Unity Technologies: 32% growth potential thanks to development of metaverse solutions

Unity Technologies is engaged in the development of software for creating video games. The company is known for its game engine of the same name, which is affordable, flexible and supported by almost all modern platforms - Unity (its main competitor - Unreal by Epic Games). The software has established itself as an industry leader:

Over 71% of the top 1000 mobile games were created on the Unity platform

94 of the top 100 game development studios use Unity to create games

Currently, the company has two business lines: Create Solutions and Operate Solutions. Create Solutions allows creators to develop, edit and run 2D and 3D environments in real time on different hardware platforms (consoles, smartphones). Monetisation of this product is realised through a monthly subscription.

Operate Solutions helps game developers monetise their development through advertising and create interactive experiences for players to increase engagement and returns. Sales in this solution are tied to revenue sharing and pay-per-use, allowing Unity to grow with its customer base.

Operate Solutions (64.7%) currently accounts for the majority of revenues and is the main driver of the company's revenue growth. The segment grew by 54% in Q3 2021. Create Solutions accounts for 29.3% of revenue, with growth in Q3 2021 at 34%.

Unity Technologies is actively developing its own products. Recent updates include:

The launch of the new Unity Gaming Services platform. It includes all the basic tools covering backend, monetisation, user engagement and player i nteraction areas. The updated version is expected to make it easier for developers to launch cross-platform multiplayer games, thus saving both time and money.

Deploying Unity Mediation on the Unity Ads network. This product aims not only to expand Unity Ads capabilities, but also to improve the effectiveness of its advertising products. Such an expansion can help Unity maintain the financial momentum it currently has in the Operate Solutions segment.

In addition, Unity recently acquired Parsec for $320 million. With Parsec's solutions, Unity will be able to provide customers with a more convenient option for collaborative remote game development. In other words, developers will be able to work together on projects regardless of their location - a much sought-after feature in the current environment.

Further development of the Unity platform products will help maintain its leadership position in the market and maintain both high growth rates and customer loyalty.

Development of the Metaverse business line as a significant driver of the company's growth

It will take millions of content creators to populate the meta universe. Unity is one platform that has the ability to provide creators with the tools they need to make this happen.

The company continues to expand its toolset and in doing so increases its competitiveness. To that end, Unity recently signed an agreement to acquire Weta Digital for $1.6 billion. The deal will significantly expand functionality for artists, allowing them to create more complex and realistic objects. Weta Digital's technology has been used to recreate characters and scenes from iconic films such as Avatar, Lord of the Rings, and Game of Thrones.

In addition, the Unity platform began providing the ability to use AR/VR solutions to create immersive 3D applications and simulate virtual worlds, in which developers can train artificial intelligence models for further application in robots and in-car autopilots as early as 2019. And in 2021, Unity went even further, launching the ability to create synthetic datasets on which AI training becomes faster and more efficient. Management believes the solution could be in demand among companies in manufacturing, retail and security.

Because Unity can provide developers with a wide range of tools for creating and rendering meta-universes, the company will significantly expand its own addressable market in the long run, which will reflect on its value in a positive way.