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AppLovin vs Unity: Who's Winning and What Could Change? · Mobile Signal

• Josh Chandley: AppLovin the apex predator of gaming ads, just had a great quarter. But so did Unity, the company trying to catch it. One sentence from each of you. Did the competitive gap get wider or narrower this quarter? And why? Vincent: So in my view, it's actually widening. the goalpost is just moving further away, I would say for the competition. but that's my one sentence. Matthew K: I think it's maybe I'm just a little more optimistic, but I I think it's at least not getting any wider only because if Unity's at the bottom floor, they can't go any lower, you know, th there's no basement here. So they're off the mat at least and and they're at least competing, which a year ago maybe you couldn't even say that. And so from that perspective it's it's potentially not widening, but but it's it's still a long way. Josh Chandley: I think off the mat is a is a really good analogy. Cause I think it depends on how you measure the gap. I think in absolute dollar terms, it is getting bigger. That's hard to deny. While at the same time, Unity is becoming a more credible alternative. You know, while while grow isn't up that much, Unit Vector's more than doubled over the last year. And Matthew K: Before Vector, we were we were almost Josh Chandley: so Matt, okay, yeah. Matthew K: at the point of calling this a monopoly business, right? It was almost like Josh Chandley: Yeah. Matthew K: it was applovin and then people throwing money at others just to keep app lovein a little bit at bay to make sure they have some competition. And now there's at least a credible number two in the market that is showing both performance and growth, you know, internally that suggests that they're a structurally sound, financially sound c number two competitor to to to balance app lovin'. Josh Chandley: Yeah, in terms of focused IOS players, I think that's f fair, Vincent. Vincent: No, I want to say that it's just the velocity. You mentioned absolute numbers, Josh, where obviously here, the the numbers are getting bigger. and I mentioned, you know, this image of goalposts, but also just the velocity. I mean, the Unity adds so the grow business, so the the network put aside the engine is plus thirty two percent year over year, where Applovin just delivered plus fifty-five percent. So the numbers are bigger, but Applovin is actually running faster as well. Josh Chandley: Well, but the strategic Matthew K: Yeah, the Josh Chandley: strategic growth has some some I don't want to call it dead weight, but it has Tap Joy and Aura in it, which are, I would assume, incredibly flat businesses. When you look at vector, it's up it's I think it's double the over years. Is that right, Matt? Matthew K: It's forty percent sequential. think it was a hundred and twenty something percent year on year, but it's still off a much smaller base, right? I think they just crossed a billion right, Josh Chandley: But then the base is even smaller. Yeah. Matthew K: they just crossed a billion run rate on Vector annual. AppLovin is a eight to nine billion annual run rate business at this point. So when you're just talking about incremental new dollars, AppLovin is still significantly higher than Vector by a couple of hundred million every quarter, on an annualized basis. Like that's that's that's important to call out, but you know, a year ago Unity was flatish at best, even on the good stuff and the strategic grow and all of the good stuff that they were trying to grow. And Appleven was still growing thirty plus percent year over year. And and so, you know, I think when we're looking at, you know, the momentum and where where the where this where the kind of sales have shifted and the winds have shifted, it's definitely f shifted in favor of unity. Now we can get into the the whys of that and, you know, what that means, but I don't I don't see a reason that App Loving can't keep growing thirty percent year on year. That's their goal. That's what Adams talked about over the medium term and there's no reason they can't do that, whether or not Unity becomes a competitive number two or not. Josh Chandley: I agree. And I I think that that reminds me back of our our last conversation in June, when you were much more worried about macro than l competition for App Levin. so now it's November, about five months later, six months later. What surprised you most since then? Like what and would would June Matt believe this answer? Matthew K: I was a little right 'cause after I spoke the stock tanked. I Josh Chandley: Ha ha. Matthew K: think I was right for the wrong reason. but I'll take it. it's better than being wrong for the right reason. which I've been many times in my career covering stocks. you know, I I I think there was some some macro, you know, noise though in the second quarter results and that definitely, dragged them down. I'm I'm I'm curious to also understand how you think about the impact of election spending on on Q three and Q four? 'Cause they talked about take rates going up, AppLoven did. Unity did not. Unity explicitly called out no increase in take rate, but AppLoven did. And so, you know, we saw a turnaround in in the Q three numbers and and it sounds like there's some some model boost, but it also sounds like there's some take rate noise. And, you know, I'm curious, you know, to your thoughts on, you know, what is political spending have to do with that? And as we look at twenty seven where we come out of the political cycle, you know, how does that kinda normalize? Josh Chandley: Yeah, I don't I don't believe the political spending is that material yet, specifically for in app ads. On on other mobile ads, perhaps yes, but I wouldn't say we're getting deep like I I don't think the Republican Party has a business relationship right now with Apploven, is my best guess. I have no idea. But I I I don't but I don't believe Moloco or or Unity or Matthew K: So so I'm I I'm I'm thinking more of secondary and tertiary effects, right? So you here's a scenario in my brain, right? So if you're you're a consumer brand, you're advertising on Instagram, all all of a sudden Josh Chandley: Yeah. It it may relative attractiveness. Yeah. Matthew K: Instagram ads get more expensive, so you're like, I can go spend more on AppLovin's network because it's a little bit cheaper, and then that pushes more value and more money towards AppLovin and that and that shifts the competitive I'm just I spit ball I'm trying to understand it more than anything. Josh Chandley: Yeah. Vincent, have you seen that? Vincent: it was 12. I mean I don't have any any data to prove it, but I think I mean you look online, it's 12 billion that was spent I believe this year, right? for the midterms. do they spend on mobile gaming inventory? Well I hope they do if they are a little bit smart and Josh Chandley: Huh. Vincent: you know if you if check where are the eyeballs they are. but definitely the bump would be I would expect the bump to be higher on the Google, the meta, the TikTok, rather than Aplovin and the Moloco and the liftoff. But there is a little bit of an effect that. So of course when you normalize that for next year, yeah, you're not gonna have this this influx of of dollars for such events. And remember the you know, June, it was the World Cup soccer. so those things obviously are not coming every year. Josh Chandley: Yeah, I think probably Calci and the the various apps like that are probably more more impactful, especially in the US since the NFL started back up. But going back to June, I I just want to may a culpa. I was very bullish on self-serve. I believed Matthew K: Mm-hmm. Josh Chandley: that it could be a major demand unlock. And I'm still a a fervent believer in that, but clearly I suck at timing, Matt, because the that didn't happen at all. Matthew K: Yeah. It's it's just a weird market we're in and you know, everyone is trying to self serve everything all of a sudden. I saw a funny joke that, everyone's vibe coding everything and then all of a sudden there's all these vibe coders that like, I wish I could pay someone a monthly subscription to manage all the apps I've built. Sounds like you want to reinvent Josh Chandley: Yeah. Matthew K: SAS. You know, so I feel like we're in this kind of weird environment where a lot of people are trying to self serve everything and build everything themselves, but then it's more of a human capital capacity problem than it is a technological capacity problem. And you know, I I think Also at the same time I don't think you can discount Vector in the in the in the conversation around self serve. And you know, if if people are are putting effort, time and dollars towards towards Vector, maybe that's that's something that that also slows down the launch of self-serve in terms of people coming in there. Vincent: I believe it was addressed in the in the earning call that yeah, it's just taking a little bit more time. and a savvy small, advertiser will be successful on the services right now, but the majority of those small advertisers are not you know, savvy. that's the thing. They are still need to be guided, and you need a super efficient self service platform to help them. I mean, hopefully, you you you're gonna have some AI agent. deployed to just help onboarding. It's all about the onboarding, setting up your targets right. the creative front is, I think, pretty pretty, pretty there. like in few clicks, you know, can generate creatives in so many tools. But yeah, it was if you were bullish Josh on that, yeah, it didn't really materialize that there yet. And I believe Applovina acknowledged that. which means again it's also good news for the future. It means which means that It's another lever that can be pulled, to essentially accelerate the growth. Josh Chandley: Yeah, and unlike Vector, where its its gaming customer base at least grew by over a quarter last quarter, AppLovin says it already works with practically every gaming company. And so go ahead. Yeah. Matthew K: And it's important to know for Vector, I think they said ninety percent of the quarterly revenue growth or ninety percent of quarterly revenue, all of it, came from existing customers. Josh Chandley: Uh-huh. Matthew K: So it's mostly people that know what they're doing and just moving to the new model and moving to the better technology. I think they said new customers grew twenty-seven percent. So if you're thinking, okay, the whole revenue grew forty percent, new customers grew twenty-seven percent, that means that existing customers are growing spending more sequentially, right? you know, so so like I I think Vector is still in a spot where it's mostly existing customers just migrating from legacy to new, whereas AppLove and to your point, everyone uses their technology, so how do we get the tail of smaller advertisers onto the platform? Josh Chandley: Yeah, I will say though, I have a I have a hypothesis that the new customers on Unity on Vector was a little backweighted. Because what I observed, I'm curious to know what you heard, Vincent, that when that Q2 earnings dropped in August, everybody just took that as a sign. Wait, am I missing out? 20 something percent sequential growth. And so after that, my my my sense is that there was a lot more interest and onboarding. And so it may also be that these new customers, they might not be less savvy, but they might have been onboarding in in August and September less July. And so that that creates an even more bullish setup, possibly for Q4, especially after this 40% beat growth by Vector. This could happen, you know, again going into late Q4. but back to Appleven, where does this next leg of gaming growth come from. Matthew K: I can jump in first. they're rolling out the new model and they won't call it Axon three yet, but it sounds like Adam is saying that this is gonna be the equivalent technological jump from one to two, so even if it won't won't be called three, it sounds like they're talking about a similar technological jump and you know, I think if we look at what happened, you know, the last time they that when they rolled out Exxon two in twenty twenty three, you know, pretty much they had it was like six or seven quarters of accelerating year over year revenue growth from that point forward. And so that's what people are getting excited about and that was the reaction in the stock is that, hey, you know, we think we're gonna have another, you know, model cycle on our hands. And that's where I think they can jump in. But, you know, I'm curious if if if if we will get six or seven quarters of of accelerated growth, or maybe it's only three or four at this point. Vincent: for me the growth has to come, you know, more use cases. so you know Aplovin is working with pretty much all gaming companies, but then you use Applovin essentially when your game is already scaled, you know, you know your ROAS and usually it was like CPI billing. And you know, Aplovin really rolled out various products. So I'm thinking about the CPM billing. So that's the ad ROAS, but you just build differently. And that's opening up just many new use cases. So existing clients can essentially spend more just you know on those use cases. The biggest example is you know soft launch. usually Apluvin, you know you don't really launch your game straight on Apluvin, you test you know your game, your iterate on other networks. Whereas this new product actually opens up spend at the very, very early day of the game lifecycle where you don't have much scale, you don't really know your metrics, CPM billing is the answer for that. And I think the growth of gaming has to come from from those angles. Josh Chandley: W the way I I think about it is there's three growth levers specifically to gaming. You know, one simply even if they had every customer, they don't have the whole budget. second, you know, I think AppLovin is incredibly adept, a casual. You know, whether it's ad monetized, you IAP or hybrid, but areas of growth for them are are mid-core and and hardcore, where it's still a bit more hit and miss. But then finally And they've mentioned this on the call before. I I still think targeting is relatively coarse. You know, Applevin says, you know, model improvements drove the reacceleration, you know, with gaming driving most of the beat. You know, so I'm curious, what do you think the models are getting better at? And how does that turn into more revenue? Vincent: Yeah, mean, I think, you know, Adam touched on that, but I think he mentioned like, hey guys, remember that on 90x percent of impression, we actually don't make any money because there's no conversions. And it's actually indeed a fundamental to actually absolutely keep in mind. So the the name of the game is essentially obviously the prediction. You see a user, how much are you happy to bid and how confident are you with your prediction that this user is off. Quality for advertiser A, B, C, D. So I'm just saying the basics there, but the improvement has to be on prediction and being able to predict with a certain set of data. And sometimes you don't have a lot of data and it's harder to predict, right? So you have different angles of how to see this prediction exercise. but for me, this is where any model you know has to make improvement on a regular basis. this is such such a fundamental part of the model, I think. Josh Chandley: Yeah. let's let's use a simplified example, right? You spend a hundred dollars, your ads get two thousand impressions, and the players you acquire generate two hundred dollars. So 200% row us. Now imagine better targeting, you know, delivers the same $200 in revenue from just a thousand impressions. You know, because it's way more than half of your impressions deliver a zero revenue to you that you pay for. so you could easily still spend $100 in cost and get the same $200 in return, even without better players or new players. But that means that for AppLevin or Unity or the ad network, your effective CPM they can bill has doubled. And so that doesn't just create a CPM inflation for that advertiser, but it creates new room for impressions to come in and be more efficiently allocated with the half that you're no longer bidding for. And so That that's how I think about this model growth. And I still think it's just a massive growth driver in this industry. How else do you see AppLove and and Unity growing so much at the same time? Vincent: Yeah, I think it's really allocating you know, the right campaign to the right user. And, you know, the better job you do at that, you reduce waste and essentially you keep your client happy, but you essentially make more money, right? You'll you need less inventory for the same output. So clients are happy and you actually improve significantly your business. Matthew K: Yeah, I I would just agree with Josh Chandley: Yeah, and good. Matthew K: that and just kinda say it's it's value capture, right? If you capture more value for your clients, you can capture more value for yourself. And it it it can be both from market share gains from dollars spent from others or just increasing share wallet overall. but if you're providing more value, they're gonna put more money behind it and then you're gonna capture a higher share of that if you're providing more value. Josh Chandley: Yeah. and so both both Unity and App Levin seem to be moving pretty aggressively on that front. You know, what would justify treating this or buying it that this is another major step change for the business? Vincent: Yeah, it's very hard to say obviously from the outside. and I think Warren mentioned in another podcast that, you know, it's never night and day and from one day to another. It's really like iteration over time. But I don't see any reason, why not believe, you know, what Aplovin is saying that yes, indeed, this model improvement actually that we didn't see, the benefit from in Q2. Actually now we we see the benefit. And I believe he mentioned it was partially rolled out. So you you have to believe that this is a significant change. I don't know if it's a two point or like, you know, whatever the decimal you use. But yeah, the model stepped up. I I think we can we can we can agree with that. Matthew K: Yeah, I'm not the technical expert here, so I'm gonna keep my answer curt, but just remember that Axon two dot at least started to be developed before ChatGPT was released. just think about how far AI technology has come in the last three, four years now. and just think about what that means for a new model for App Loving, you know, as as they incre as they as they bolster their technology stack. Josh Chandley: Yeah, I I agree with you both. We can't look at the architecture from the outside, but the everything we know kind of tells us this is a huge growth area. go ahead. Matthew K: And and I and I think they've they've always been a little a little coy and a little conservative in how they talk about these things and let results speak for themselves too. But they don't think there there are definitely Josh Chandley: Mm-hmm. Matthew K: I mean Unity's former CEO, John Richatello, talked a big game. He o at EA he talked a big game. At Unity he talked a big game, he was that personality. Adam's not that guy. Adam lets the results speak for itself and and and and I think that's also just part of the culture at Apple F and is they know their technology is the best and they're gonna let it speak for itself. Josh Chandley: Yeah, that's definitely their perspective. But I think what's interesting is that there's a model enhancement that makes Q three better. And there's a model enhancement that makes Q three better and sets up the architecture so that you can keep growing and growing and growing. and that's what would make this comparable to Axon too, if it's that much of a technological and architectural reset. And that's the part of, you know, the management's argument that I find interesting. Because this quarter to me is evidence of progress, but I don't think they've truly demonstrated if this new architecture is creating that new runway yet, right? Matthew K: the the sell side thinks that this is an axon two dot runway. a lot of the sell side research I read after the results was their modeling this to be another step change like axon two and whether that's from exactly what was said on the earnings call or what was said in their their one to ones afterwards, 'cause a lot I don't know, for those that don't know the world the finance after the public earnings call a lot of the cell side analysts get one to ones with the CFO or the even the CEO and so, you know, whether that comes from those direct conversations or what was said publicly and even unpublicly they talked about it too. I think a lot of people, and at least in the financial world now, are seeing this as this is another step change. Josh Chandley: speaking of step changes, Vector was a surprise for me this quarter. I I thought it was gonna grow, but I didn't think that we'd see Vector growing 40% quarter over quarter. as a benchmark, the biggest number we ever saw from AppLovin's software platform post Axon two point was twenty four point two percent sequential. And that was also in Q three in twenty twenty three. So different starting sizes of course, but what what explains that cartoonish acceleration? Vincent: it's just like the snowball effect when when you scale something that is actually in effect very good. The more data you pour into your model, you know, the better it becomes and it learns faster, right? And it iterates faster. So I think this is what happened. as more clients, as you mentioned earlier, you know, some clients had maybe some FOMO, right? So they started testing, maybe they were waiting before again. They started with IAP, and only then their model actually were roared for IAA clients. So you have this influx of tests coming out, your way. Because in the beginning, let's face it, it's goodwill. you have money of big clients happy to test. That was a year, a year and a half ago. Now the model is delivering results, and so it's essentially attracting more dollars and meaning more data. and then Then the rest is speculation, I think runtime data. You you you discussed that with Felix, but I don't think it's really there, and really boosting the model. Add quality tool data. I mean, there is obviously a trial there to understand, you know, the usage. Unity is saying they don't use it for vector, who knows? Josh Chandley: I have no idea if and how ad quality data may be used. But I think the day 28 targeting was obviously a huge unlock. It it allows, you know, Unity and Applevin to dance around those day seven limited ad networks. But what also sticks in my head that FOMO, I remember on the pod, Warren Woodward, CGO at Uptick, you know, he manages a nine-figure portfolio. He said, This is exactly what I needed to see in order to retest. And I think we saw that effect. Matt? Matthew K: Yeah, I I just couple of comments there. First on on runtime. Again, we don't know if this is feeding vector or not. They said it's not, but doesn't mean it's not like indirectly feeding into it, right? And internally, but they said opt in for new projects is ninety percent. 30% of the top 1,000 spenders are now sharing runtime data. So there is some amount of data ingestion there. Now what they're doing with that data is a separate separate conversation. in terms of the revenue, like put it in perspective, when Axon 2.0 came out, Apple Oven was like a thr you know, the the the advertising side was like a three to four billion run rate business somewhere in that neighborhood. I didn't have the exact numbers in front of me for the the segment split because they still had a game, you know, the gaming portfolio at that time. so growing 0.20% sequentially on that is like 700-800 million incremental revenue annually Vector growing 40% on a billion run rate, plus well, it's a plus or minus a billion, so 400, 500 million. So just to put it in perspective of dollars as opposed to growth rates, because that's a little bit more comparable, right? So Apple of and you know, their their their dollars growth at the time of 2.0 is still higher than where vector is, plus or minus. and then on the margins, yeah, you know, the the caveat, well, a couple, a couple caveats, and then financial engineering caveats. you know, Unity's margins are weighed down by by create. Create is basically a break-even business for them on an EBITDA basis. I have thoughts on what they should do with it, but that's a separate conversation entirely to this one. maybe it ties into an LBO conversation that we'll get to. And then also just like financial engineering wise, their stock-based compensation is still out of control. Unity. It's like twenty-five percent of their EBITDA is stock-based compensation, and that's kind of their guidance for next year too. app Levin, I don't have the exact numbers, but it's a lot more controlled and part of that is because when they IPO'd and the stock was so high, they issued all these all the you know, they gave all these stock grants and everything and now it's coming to roost with the business being much less profitable and and the stock price being depressed and so their SPC is out of control as well and that and that inflates because that's an adback to EPTA. Josh Chandley: the the thing that we keep coming back to as well is this idea of growth rate versus absolute dollars. And I I just wanted to say it in most businesses, I really do see absolute dollars as a much more material comparison. But what's what hurts my brain about ad tech is the simple reality that scale but gets scale. The more data that you have and the more opportunities you have to learn, the more you can grow. And so when as you grow, maintaining those growth rates almost feels easier to me than with some other businesses. and so when you look at Unity Strategic Grow delivering around 431 million last quarter, that's about a fifth of AppLovin's 2.2 billion. You know, so matching AppLovin's current scale would be a 5x move. And that target is obviously moving. What's the hardest thing Unity still needs to solve? Vincent: we mentioned engine or runtime fee data. It could be a silver bullet, we just don't know to what extent and when. but I think they're gonna be a ceiling, you know, because again, everybody's playing in Aplovin's playground, right? So Aplovin is essentially making the rule and you need to play with them, w being access to supply. As long as you know Applovin's gonna be dominant on access to supply. Every other players, including Unity and Vector, will at some point reach a ceiling. so I'm not sure I answer your question, but I think that's gonna be the hardest thing to solve. will that hinder them, you know, to close the gap? You know, you mentioned a fifth. Yeah, probably at some point. I'm not sure when, you know, when they reach a billion, one point five. but yeah, right now, as you mentioned, Aplovin two point two billion, yeah, it's just ridiculously higher than what Unity just delivered. albeit with a super strong, year over year growth on the Unity side. Matt, what do you think? Matthew K: Yeah, I I don't I don't think Applevin's gonna sit idle and let Unity get to fifty percent, sixty percent of their scale. and do nothing, right? Obviously they have a new model coming out, but even if vector continues to scale and the and the dollars gap starts to narrow even more, like they're not like you Josh, you call Apple and the Apex Predator for a reason, right? Like Josh Chandley: Yes. Matthew K: they're not gonna sit there and let that happen. Right? They're gonna they're gonna they're gonna do something about it and they can do something about it. They can get more aggressive on you know, pricing, they can get more aggressive on on on on on other incentives to get people to spend more and and kinda stymie vector's growth. And so So I I don't I don't I don't This is not to say that don't think Vector will keep growing and I think it'll do its thing, but I don't think Appleven's gonna sit there and let it happen and just take it. they're gonna they're gonna compete. Now, does that mean that that hurts their margins potentially? And so I d I don't think they're gonna lose their their market share per se, but I think this could you know, yeah, this is my thesis on economic depreciation and with modern AI and the ability to have these in you know, these these step change improvements on a much more frequent basis is kind of my working thesis around around this industry, right? And so, if they can have these axon 2.0 like or even vector like step changes and model improvements on a more frequent basis, they're gonna be competing much more aggressively and with less time to recoup the investment it takes to build that next incremental step change, right? And so what that means is that both your quarterly margins and your return on invested capital get depressed. And that's my bigger concern with AppLovin than like they're gonna lose their market share to vector. It's that the return on invested capital and their margin. Josh Chandley: And you're both to some degree describing an arms race where the amount of time that you can enjoy the benefit of a new model or new R and D in some way is being compressed. Is is that a a decent summary? Matthew K: for the yeah, for the For those that are not in the weeds, and I think your audience is mostly in the weeds here, but maybe I'm pulling in some Josh Chandley: Extremely. Matthew K: finan some financial folks, maybe I get one or two of them in here, right? Just think about what we're seeing with anthropic and open AI and and the arms race and just like GPT models right now and and what they're doing, right? And you know, at at one point it was like a year between these these models and now it seems like every two months there's you know, it went from Opus five to Opus five five in six weeks, right? Like and and that was a significant step change. I mean i and so like that's that's a a layman's example, but I think that's that's where we're at right now. And with all this investment in compute, you know, that's gonna funnel through here as well. Josh Chandley: Yeah. And I think the the other ceiling that's being created for Unity right now, I think Vincent mentioned as well, is is inventory. You know, Max belongs to AppLovin and they're charging Unity a fee for the right to access that inventory. And so I suppose inventory access could come from unexpected places like CTV, but the the core of their business is still in app ads. but you also you mentioned capital, Matthew. And so perhaps it's time to go there. Matthew K: Mm-hmm. Josh Chandley: the the reported Silver Lake and PIF buyout talks add another layer to this this complex web of dramas. Would this how likely is this to happen? And would this buyout make Unity's path easier or harder? Matthew K: You can't put odds on anything when it relates to sovereign capital 'cause the Saudis have infinite money. I mean, they literally just threw away five billion dollars on Live Golf because they thought it was fun to try to build a golf league. and they just wanted it down, it's bankrupt now. So like they can throw around money whenever they want. They just acquired EA for a lot more money than Unity would cost. That was fifty, sixty billion, this would be a twenty five, thirty billion dollar total acquisition price. Now, so the odds are never zero. I I I don't put them very high and I'm probably saying that, and by Monday, before this podcast even gets released, the deal will get announced. Right. We'll get announced, Josh Chandley: It'll close, yeah, or announce. Matthew K: you know, Sunday, tomorrow, and then Monday in the morning or whatever. But just to kind of give the context, Silver Lake already owns, when you fully dilute for the convertible bonds, 10.5% of the equity of Unity. They were a pre-IPO investor, so they know the business. So you can't discount that Vector. They've partnered, they partnered with PIF, with the Saudis on the EA acquisition, so they they have that relationship. Where it gets tricky is the financing. The EA acquisition had a significant debt component to it, and it was more of a traditional LBO in that sense. It was one of the larger LBOs in many years, leverage buyout for those that don't know financial jargon. What that means is you put a lot of debt on the business and use the cash on there to help buy the business. And that puts a debt burden. You know, EA was generating two and a half, getting to three billion of you know free cash flow a year. Unity is nowhere close to that. Unity's cash flow is still depressed, even with you know, you Can't take one quarter's results and extrapolate that. The credit markets won't allow that, especially in the current environment for where the credit markets are at. And so my whole view is that this wouldn't be a traditional LBO. That the Saudis would have to cough up a significant equity check, significant cash check, and more like instead of it being like 6040 equity debt or even sixty forty debt to equity, this would have to be more like eighty percent plus equity coming in, including the rollover of the Silver Lake stake, but there'd have to be a much larger equity component for the amount of debt. that Unity as a business could support in the credit markets today. And so it's not to say that it can't get done. It just it it needs to be a big fat check coming from the Saudis to make this happen. Josh Chandley: Vincent? Vincent: yeah, I mean, super interesting news. You know, when we woke up, we saw that it was like, wow, my goodness. I'm super curious as well on their synergies, you know, what would be the end goal? would that, you know, because Unity obviously was without when I say independent, is essentially being a publisher as well, or compete with your clients, right? And so at some point Unity owns Supersonic, they just sold it to triple dot. So now Unity is not a publisher anymore. and I do believe as a tool it's better if you don't compete, right? So that will put Unity, you know, obviously next to EA, Scoply, you know, in the family. it can be a good thing, like hey, you improve, you're closer to your clients, you understand the needs of your clients, or you can actually scare a little bit the industry because you're not neutral anymore. For me that would be this angle that would interest me. But yeah, we'll see. Matthew K: So here's what I would do if I was them and and I actually did this deal. I would the first thing I would do is make the engine business free. I would get rid of subscriptions. I w I would completely blow up the financial model of the engine business and make it free and make it just open use and have a different financial model that more looks like epic and unreal where you're taking a a share of of lifetime revenue. But you can you can caveat that by saying, but if you spend so much money on vector, we'll credit that against the the take rate the take rate, right? And I think that's the winning formula is get more people using the engine to collect the data for runtime. And you have to make runtime mandatory at that point. Because if you're giving away for free, I know there was a whole big big thing over mandatory runtime opt-in, but if you're saying, Hey, I'm gonna make this free, right? that that changes the economic equation. People may be less against it by when you say you're gonna give it to you for free now, right? As opposed to charging you, you know, monthly subscriptions. And so make runtime opt-in mandatory so you get the data from everything there. And then what I kind of what I said, you know, then have that commission structure, but credit your vector spend against the the the commissions. And I think that is the winning formula for for for truly competing, because that that that leverages the differentiated Vector that we know that Unity has against Which is leveraging the runtime data for for for more to grow vector. Josh Chandley: I on on one hand, I agree with you that perhaps the majority of the revenue growth that Unity will enjoy from the engine may actually be recognized as part of the grow segment. on the other hand, after the runtime fee and all of the the trauma deeply internalized by that organization, I think there's a zero percent chance what you just said happens, even if it's just limited to mobile. Matthew K: Yeah. Josh Chandley: the other thing I would yeah. Matthew K: That that's fine. I I'm I'm giving out the the crazy Matt scenario. It's very unlikely that any of Vincent: I like it. Matthew K: that happens. Josh Chandley: It is a crazy mad scenario. I love it. but I think that I'll I'll throw out one more weird thing. I believe that Applovin and Unity are enjoying a very weird benefit from being publicly traded on the New York Stock Exchange. one example, okay. well, one example Matthew K: I don't. Josh Chandley: is like Mintigral, where they're they're listed in was it the Hong Kong stock exchange and we don't cover them as well. Well, well, what what I what I'm Matthew K: yeah, if you're comparing against if you're comparing against other stock exchanges, yes. Unity s e even today, Unity is not not profess Unity as an organization okay, let me put it this way. Unity IPO'd in twenty twenty one when the markets were going crazy and all these companies that should never have IPO'd IPO'd. If Unity tried to IPO today it would not it would not get listed. It would not it would not attract investor interest enough to to justify the valuation they want to get. And so that's that's that's my thesis. That or that's where that's what I'm saying. Josh Chandley: And yeah, and so where I'm coming from is because this it's an accessible stock, people are talking about it much more than Mintigral and other privates. And I I really do believe that the Q2 earnings was one of the best things that ever happened to Unity Vector marketing. And I bet that we're gonna look back in a couple of months and say that maybe the Q3 earnings was one of the best things that ever happened. to Matthew K: That's fair. Josh Chandley: to the to for marketing. And so I wonder if you lose that, like if we go back in time and they got LBO'd nine months ago and it closed nine months ago, would Vector have gained 27% new customers in Q3 without that earnings report? Like does does losing being public actually materially damage the business right now because this is such a an interesting kind of way that UA people kind of think about who to work with. and again, like Mintegral is very large too, but no one talks about them. No one talks about their growth in the same way. Matthew K: Yeah, no, it's an interesting thought. I w I was from the perspective of the quality of the business, would not get listed today if they tried to. Josh Chandley: Would not support an would not support an IPO. all right, let's let's talk about the publisher impacts. Both companies are growing so quickly. That is consistent with a growing pie, but does that mean that there is no fight for share? Vincent, what do you think? Vincent: I think it's actually more fight for share, honestly. Essentially the question is is it incremental? and I'm again from a publisher perspective, example, if I spend more on Unity, is it at the expense of others? I think the answer is yes. to to to some extent or to for a large part. essentially, yeah, Unity Applovina are taking shares out of, you know, the lift of the Moloco. You mentioned Mintigral. Even if the market, might be growing, yes, there is still, you cannot grow fifty percent euro of a year by just growing the pie. So you're eating, someone's plate. so that would be how I see things. Matthew K: Yeah, I'm I'm not I'm not in the weeds as much, but I I I think it has to be share being taken from somewhere. That's probably a combination of Vincent, what you said, but also just potentially other media budgets. everyone's for the last several years has talked about wanting to funnel more money into gaming from other, you know, media avenues. IAB has a whole gaming, you know, track set up. That's that's one of the large like digital advertising, you know, groups out there. They even have like Roblox specific ones now too, which is crazy 'cause there's no UA network on Roblox, which is a whole separate conversation and part of the reason I think that they're struggling. but but all that's to say that th there's probably also some degree of incremental new dollars coming from other media classes into gaming and increasing the pie as well as share being taken by Vector and AppLoven. Josh Chandley: Yeah, I think year over year, axons up over fifty percent, vectors up over a hundred percent. Unless there's a large ad network about to go bankrupt, the pie has to be growing at least moderately, right? you know, I I I don't but I don't see any networks doing that right now. but I suppose there is a difference between Taking another network's budget and unlocking new spend to a degree that dilutes other network budgets in terms of total share. on net, though, I do think there's an undeniable battle for impressions. Just because the budget, this because the pie is growing, that that doesn't mean that there's not a bidding war emerging, driving publisher earnings up. there's a simple truth. If you're mark if you are marketing a match three game and your ad network doesn't know that a candy crush ad is desirable, there is something wrong with your ad network. there is some direct competition that you you can't deny. But I I still do fundamentally believe that app love and in Unity, when they say that tr the targeting has upside, I really believe it. I I I believe I don't think it's crazy to say that there could be, two X revenue creation per impression over the next four or five years, especially with consumer coming in. So I I still really believe it that the pie is growing, but I also believe that the knives are out and people are fighting for share. Vincent: Yeah, obviously the consumer segments. also, we can think that now, with vibe clothing, a lot of people are entering the market, trying their chance, building apps with AI, publishing, and no, that's a big problem for the stores. And you know, you try to market them till you spend. So this money was not there before, So I'm not sure how big is that. And I think it's just like win or lose very, very quickly. but that's potentially, you know, influx of of fresh money. but yeah. Matthew K: The number of apps being released every month, it's slowed down a little bit, but at one point it was doubling year over year on on the iOS app store. It's probably No, I well whether Josh Chandley: I think that's a bullshit statistic, but yeah, sorry. I Matthew K: or not it is, but it's hard to track, I know, and it's probably just, you know, what are they tracking, right? But regardless, the vibe coding was real and there was a lot of slop ads being released, but, you know, revenue wasn't moving, spending wasn't moving. And I think that's the broader conversation is that none of those ads are gener none of those apps are generating money. and I don't I don't think I personally don't think that those are sophisticated enough people to put money behind them to to grow them, you know, in a structural manner. But I think we're getting to the next iteration of vibe coders who are more professionalized and I think that's where that could potentially come into play in a more structural manner. Josh Chandley: so on the earnings call, Adam said that Applevin either has to pay more for publisher inventory or improve its technology fast enough to keep up. and ideally faster. What's he getting at here? Matthew K: It's what I talked about before, it's economic depreciation of of the business and that's what I was referencing in terms of, you know, that's the big risk here that I see is structurally lower return on invested capital for the for for the business is, you know, if if Vector keeps its cadence up and keeps growing and and keeps that flywheel, Applevin is not gonna sit idle. They're gonna either have to spend aggress you know, take take margin hit to aggressively fight against that. that's what I think he's getting at, is that there's a risk here that, you know, it is an arms race, Josh, to your point, and that arms race significant not significantly, but somewhat impairs the structural value creation of the business for from an investor standpoint. Josh Chandley: if the price of inventory i is going up, who are the who are the biggest winners from that competition? Vincent: on the face of it, it has to be publishers, right? Because publishers, own the user base, the relationship with the users. And if there is a good, yield and bid density, you're supposed to sell your inventory higher. but then again, is the correlation between the money you get as an IA game I'm talking, right? Obviously. the correlation between your CPM potentially going up and then obviously to buy, so your CPI being symmetrical, meaning the net net is zero. Potentially. But on the face of it it sh Josh Chandley: Potentially, but Vincent: should be the publishers, yeah. Josh Chandley: On the face of it. Yeah, add monetized publishers. Vincent: Yeah, yeah. Josh Chandley: given given what we've learned, Vincent, what would you test differently in your acquisition or your monetization strategy right now? Vincent: Ooh, good question. again, right now, you know, everybody's trying to, adopt vector and scale and essentially having increments of business thanks to those model improvements, whether it is with Applovin or or Vector. So I don't know, testing Vector earlier, testing harder, right? that's one thing. On Applovin, you Applevin again, as I mentioned, there really is a couple of different products where the narrative is There's no cannibalization, then you can launch a pro product A, B, C, D. It's all incremental, between CPM billing, CPI billing. And then if you have hybrid game, hey, launch IEP and IA and hybrid ROAS. And that essentially the model is going to find pockets of inventory that's going to be different, right? So, you know, that's another avenue. Like, hey, test as many products as you can on each of those networks. So that could be, you know, things I would do differently. Josh Chandley: Let's talk about lock end. in June, we argued that the biggest threat to app lovin' might be whoever could disrupt Max. You know, after this quarter, does that still hold? Vincent: it's still the biggest threat. again, we we keep talking about those models and the UA battle, but I strongly believe the battle at the end of the day, and we may we touched on that with the ceiling, Unity could face is access to inventory. Right now there is no contender. You know, Vector is making noise, but they gave up on level play. right now I don't see any contender. We mentioned, I believe, you know, Google Admob, are they making progress on their mediation? obviously Cloud X is releasing a ton of feature and product, but we still get to see them challenging, Uplovin on the gaming side. so right now, it's still Uplovin's playground. And for me, that's the the main thing that needs to be secured, and that's what Applovin is Matthew K: Alright, so big big Josh Chandley: So to go ahead. Matthew K: big bring question. Saudis acquire Unity. They have Scopley, they have Niantic, they have Moonton, they have EA's mobile business. What is that does that change the dynamic at all? Because now they own not a a good that's a good chunk of supply in the mobile games market, right? That's a good chunk of, you know, the large games out there. I mean maybe they're not they're not all IAA driven games, but that's a lot of eyeballs, no? Josh Chandley: Yeah, but Applevin used to own a lot of game studios, Matthew K: Yeah. Josh Chandley: and so did Unity, and they sold them for a reason, I think. Matthew K: Right. Josh Chandley: I think what we're seeing is that there's actually more game developers trying to build ad networks than there are ad networks and built game studios right now. Matthew K: Yeah. Josh Chandley: And the then the reason behind those ad network creations from Tencent like MiniClip, for instance, is because even if This network that you create ends up buying at low or no margin. It's essentially a scale initiative for the games. And I'd say that the Saudi assets in mobile gaming, they underindex on NAP ads. They do have some big Matthew K: Yeah. Josh Chandley: NAP ad titles, but they do relatively under index. And so that supply access isn't quite as insane as you might think. and then they still might not want to move off of Max. You know, if I'm if I'm a publisher on Macs today, like Vincent What would an alternative have to deliver to make switching even a consideration, let alone worthwhile? Vincent: Yeah, that's always the one million, dollar question. what do you need to change mediation? And again, the the answer is is always very simple. Yes, of course, I need to make the same amount of money, you know, from my inventory if I switch, like the CPM, the APDA, the bit density, the access to demand. But actually the problem is not that. The problem is where do I put my money that now, you know, is out of action. You know, if I'm spending, let's say, One million a day on Axon. if I move mediation, what do I do with this UA? And if I don't spend, you know, my DAU and my revenue is down. So the supply is essentially, you know, a UA problem, right? You need to find and again, there's not too many crazy good performing models out there, right? There is axon, potentially vector. So far, you know, we can talk about meta and Google as well, but Where do you find growth? so that's what you need, I would say to consider moving out of Max. You need actually to join a company that has a crazy good UA product. Josh Chandley: Yeah, you need the ARP DAO uplift to overcome a loss of installs from Applevin's Axon, or you need a replacement for Axon or some combination of them both, is what you're essentially saying, right? Vincent: Yeah, but I don't I don't believe in the in the in the first option. the app that compensating for the drop of the AU, I don't believe in that. Josh Chandley: Yeah. Ooh, okay. Fair enough. Why? Vincent: It's just you can compare. how many more ARPDA and revenue you need to make to compensate your UA share spend on Applovin, which again, rem you know, remember, Josh Chandley: If you're a max publisher, yeah. Vincent: yeah, if you're a max publisher, you probably spend thirty, forty percent of your UA, on Applovin. So that's a s you know, substantial amount of of of UA and therefore DAU and revenue that disappears. And there's no way a mediation, even a good one or better one than Max can compensate that, right? Josh Chandley: Well, there there's also the idea of piercing Macs in some way. you know, Unity's ad quality tool found an opening with publishers using Macs. What were publishers getting from that that they weren't getting from AppLobin and Macs already? Vincent: well I I think everybody, you know, who tested or or work with Max, they know it's it's probably the best product. I mean, on this of of you honestly, the the ab die is pretty unrivaled, but you have very little control. And I guess it's related, right? So the less control or self service features or transparency you give to the publisher, the more you can actually optimize on their behalf, right? To be fair. And the ad quality capabilities of Max has never been, the best compared to some other products. And Unity Level Play or the level play mediation ad quality product was one of the best. I think anybody who tested a couple of mediation, they they they all say and agree that it it was super granular, super good ad quality product, better than the max product if you compare those two segment or sub segment of product. Josh Chandley: So what would happen to those publishers using Unity ad quality if it was suddenly turned off today? Vincent: I mean not much. You just back to having to do your ad quality and build your own tool internally. And it's just a harder job to manage your block list and and you know, offer a good experience to your users. You just have to work harder. Again, you can do the same thing. Yeah. Essentially you can do the same thing, but it's just more time and more Josh Chandley: It's just way harder. Vincent: more investment, yeah, in your own tools. Whereas here it's plug and play and you essentially can improve your block list and your ad quality work. instantly. So I mean you don't die. if you remove Unity L quality tool from the market right now to be accessed from max clients, you know, it's not a big deal. it's not going to change the the the world and the revenue of those publishers. It's just an annoyance. Josh Chandley: And so it's interesting, the product is free. What does the dispute over this ad quality data reveal about its value in the publisher's monetization stack? Vincent: Yeah, good question. Why are we making a big deal out of that? essentially is what you're asking. I think it's just telling you how tense the competition i is in this, you know, mobile gaming business, which is a big, big business, right? But because when you compete, each bit of advantage you want to keep, right? And so it's just telling you that potentially impression level revenue data, essentially that you know the data of how much an impression has been sold to who is actually super important and critical for understanding the business. Potentially, if you use that to improve your model, well, to improve your model. And if that's true, and if you can use this, if you legally can use this data and that's improving your business, well, that's a critical, piece of advantage that you you want and you don't want your competitors to access, right? Josh Chandley: Yeah, I think it's clearly a an advantage to own the infrastructure, to own the railroads. and AppLovin is defending that advantage to the best of their ability, and we're seeing them, perform really well, like especially on iOS right now. when we look at the latest Apps Flyer Performance Index, they're number one in gaming on on iOS, not just worldwide, but in every single region. My My guess is that less effective competition from Meta and Google on non-IDFA inventory on iOS helps explain at least a portion of of that position. if they became materially stronger bidders on Macs on iOS where there's no IDFA, how much would that pressure axon and would it strengthen or weaken Max's lock-in? Vincent: I obviously it's a matter of dependency, right? So if you know Google, Meta or anybody, you know, challenge Applovin on iOS, it means you're gonna spend your dollar, you know, in a more even way. Instead of spending, I don't know, eighty percent, seventy percent on Applovin, now you're gonna spend on other networks, meaning your UA dependency reduced, meaning the day you actually want to contemplate potentially moving away from Max, if that's your decision. it's gonna be a little bit easier because again to deploy this lost UA is gonna be a little bit easier. The numbers gonna be lower, right? So you're gonna have less a lower number of UA to lose if you move out. So reduce dependency. Josh Chandley: Hmm. Right. that said in a June mobile dev memo article titled Would Meta reprioritize non-IDFA traffic in fan? You know, the the great Eric Sufer argued that the opportunity probably isn't attractive enough for Meta. You know, they have greater opportunities on their own inventory and they face a disadvantage competing through Macs. You know, I'm on the record taking the other side of that bet. But what's the strongest argument that that he's right and I'm wrong? Vincent: I would actually agree with you on that, But the question is, you know, what what opportunities, what bigger opportunities Meta could have outside of I mean on the ONO and essentially not prioritizing fan or bidding outside of their own inventory, right? I mean, recently obviously we saw and we see you know Instagram being very ambitious and potentially with long format. Because YouTube is doing super well, right? So you want to essentially jump in this on this you know boxing ring and get those dollars if you're on Instagram. And I believe it's you know they announce adopting or pushing long format to essentially, compete with YouTube. If that's the direction, well, yeah, that might be a way bigger opportunity than prioritizing, bidding on iOS and strengthening the audience network. Again, meta there, yes, they they are at a disadvantage back to access to supply. meta is a super large ONO, but they are at the disadvantage obviously because that they don't have a mediation. Google is a very, very large ONO footprint, and they have a mediation and they have a network. So that put meta obviously a little bit behind. But again, depends what O and O opportunity you're contemplating. Josh Chandley: ahead. Matthew K: my thought on meta, Josh, you've heard me say this multiple times is what's the point, right? They spend a whole buttload of money to catch up to max to capture a couple of billion more of revenue. That doesn't move the needle for them at all. Right? Especially when you think about their broader corporate initiatives, they have Muse right now, which is bleeding money and makes no money. They need to find a way to make money with Muse and advertising is going to be a part of that. So if you're thinking about optimizing their O and that's a entirely new platform that they're gonna have to figure out a way to monetize. They they it just doesn't make sense to spend the amount of money they have to spend to catch up to max to capture a couple more billion of revenue a year. Josh Chandley: Yeah, I think that that's the strongest argument. And I would I I would paraphrase it as being the opportunity cost argument. especially in a environment where Meta is trying to reduce headcount. it's easy to claim that Meta's a trillion dollar company and therefore infinite money glitch like the Saudis, but there are economic realities. there are there are trade-offs to be made and I I think the question is. what is the what is the benefit of competing and slowing down companies like Applevin? My sense is just from the trade shows and the conferences and listening to the meta talks. I don't think they like AppLevin very much. I don't think they like Appleovin going after consumer in that segment and e-com. And I really don't think that they like the idea that AppLevin is shooting for one day owning social as well. They don't want another TikTok situation one day. And so if there's a relatively small investment that is probably at worst case ROI neutral. That also mitigates a long-term competitive Vector that probably has some benefit as well. But I I'm I'm not in the room at Meta, my name isn't Mark. so focusing back in on Apple and Unity, we opened by asking whether the competitive gap got wider or narrower. after all of this discussion, what's your answer now? Vincent: beginning of the podcast, I I said that, you know, the goalpost was essentially moving further along. So I think it's essentially widening. I I do believe Applovin was a little bit underestimated, with this guidance thing in Q2. And for me now it's like plus people were questioning the gaming segment. and I think the Q3 earnings just put all of that to bed. And the fundamentals were good, they are still good. So for it's widening. Matthew K: Yeah, I I I think from that perspective I agree. I just my only caveat as I said is, you know, versus especially like a year ago, there's a real competitor as opposed to a competitor that could have potentially gone out of like gone out of business or been in a much more distressed state. You know, Vector really is kind of save Unity's business. and whether you can attribute that to the leadership change or not, I I I I do not know 'cause there's a lot of people below that that make that happen. But you know, I I think Unity's off the mat and competing and that's more competitive than it was a year ago, but in the last three months, since June, I don't think Applevin is is is sitting sitting idle and is is gonna do everything they can to maintain their leadership. Josh Chandley: I I still love that phrase off the mat. That is such a great description. Where, from my points of view, we've seen a clear inflection point from vector in the last two quarters. And I'm looking to Q4 to see if Axon proves that it is also inflecting. We can't truly prove yet if Q3 was a catch-up quarter from a slow Q2, or if it was a trampoline setting up for the next big leg. And so it's really hard to say. On one hand, the the literal dollars it it is widening, but the growth rates if sustained will cause an eventual closing of that gap. and I do think that Unity is set up to to keep growing for a while. They have a lot of customer interest, they have a lot of of newly onboarded customers that clearly are not at massive scale yet because they're relatively new. And there are are more things coming like runtime. If Axon, if this new architecture can deliver, they can maintain or grow the gap. So that's the question I have in my mind. And so over the next year, you know, I think I just gave my point of view to a degree. You know, what would count as someone meaningfully catching AppLovin? what is the the most likely thing to get us there? Vincent: So again, I'm a little bit fixated, but I think it's what could happen on the supply. So anything can happen, you know, an MA, but I I think I'm I I posted on LinkedIn, you know, the year of monetization. but yeah, a lot is going on on on the monetization front. Google is doing a stunt on metamediation, Cloud X just keep releasing features, the products from the outside and on paper, product looks fantastic. Obviously, now they need A UA product to compete to our point earlier. you're gonna move mediation because of UA, right? so that's what needs to happen if you want to slow down Applevin and really start to challenge them. I like what Vector is doing to Matt's point. Now there is you know someone on the ring, on the boxing ring, trying to compete, although you know the difference in absolute number is is is really big. but something needs to happen on supply if you really want Applovin to be challenged. Matthew K: the thing that I'm really look looking for again is is less that someone catches App Lov and and it's more what I talked about with the margins and the competitive nature of the industry getting getting getting harder and does that start to weigh into their margins? And and I think that's a risk that the financial community is not talking about yet 'cause everyone's talking about, look, growth's reaccelating, everything's good, but what are you paying for that growth? That that's that's my big concern right now. And yes, if eBaTumb Josh Chandley: Yeah, and Matthew K: margins go from, eighty four percent to seventy five percent, that's still really good. But that's a drop that no one's thinking about. Josh Chandley: I think my prediction for 2027 is fairly simple. There is no catching the apex predator. Not next year. not next year. If anything is to happen, this is a multi year story. I think the last 12, I guess maybe 18 months has been can Unity compete at all? The answer is yes. But there's still such a chain of like things that has to happen. and that continued execution is so challenging. we would need to see a lot of things happen. And even if those things do happen, I don't think that twenty twenty seven is the year anyone catches the Apex Predator in mobile gaming. I'm willing to have that played back on me in in a quarter or in a year. what about you two? What's one prediction you're willing you're willing to be tested on? Who's brave? Matthew K: I I can go. I got I got two 'cause one is Josh Chandley: shit. Matthew K: not gonna happen. The first is if Unity does get acquired in a true LBO, like the the scenario with a lot of debt that I said is not gonna happen, the debt becomes a hindrance and it stymies everything they're doing well. And that is, I think, part of the reason it's not gonna happen. that way. My other prediction is that one of the two of them in the next four quarters misses on their Ebata margins. because of the competitive nature that I'm discussing. Misses expectations on on Ebata margins. And I don't know if that causes the stock to drop 'cause it might be the scenario where they they beat on the top line and the dollar Ebatah beats but the margins miss. But I think at some point people are gonna pay attention to the margins and not just the absolute numbers. Josh Chandley: Mm-hmm. Vincent? Vincent: I had predictions. let me say let me say that right away. Josh Chandley: As a as the man who predicted self serve in June, I also hate predictions. Vincent: See. no, you know what? I'm gonna go with having actually a second competitor on top of Unity. So having you know a three-horse race rather than just like you know the accent versus the vector, and it has to be around D28. so you know, wait and see who's gonna get out of the woods. but yeah, obviously as as you mentioned, right now Axon and Vector are essentially dancing around all the other networks who are at D7. One of them's gonna accelerate, launch at D28. And then to your point, it's gonna it's gonna take a year, l maybe less than what Victor, it took for Victor, but it's he's gonna take a year to really have another and a second strong contender. But yeah, that would be my prediction. No idea when. but yeah, in the course of I guess the two next quarters. Josh Chandley: That's a good one. All right. Well, on that note, it's a wrap. Vincent and Matt, see you next time. Vincent: Cheers. Matthew K: Thanks.