Unity Software is a leading platform solution provider to create, operate, and monetize games and other 3D content; a so-called Game Engine. The engine lets creators import graphic and audio assets from other software, such as Photoshop or Autodesk, or create it directly through the engine. Together with powerful physics and scripting systems, the creator can both create beautiful content with lifelike properties and operate the end-user network with game communication, matchmaking, hosting, in-game purchases, cheat prevention, and analytics.
The company operations can be divided into two different, but synergistic, solutions;
The CS includes HD rendering, graphic animation, audio and UI tools and much more. It’s priced based on a monthly subscription per seat, ranging from $30-200 depending on the plan, where the simpler plan includes basic access to the platform and the more advanced plans include customer/technical support, collaboration tools (Unity Teams) and learning sessions.
It is a platform-agnostic service that lets studios publish their games on a wide range of platforms (mobile, Xbox, PC, etc) without the need to re-code for every new desired platform. Their partnerships with hardware and Operating System providers enable their platform to be deployment-ready for next-generation devices and updates before they hit the market.
The OS lets the customers monetize and run their content as well as engage their user base. The solution can be deployed to any content, regardless of whether it was created on Unity or not. The solution includes Unity Ads and Unity In-App-Purchases for monetizing, deltaDNA for deep analytics of user behavior, and Multiplay and Vivix for multiplayer hosting and player to player communication. The solutions are all tools that let game developers lower their CAC and raise their LTV of their customers. The OS is priced based on a revenue-share agreement for the monetizing products, and a usage-based agreement for analytics, hosting, and other - usually based on active end-users or storage needs. As of June 2020, 55% of customers with ACV of >100k was using both solutions.
Unity has grown rapidly in the last years, growing its ACV >$100k customer base from 389 to 716 in 30 months, representing an annual growth of ~30%. This is mostly done through a land-and-expand model and by cross-selling their two solutions. By offering their Create Solutions for free to students and hobbyists, and offering more complex solutions as their customers grow, they can scale together with the customer. This lets them capture significant market share in the lower end of the market and creates a lock-in effect as publishers scale.
The model has granted the company an impressive 99% gross retention rate, meaning that year-over-year only 1% of customers leave the platform. Looking at Dollar Based Net Expansion Rate (including up sales and cross-selling) the number amounts to 143% as of June 2020, up from 129% one year ago.
The company has been able to solidify its position as a market leader over the years and today more than 50% of all games (mobile, PC, and console) are made using Unity. I believe that two of its competitive strengths as a company, that, in turn, help the acquisition and retention of clients, are its strong Community and a massive amount of generated End-User Data.
The importance of a well functioning community can't be overstated, and Unity has over the years attracted a massive amount of creators and can now boast with their incredible 1.5 million MAUs, of which the Pro customers spend an average of 5.1 hours per day on the platform. This facilitates a community of creators matched by few others, where designers, artists, programmers, and animators can share ideas, brainstorm, resolve problems together, and showcase their latest creations. In the Unity Forum, they can browse thousands of threads on different topics, many with lively discussion and tens of thousands of views, or pose their questions in the Unity Answers tab where dedicated members will provide help. If the creator needs more help, they can schedule a 1:1 session with a verified community expert for a fee on most topics.
The Unity Asset Store is a creation within the community that lets creators publish and buy lines of code for specific use cases, this gives creative publishers a way to monetize their work, and creators to save time when building their own game. The assets can be everything from the sword fighting-motion of a character, a realistic shadow, or the sounds of a dragon breathing fire. Unity, like many other marketplaces, applies a 70/30 revenue split with the asset creators.