The system is 100% deep learning, but most our our spend going to app lovin was in a new product that isn’t use deep learning yet unfortunately. You’re correct though :) we bid to roas/cpa and the affected campaigns were bidding to cpc!


That makes sense. I wouldn't call that ad fraud. That's the ML system optimizing for what you've said you want. If you bid for cpc you're going to get a lot of cheap clicks, but they're going to be nearly worthless. That would be the case on any large ad network, especially since mediation is so mature.


Great opportunity for Godot to take up space in 2d and low scope 3d games


applovin feels like the modern day embedded IE toolbar in your MSI


most major ad tech companies use borderline scammy ways to increase KPI's


It's a weird decision.

Unreal Engine is redefining game engines into something capable of creating both movies and games, and pushing the state of the art to somewhere amazing.

Whilst..... Unity is laying off people and leaning into low quality advertising.

It's weird also that the big players like Microsoft didn't swing in to buy Unity and do the same thing that Unreal is doing.

It's like the future of high end media is being created in this space and Unity is tossing away their second place position entirely.


Meta would love to buy Unity, it has been on Zuckerberg's radar for almost a decade:

https://techcrunch.com/2019/02/13/facebook-mulled-multi-bill...

But in practice they can't do any acquisitions anymore because of antitrust. Two recent examples:

- Meta purchased a VR fitness app maker called Within, and the FTC is now blocking the sale.

- Meta purchased Giphy years ago, and the UK antitrust authority now wants the sale unwound even though Giphy did no business in the UK.

Multi-billion dollar acquisitions of public companies like Unity are out of the question for Meta because they're subject to a much higher standard than anyone else. Microsoft can probably get away with buying Activision Blizzard while Meta can't buy one insignificant VR game.


The case of Giphy is really absurd.


This is a real shame. Meta is a company that is trying to do something (beyond Facebook) and I think a Unity acquisition would benefit both of these companies (in their current positions).


Is it? Facebook is trying to "take over" areas not at all related to social media in order to gain more data and could act as a loss-leader in the game developer space just in order to bolster market share in other areas. Preventing that seems to be better for consumers in general.


Isn't that what Microsoft is doing as well?

If Microsoft is allowed to buy Activision Blizzard they would have bought the vast majority of the most popular video game series in the world.

Minecraft, Call of Duty, World of Warcraft, Diablo, and Elder Scrolls are all top selling game franchises.

The only company that would have more top selling game franchise would be Nintendo and they created all of them for themselves.

Why is Microsoft allowed to buy all of these game studios but Facebook can't buy a single VR studio?


> Isn't that what Microsoft is doing as well?

Yes. And Amazon. And Google. And others.

What the the US government is doing, I have no idea about, but they don't seem to care a lot about preventing huge companies from taking over entire markets, even those not related to their core business. Which already is hurting consumers, but the worst has yet to come.


Has that acquisition been approved? You’re implying that it has, but last I heard of it, it was being investigated by both the FTC and the CMA in the UK.


Just like Occulus? All Unity accounts will be authorized by a Meta account. Lose the Meta account lose the Unity access.


Meta is a company that's trying to land grab a new continent (metaphorically). Their motivation to push the Metaverse is their control over it. I don't see why any of us should want to help them do that.


On the other hand, I'm not looking forward to eventually get a Facebook out of necessity when I need to login into my Unity editor.


This is good! Multi-billion-dollar tech companies have been given too much power by governments, partly because they want to capitalize on the spying capabilities provided by their endless cycle of private data slurping, collecting and de-anonymizing, and partly by regulatory capture from an army of lobbyists employed by the tech companies.


Unity is still the engine for the vast majority of 2D and 3D games, especially VR. It feels like each has filled their niche well, and they are now bifurcating to target different audiences.

It doesn't seem to me like Unreal will ever capture the majority of the market, unless their tactics change.


I would wager it's owed mostly to the mobile market dwarfing console/PC nowadays for which Unity is the de facto choice. The same way the web market gives us legions of Js devs: Unity is just the game engine ver of Node - easy to hire for and runs everywhere.


I am so glad I didn’t go for Unity but Godot. I know it’s playing catch-up but it’s been a joy to work with. Not sure what to think of Unity.


For anyone interested in creating games. I can only second this. Been using Unity for work and hobby purposes since Unity 5 and feel its always been undecided on how to do things. Even more so now than back then.

With Godot I've never had the feeling that I'm working against the engine to achieve something. Godot has one, maybe two different ways of doing something. If more than one, there are usually obvious tradeoffs between the two ways.


There were alleged rumors that Microsoft did try to acquire Unity at one point. It takes two to tango and the allegation was always that Unity wasn't interested in selling to Microsoft. The impression that I have is that Unity didn't get to this "weird ad company with a game engine byproduct" by accident, they seem to have had board members where this was their exit in mind all along and the (weird, gross) direction they intended to move the company.



Unreal/Epic have taken free to play money already. It was Unity's turn i guess.


Either way, Unity += ads.

dupe

2022-08-09 https://news.ycombinator.com/item?id=32397510 (AppLovin offers to buy Unity Software in $17.5 bln deal)

> For people wondering what happens with the ironSource deal, this bid is meant to derail it.

see also

2022-07-14 https://news.ycombinator.com/item?id=32097752 (Gamedevs not baking in monetization are “fucking idiots”, says Unity CEO)

2022-07-14 https://news.ycombinator.com/item?id=32096371 (Unity is acquiring a company who made a malware installer)

2022-07-13 https://news.ycombinator.com/item?id=32081051 (Unity merges with IronSource)


Is it time to start avoiding all games created with Unity?


Not yet, games can still be created in older versions.

I think many game devs will be moving from unity on new projects. But there are many projects that have been in development for years, and you shouldn't avoid them because the engine's company is fucked up.


According to Wikipedia, AppLovin has 6.16Bn in total assets and 2.5Bn revenue. How can a company this size bid 17.54Bn to acquire Unity?


The title is too simplified. The merger/acquisition will create a new entity in which Unity will own 55% of the total shares and 49% of voting shares. Unity CEO John Riccitiello will become CEO of the combined business, while AppLovin CEO Adam Foroughi will take the COO role.

This is basically a desperate play by AppLovin to prevent Unity from acquiring ironSource (its main competitor) and cutting it out of the mobile ads business.


Why on earth would Unity accept giving this company majority control... a company that is worth less than Unity.

Just a dumb and terrible proposal


According to the proposal the non-voting C-class shares are going to be given voting rights, so Unity stock holders will end up with the majority of voting rights too after that goes through.


So who's acquiring whom? I am very confused.


Well, that's a bit less ridiculous then


It is still ridiculous since AppLovin is cornering Unity into an unsolicited edge


What does this mean?

Unity can turn down the proposal. And there is nothing wrong with unsolicited proposals. And I don't understand what an unsolicited edge is?


It's so interesting that the move to avoid being destroyed is to destroy oneself.


If you can't beat 'em, reverse-pseudo-corporate-join 'em?


Reminds me of how FireEye bought Mandiant, then 8 years later Mandiant sold FireEye.


How is it possible for the subsidiary to sell the parent?


In a lot of these acquisitions, it's not a becomes a subsidiary of b, it's often that all of the employees of A are transferred to B under something like a TUPE [0]. As part of these acquisitions, the leadership of the acquired team can be offered senior positions in the acquirer, e.g. in this case the CEO of AppLovin would become the COO of the new world.

Combine these two things and with a bit of luck and timing, AB corp now decided that A isn't in its best interests anymore and decides to sell that part of its business.

[0] https://www.acas.org.uk/employee-rights-during-a-tupe-transf...


Huh, so weirdly interesting. Thanks for the explanation!


Interesting (and probably accurate) take.

Worth noting that this transaction excludes the $4B proposed purchase of IronSource by Unity.


-- In the same manner that Twilio acquired Sendgrid --

https://techcrunch.com/2018/10/15/twilio-acquires-email-api-...


The valuation (based on the trading price of each stock) of the combined companies is more than the $18 billion (it can vary in exciting ways).

This article lays it out pretty clearly:

https://www.barrons.com/articles/applovin-unity-software-tak...


I just commented about this. I get the impression large investors are using other lesser known companies to make acquisitions probably to conceal financial records somehow. It's like a shell corp but one that is legitimate enough to not be called a shell corp outright.


> I get the impression large investors are using other lesser known companies to make acquisitions probably to conceal financial records somehow. It's like a shell corp but one that is legitimate enough to not be called a shell corp outright.

That's simply not correct.

It's an all stock transaction, so AppLovin can issue stock equal to $17.5B and transfer that to owners of Unity stock in return for their Unity stock. Then the two companies merge and the AppLovin stock owners now own both.

You can read details here:

> in a transaction where each outstanding share of Unity common stock would be exchanged for 1.152 shares of AppLovin Class A voting common stock and 0.314 shares of AppLovin Class C non-voting common stock. Under these terms, current Unity shareholders would receive approximately 55.0% of the outstanding shares of the combined company, with the Class A shares representing approximately 49.0% of the outstanding voting rights of the combined company.

https://www.businesswire.com/news/home/20220809005530/en/App...


Do AppLovin stock holders prior to the acquisition see a massive price decrease in their shares?

Seems like they’re basically printing double the existing stock to cover it


No, because the acquisition makes AppLovin more valuable. If merging with Unity makes AppLovin $17.5B more valuable than it was previously, then the existing stock's value doesn't change.

Of course, the market may disagree on the value in either direction.

Mergers are weird.


There's an added complication that some of the stock is class-C non-voting stock (which is less valuable) but they plan to make it voting stock at some stage after the transaction.

Also, Unity stock holders end up holding 55% of the merged company.

And Unity is a loss making company, with only $297.0 Q2 revenue. https://www.marketscreener.com/quote/stock/UNITY-SOFTWARE-IN...


$292.0 million, but yeah.


It would only go in half if they issued double the shares and didn’t get any assets.

In this case, the expectation is that the value of Unity equals roughly the value of the issued shares.


For those discussing the dollar amounts, it's really just a merger with AppLovin as the dominant partner [1]. It's an all-stock deal, so I don't think there's any need for external money.

[1] https://www.marketwatch.com/story/applovin-submits-bid-to-bu...


based on the details of their offering Unity would actually end up the dominant partner. Even if just barely


Meta should have bought Unity. Zuck is sleeping at the wheel. They are gonna try to win at the metaverse without a dev platform. Good luck with that.


It is surprising they didn't, and while I am glad they didn't for Unity's sake, it feels like Unity is about to get shagged anyway. There are sharks circling their value propositions to developers, and they're spending their energy on acquisitions that demonstrate their focus is shifting away from those same developers. Who wants to commit a multi-year, company wide project to an engine with lagging technical offerings AND a faltering mission statement?


They are forgetting that developers don't like ad companies or being controlled. Devs will move on, leaving unity behind.



interesting, that would have been very shortly after John became CEO. Wonder how that would have turned out if John was given another year or 2 to sink his fingers into Unity?


Seriously doubt regulators in the eu will approve any Facebook purchase at this point. Maybe in 2018 this could’ve happened, since then I doubt it.


And yet Amazon which is 300% bigger can buy iRobot with no issues. I’m so confused by the weird random things the EU and US block wrt to mergers and yet they don’t block massive obvious ones it seems.


It's not about size it's about influence


Influence? Amazon and Bezos control a huge portion of retail, the internet (aws), the entertainment industry (prime, MGM), gaming (twitch), Washington post… I could go on… they are hugely more influential than anything meta is doing.


AAG and Microsoft are incredibly influential and powerful.


The US government won't let FB acquire any company that generates a headline when an acquisition is announced. We are in a period of government-incentivized small-ness.


They probably saw what happened when Amazon acquired Crytek and decided against it.


There would have to be some serious anti-trust concerns given their mobile marketshare.


I haven't coded anything in Unity in a few years, but I did, and others I know well did. They ran into the problem that Unity wants its resources to all be defined at compile time. A metaverse is totally data driven (at least should be), so Unity and a metaverse are not compatible.


VRChat is written in Unity. So is/was Tilt Brush. Even. Virt-a-mate. All loading user generated content just fine.


This probably would merit context as my employer has implemented several model viewers in Unity which by definition imports resources at runtime.


It really does seem that this bid will be tying two sinking ships together. Whether that helps them float, I don't know.


This probably have an amazing background story.

AppLovin and Unity has a similar market cap, making this merger almost equal in power - which typically leads to an uphill battle in management of who has the power.

This first and foremost blocks the IronSource merger, and it's probably something that Unity management don't want to do. But the board must consider it or otherwise it will suffer hell of litigation from shareholders.

It's super interesting to see where this all leads.


Absolutely, I hope we get to hear the story at some point - so much bad blood between AL and IS. With this proposal coming on the day of Unity's shareholder meeting, and sending weak signals about AppLovin's outlook, it's such a weird play. I'm too much of a rube to know if it's brilliant or desperate, but I'm sure it's a good story regardless



Why do I get a sense that some of these companies making acquisitions are just fronts for acquisitions. Regardless, personally I see a lot more value in Unity than Twitter.


I sometimes wondered if Meta would purchase them in an attempt to make it the defacto metaverse dev tool.


Seems like a no-brainer. But maybe they're building their own.




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