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What Unity Does

Unity is a software platform for creating and growing real-time 3D content across mobile, PC, console, and XR. The company organizes its offerings into Create Solutions and Grow Solutions, serving both game developers and industries adopting interactive visualization such as automotive, manufacturing, and AEC.

Create Solutions: This segment centers on the Unity engine and editor, delivered through the Unity 6 release family with annual LTS versions and periodic updates for performance, stability, and new features. Surrounding the editor is a toolchain that includes Unity Gaming Services for multiplayer, backend, and live ops, and Unity Cloud for asset management, collaboration, DevOps, and content delivery. These products enable teams to build, ship, and operate games and other RT3D applications at scale.

Grow Solutions: Unity’s growth stack combines an ads network, mediation, and publishing and distribution services. Unity Ads is powered by Vector, an AI platform that optimizes user acquisition and monetization outcomes. Developers can manage a diversified demand stack with LevelPlay mediation, while Supersonic provides publishing support and Aura offers on-device distribution through carrier and OEM partnerships. These products are designed to increase installs, retention, and revenue for mobile titles.

Business Model: Create is primarily subscription and services for development and operations, and Grow is primarily advertising, mediation, and related services. Unity reports financials by these two segments in its investor disclosures, which also describe the platform’s role in helping customers create, market, and grow interactive experiences across major platforms.

Key Metrics and KPIs to Watch

Unity’s performance hinges on two engines of value creation. The first is the ads and monetization stack that Vector powers. The second is the Create Solutions subscription and services base. Track both sets of key performance indicators (KPIs) to understand growth, durability, and operating leverage.

Ads and Monetization (Vector and Unity Ad Network)

• Unity Ad Network revenue growth. Prioritize sequential growth and year over year growth. Sustained double digit sequential growth through peak seasons indicates share gains, not just seasonality.
• Auction win rate. Wins divided by total eligible auctions. Rising win rate on high value cohorts signals stronger models and demand density.
• eCPM, effective cost per mile (thousand impressions), and fill rate. Healthy eCPM with stable or improving fill across top geographies and device tiers indicates balanced marketplace dynamics.
• ROAS (return on ad spend) at scale. Stable day 7 and day 30 ROAS while budgets scale is a clear sign Vector is compounding across iOS and Android.
• Payback period and LTV to CAC. LTV (lifetime value) relative to CAC (customer acquisition cost) and the months to recover acquisition cost. Faster payback and LTV to CAC above 3.0 are strong allocation signals for performance advertisers.
• Retention and monetization quality. D1, D7, D30 retention rates (day 1, day 7, day 30) and ARPDAU (average revenue per daily active user) for users acquired via Unity demand versus other channels. Convergence or outperformance points to higher user quality, not only higher volume.
• Supply breadth and SDK footprint. Growth in active publishing apps, SDK (software development kit) integrations, and incremental inventory from top publishers. A broader footprint improves data scale and auction liquidity.
• Privacy era resiliency. Share of modeled conversions, SKAN performance, and Privacy Sandbox signal quality. SKAN refers to Apple’s SKAdNetwork attribution framework that limits user level identifiers.

Create Solutions and Ecosystem Health

• Seats and seat retention. Net seat adds in Pro and Enterprise and logo retention. Seating growth with stable churn reflects durable adoption by professional teams.
• Active creator and project counts. Monthly active creators and active projects across mobile, PC (personal computer), console, and XR (extended reality). More active projects expand the future monetization surface.
• Engine mix and upgrade cadence. Share of projects on current LTS (Long Term Support) and adoption of Unity 6 features. Faster upgrade cycles correlate with higher attach to services and better telemetry for Vector.
• UGS (Unity Gaming Services) and Unity Cloud usage. Growth in services such as multiplayer, analytics, backend, asset management, and build distribution. Services attach rate per seat is a leading indicator of Create ARPU (average revenue per user).
• Time to first render and build throughput. Operational KPIs that reflect pipeline efficiency for studios. Improvements reduce development cost and increase stickiness.

Financial and Operating Leverage

• Segment mix and gross margin. Create versus Grow revenue and their respective margins. Mix shift toward higher margin revenue expands consolidated gross margin.
• Operating expense intensity. Sales and marketing, research and development, and general and administrative as a percentage of revenue. Declining ratios with stable innovation cadence indicate maturing scale.
• Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and free cash flow. Conversion of revenue into cash, seasonally adjusted. Strong cash conversion validates the quality of revenue and pricing discipline.
• NRR (net revenue retention). Expansion within existing customers net of churn. NRR above 110 percent in Create and expanding advertiser budgets in Grow support a compounding thesis.
• Guidance accuracy. Variance between guided and reported results and the size of intraquarter updates. Smaller variances indicate higher operational control and forecast fidelity.

For investors, triangulate these metrics rather than viewing any single indicator in isolation. The strongest signal occurs when Vector’s marketplace KPIs improve at the same time that Create seats, services attach, and consolidated margins expand.

2023 Runtime Fee Announcement and backlash

On September 12, 2023, Unity announced a per-install Runtime Fee scheduled to begin on January 1, 2024. The fee would apply once a title exceeded 200,000 cumulative installs and 200,000 dollars in trailing-12-month revenue, with charges up to 0.20 dollars per install depending on plan and geography. Unity framed the change as aligning monetization with engine usage at scale.

Developers immediately raised concerns about counting methodology and operational complexity. Questions focused on whether reinstalls would be double counted, how charity bundles and demos would be treated, and how installs from subscription services such as Xbox Game Pass would be handled. Unity clarified that only first-time installs would be counted and that demos without the full game were out of scope, yet confusion and skepticism persisted.

The reaction escalated quickly. Mobile studios coordinated boycotts that threatened near-term demand for Unity Ads and related services, and many developers publicly considered pausing updates, canceling projects, or migrating engines. Investor sentiment turned negative in the days following the announcement, reflecting reputational damage and execution risk.

On September 22, 2023, Unity issued an apology and materially revised the policy. Unity Personal remained free, the revenue cap for Personal increased, and the mandatory splash screen requirement was removed. The Runtime Fee would apply only to projects built on the next Long Term Support release beginning in 2024, which eliminated retroactive application risk for existing titles that did not upgrade. Eligible games were given a choice to pay the lesser of a 2.5 percent revenue share or a calculated fee based on new people engaging with the game, with developer self-reporting for both revenue and engagement. Titles under 1 million dollars in trailing-12-month revenue would not be charged.

These revisions reduced immediate financial exposure and clarified counting mechanics, but they did not fully restore trust. By late 2023 the company faced meaningful business and governance consequences, including an advertising boycott that pressured the Grow Solutions segment, the departure of the CEO in October, and a company reset in November with workforce reductions and the unwinding of a VFX services partnership. A larger workforce reduction in January 2024 extended that reset.

Full Reversal in 2024

On September 12, 2024, Unity canceled the Runtime Fee effective immediately, stating that no version of the engine, including Unity 6, would carry per-install charges. The company characterized the move as a recommitment to its creator community after consultations with developers.

These revisions reduced immediate financial exposure and clarified counting mechanics, but they did not fully restore trust. By late 2023 the company faced meaningful business and governance consequences, including an advertising boycott that pressured the Grow Solutions segment, the departure of the CEO in October, and a company reset in November with workforce reductions and the unwinding of a VFX services partnership. A larger workforce reduction in January 2024 extended that reset.

Unity coupled the cancellation with a return to a seat-based subscription model and announced plan and price changes that would take effect on January 1, 2025. Unity Personal remains free, with the revenue and funding limit doubled to 200,000 dollars and the splash screen made optional for projects built on Unity 6. Unity Pro pricing was set at 2,200 dollars per seat annually, and Unity Enterprise pricing increased by 25 percent, with Enterprise required for companies at 25 million dollars or more in annual revenue and funding.

To formalize the change, Unity updated its Editor Software Terms in October 2024 to remove Runtime Fee language and align contractual terms with the new plan structure. This step closed out lingering concerns that the fee could be reintroduced through terms updates and clarified the company’s pricing basis going forward.

Leadership framed the reversal as part of a broader effort to rebuild trust. In public interviews, the new CEO, Matt Bromberg, described the prior period as a breakdown with customers and positioned the policy reset as foundational to repairing relationships and refocusing on product execution.

Vector, Unity’s AI Ads Platform

Vector is Unity’s AI platform that powers Unity Ads with self-learning models trained on campaign performance signals and game telemetry to acquire higher value users and optimize return on ad spend. Vector dynamically adapts to player behavior and game changes to sustain performance at scale across iOS and Android.

Unity began migrating its ad network to Vector in early 2025 and made the platform generally available in May 2025. By that point all iOS and Android traffic had been moved to Vector after a complete rebuild of the stack.

Early results showed a 15 to 20 percent uplift in installs and in-app purchase value compared to the prior stack, alongside a 15 percent sequential increase in Unity Ad Network revenue in the June 2025 quarter and guidance for continued double-digit sequential growth into the September quarter. Case studies from developers also cited ROAS improvements and greater scale.

Operationally, Vector supports ROAS and event-optimized campaigns and provides suggested country-level ROAS targets calculated from predicted revenue. The models learn from real-time auction outcomes and post-install events, which enables budget allocation and bidding that track lifetime value rather than only install volume.

For investors, the key questions are durability and competitive positioning. AppLovin’s AXON remains a strong benchmark in model maturity and demand density, so Unity must demonstrate that Vector’s performance translates into sustained share gains, better win rates, and improved monetization for developers. The near-term indicators are constructive, but the thesis depends on continued sequential growth in the ad network, evidence of stable ROAS at scale, and expanded advertiser adoption through the back half of 2025.

Competitive Landscape

Unity competes in two closely linked arenas: the game engine market that determines where content is built, and the mobile performance-ads stack that determines how that content is discovered and monetized. Competitive outcomes in ads are especially sensitive to data scale, model quality, and demand density, which is why AppLovin and Google are the primary benchmarks for Vector.

AppLovin’s position is anchored by MAX mediation and the AXON modeling stack that powers its demand product, AppDiscovery. The advantage is a tight loop between large, consistent advertiser demand, broad SDK reach, and models trained on high-volume auction and post-install outcomes. This typically shows up as strong win rates on valuable users, stable ROAS at scale, and resilient eCPMs through seasonality. For Unity, closing the gap requires proving that Vector can match or beat AXON on acquisition efficiency without sacrificing volume, especially in top geographies where competition is most intense.

Google holds unique ground through AdMob supply, Google Ads app campaigns, and deep integration with Android and the Play ecosystem. The practical edge is fill and liquidity across a wide range of countries and device tiers, plus durable advertiser budgets that flow through Google’s broader marketing platform. Unity must demonstrate that Vector can consistently win head-to-head against Google demand in mixed waterfalls and bidding environments, not just in controlled tests.

Meta, TikTok, and programmatic DSPs such as Liftoff and Moloco remain essential performance channels. They influence the competitive bar because advertisers benchmark ROAS, scale, and creative iteration speed across all of these sources. If Vector materially improves optimized CPI and payback periods relative to these channels, budgets will reallocate toward Unity’s network even when absolute prices rise.

On the engine side, Epic’s Unreal Engine is the high-fidelity standard for console and PC, with growing mobile relevance, while Unity retains strength in mobile, 2D, casual, and cross-platform workflows. Engine choice affects monetization indirectly through SDK footprint, data feedback loops, and publisher relationships. Unity’s integration of creation tools, live-ops services, and ads is a strategic differentiator if it yields better telemetry and faster optimization while respecting platform privacy constraints.

Platform policy changes remain the common risk. Apple’s ATT framework and SKAdNetwork, along with Google’s Privacy Sandbox on Android, reduce deterministic identifiers and shift optimization toward modeled conversions and coarse signals. The networks that maintain performance in this environment will be those with robust measurement infrastructure, strong creative tooling, and models that learn quickly from sparse, delayed feedback.

For investors, the competitive proof points are straightforward. Vector needs to deliver sustained sequential growth in Unity Ad Network revenue, rising win rates on high-value cohorts, and stable or improving advertiser ROAS at scale across iOS and Android. Share gains against AppLovin and Google in key markets, combined with healthy fill and eCPMs for publishers integrating Unity’s SDK, would indicate that Unity’s data and models are compounding.

Risk Factors

Platform policy and privacy risk. Unity’s ads business is exposed to Apple’s App Tracking Transparency and SKAdNetwork, and to Google’s Privacy Sandbox on Android. These frameworks reduce deterministic identifiers and shorten event windows, which can degrade attribution fidelity and model convergence. If Unity’s measurement stack and modeling cannot maintain stable return on ad spend and payback periods as signal quality changes, advertiser budgets can shift away.

Competitive intensity. AppLovin, Google, Meta, TikTok, and high-performing programmatic DSPs compete for the same performance dollars. On the engine side, Epic’s Unreal Engine is the default for high-fidelity console and PC. If Unity’s Vector models or demand density underperform peers in key geographies, win rates and eCPMs can compress, and if Unreal gains share in mobile, Unity’s SDK footprint and data scale can erode.

Developer trust and upgrade cadence. The 2023 pricing episode created reputational debt. If upgrade rates to current Long Term Support releases slow or if large studios keep contingency plans on alternative engines, Unity may see lower attach of services, weaker telemetry for optimization, and reduced opportunity to cross-sell UGS and Cloud.

Macrocyle and budget sensitivity. Mobile gaming spends and brand budgets are cyclical. Downturns amplify pressure on eCPM, fill, and ROAS metrics, and can lengthen advertiser payback periods. A slow content cycle or fewer hit titles can also limit auction liquidity and dampen network growth.

Execution and cost structure. Unity must deliver simultaneous improvements in model quality, advertiser tooling, and publisher yield while maintaining disciplined opex and reliable systems at scale. Slips in roadmap, outages, or poor tooling UX can push advertisers and publishers toward competitors and delay margin expansion.

Regulatory and legal exposure. Changes in app store rules, data localization mandates, kids privacy requirements, and content restrictions can increase compliance cost and reduce accessible inventory. Contractual disputes with large publishers or OEM partners would add uncertainty to supply and distribution.

Opportunities

Model performance and data scale. Vector’s self-learning models can compound with more auction outcomes and post-install events. Sustained gains in win rate, ROAS, and LTV to CAC at scale would support share capture from AppLovin and Google, higher publisher eCPMs, and healthier marketplace take rates.

Create and Grow flywheel. A tighter integration of the engine, UGS, analytics, and ads can improve telemetry quality and shorten optimization loops. Faster upgrade cadence to Unity 6, higher services attach, and broader SDK adoption expand observable events and improve targeting, which in turn attracts advertiser budgets.

New formats and automation. Creative automation, event-optimized bidding, and country-level ROAS guidance can unlock performance in privacy-constrained environments. Better creative iteration and inference closer to the device can raise effective yield without heavy identifier reliance.

Non-gaming expansion. Automotive, industrial, AEC, simulation, and digital twins increase the Create installed base and open incremental services revenue. As these customers adopt real-time 3D at scale, Unity can monetize through seats, cloud build, collaboration, and industry-specific toolchains.

XR and platform transitions. Growth in mixed reality and next-gen consoles creates a window to reinforce Unity’s strengths in mobile and cross-platform workflows. Early support for emerging hardware and platform features can lock in developers before standards settle.

Operating leverage and cash generation. Mix shift toward higher-margin software and services, disciplined sales and marketing spend, and improved forecast accuracy can expand gross margin and free cash flow. If Unity can convert sequential Unity Ad Network growth into durable margin expansion while keeping churn low in Pro and Enterprise seats, the financial profile improves meaningfully.

Investment Takeaways

Unity has removed a major tail risk by canceling the Runtime Fee and returning to a clear seat-based model, which stabilizes the Create segment and reduces churn pressure. The growth narrative now centers on Vector and Unity Ad Network execution. The thesis requires Vector to deliver sustained improvements in auction win rates, eCPM, and ROAS while advertisers scale budgets, and for those gains to translate into sequential Unity Ad Network revenue growth rather than one-off case studies. A tighter Create–UGS–Cloud–Ads loop is Unity’s most credible differentiator if it yields better telemetry, faster optimization, and higher publisher yield in privacy-constrained environments. On the financial side, the path to a better profile is straightforward: mix shift toward higher-margin software and services, disciplined operating expense, and stronger free cash flow conversion. The main competitive reference points remain AppLovin and Google. Unity needs to demonstrate share gains against both in top geographies without sacrificing advertiser payback or publisher economics.

Conclusion

Unity has reset its relationship with developers, clarified pricing, and redirected focus to product execution. The company’s investment case is now predominantly an execution story: prove that Vector’s model performance is durable across seasons and policy changes, re-accelerate the ad network on a sequential basis, and compound Create adoption and services attach. If Unity can show consistent gains in win rate, eCPM, and ROAS alongside stable or rising seat counts and improving margins, the setup supports a constructive view. If competitive pressure or privacy headwinds erode performance or delay monetization, the upside case weakens. Over the next few quarters, watch for evidence that Vector’s improvements are broad, repeatable, and reflected in revenue and cash flow, not just in isolated metrics.