Latest / Mobile Signal / Roundup: Which networks are winning? Is D2C here? Are downloads really down?

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Roundup: Which networks are winning? Is D2C here? Are downloads really down? · Mobile Signal

• Vincent: So my plumber next door knows Google and Meta and he's gonna spend to find clients. And obviously nobody knows Applov in in the Josh Chandley: Okay. Vincent: you know in the my neighborhood. All right. So real people outside of Adtec. And I think yeah at some point that will be potentially a blocker. And I don't see Apploving, you know Doing brand advertising for their own brands. As a reminder, they launched this app, you know, GIST recently. I mean, either it was just like, you know, RD testing things, or they're gonna just buy Reddit at some point, right? Josh Chandley: Greetings and welcome to Mobile Signal. We're going to discuss four stories today if we have time. First, Applevin, Unity, and Liftoff all reported earnings in the last week, liftoff just last night's. All three grew and the market priced them in completely different ways. Second, sensor tower says installs are down and revenue barely moved. Are these numbers actually falling or are they just leaving the store? Third, Google and Epic dropped their settlements. Third-party app stores are now live on Google Play. What does that mean? And finally, a sleeper pick if we have time. Reddit's ad business grew 64% year over year. Is it a real UA channel yet? I'm your host, Josh Chandley. Joining me today is. Vincent: Vincent Tessier, CMO fifty two entertainment. we have bridge card games and casual business and I'm talking with a very much IAA angle. Pleased to be here. Warren (Upptic): And I'm Warren Woodward. I'm the co-founder and CGO of Upptic we have a games UA agency and we build UA software for workflow automation, data modeling, and analytics. But been a long term UA guy in gaming for the last decade or so. Josh Chandley: We're gonna go deep into the weeds today. If there is a term or or a concept in this episode that is new to you, drop it in the comments. We'll answer it as fast as we can. With that, let's get into our first story. AppLevin and Liftoff's perceived letdown meets Unity's highlight rule. At the time of recording, Unity and AppLevin reported last week, and Liftoff reported 18 hours ago. Two disappointed, and one had the best quarter in its history. These are all in-app ad networks, so we're bundling them together. They're they're bidding into mobile game and app traffic. All three grew. App Levin's up 53% year over year, liftoff 35%, and Unity Strategic Grow, which is the the ads business, is up sixty-three percent. The market rewarded one and punished two heavily. What are your takes? Warren (Upptic): Yeah, I I can start here. it's very confusing, right? I would say, you know, talking to people in the industry, in you know, in in games, anyone working on the UA or monet monetization side of of these networks, I find people's takes on them are wildly different as far as like their perceived power and value in the ecosystem. and I feel like the market continues to consistently get confused about these. I probably multiple times per week I'm asked to do some sort of consulting call for like some investment firm about these companies. I tend to always say the same shit. So say some of it on here for for free. but I at a high level, you know, I think the framing of like where these two are in the ecosystem and maybe what's changing is, you know, if you are in admon, sorry, if you're ad revenue-driven game, apple in is your be all end-all. it is your bread and butter for Monzation. Josh, you know a lot more about that than than I do. but for UA, it is your BLNL. It might be the only ad network that works, but you have to check two boxes. And those boxes are that you're primarily ad revenue driven and that you're using max ads. If you do not check those boxes, apple-in is generally trash as far as the quality of UA source, and I think they will even say that themselves if you don't meet that profile. That's all to say, you know, I I think my strongest opinions on where they are is more about where the future is for them. and I think, you know, we're gonna get into some more trends with like you know, n new game trends, if is the industry growing or not. But I think they're gonna really struggle to find this level of continued growth. Now I've been wrong about them before. but they're two expressed paths of growth. One is the e-commerce. They've been very cagey, not sharing direct numbers there. about what that is. So it still feels more aspirational than something real. I'd curious if you guys think differently. And the other is to move more into IAP gaming. On the high level, that's exciting to me because I work mostly in IAP based gaming. But when you actually dig into what they say about the strategy, what is the strategy? It is to convince IAP-based games to put ads in their game. So it's it's just a sales strategy. It's just like go do sales to the IAP companies, have them try to get ads in their games, then just do the thing we're doing already. It's not really maturing the algorithm to work better for those games. So this is why I'm I I'm kind of skeptical with the state of the industry, which I'll know we're get we'll get more into later, of where will the next growth come Vincent: Yeah, so on my end, I think I think you you you know, uploading is the foundations didn't go anywhere, right? The foundations are massively strong and honestly they missed the guidance by I think it's zero point seven percent. So and the year over year growth is fifty-three percent. Yes, it is slowing, but what do you expect when you reach nearly two billion per quarter? So I think I checked and at some point it was seventy percent, you know, like year over year. Growth is now, I don't know, four or five quarters now. It's like only 50% growth with still a massive number. And yes, they're falling short on their own guidance. So it's like when you don't hit your goal, it's like, maybe your goal was a little bit too high, right? So, you know, managing expectation, being bullish with the market, being maybe too optimistic about your own success, you know, after so many quarters of success, maybe, you know, that's a trap you anybody can fall into. But I think the market is pretty, pretty harsh, pretty harsh and and I think Aplovin is still, you know, the king of the hill, right? So that there's there's no question. and you know, we're gonna go into many, many rabbit holes, but yeah, there's two things, right? There is the model improvement by step changes or continuous, you know, small incremental improvements. And can you bet on it to the point where you lean and you really expect that to happen to deliver on your on your guidance, maybe a little bit more. Too too, you know, too optimistic there. Second is obviously the consumer, you know, is it happening? Is it all fluff? As you mentioned, Warren, it's still some kind of a black box. We don't have much numbers or insights. And yeah, they won GA, but no sales team, all you know, channel partnerships, whatever that means, you know, like someone else gonna do the sale for you to essentially bring all those, if not long tail, because they are very clear they're not chasing long tail right now, they're chasing mid mid-size type of advertisers. And yeah, maybe here it's a little bit below what they were expecting. But overall, again, I am not disappointed by Aplovin by by any stretch of imagination on that. Josh Chandley: Yeah, just fifty percent year over year growth. How disappointing. Vincent: Exactly. Josh Chandley: How how disappointing. But I think Warren described the the flywheel for AppLove and I think pretty pretty well. you know, you they make ad monetized games more money per player, and then they help those ad monetized games scale, which just increases the inventory size even more. and and helps revenue go up and that that's the that's the flywheel and and in order for that to work it can't just be ad monetized and iap monetized games feeding into this consumers consumer spend needs to grow as well non-gaming that hit a record this quarter you know 28 above the q4 peak Which is big considering how slow half one tends to be, especially for things like e-comm. But management also said something that confused me, or concerned me, which is that growth is coming from existing advertisers, not new logos. Is this their explicit strategy, or are they just having a hard time acquiring new customers for this? Warren (Upptic): And I think the related question that I have when I hear that, Josh, and you know, we've we've had little side chats about this, is when they're saying growth's coming from existing advertisers, the other side of that coin implies that those monetizing with Max are should be making more money. Are Josh Chandley: Yes. Warren (Upptic): are you are are our advertisers or or is this like their algorithm getting more efficiency and squeezing that margin out of the middle, or is it a little column A, column B? What's your intuition? Josh Chandley: I I I don't have these my intuition. They actually publicly disclosed Warren (Upptic): Yeah. Josh Chandley: in their earnings call the max pub earnings, like total max revenue for for game publishers is up double digits quarter over quarter. so in in the last yeah, so quarter over quarter sequentially, ad rev for s for games is growing in max at least ten percent quarter over quarter. and now max is not. the entire mediation market, probably near as makes no difference, but it it's not the entire market. but that that implies there at least is something kind of passing through. Vincent: Yeah, the other variable is maybe, you know, the flood of AI based apps, you know, hitting the stores. So that means more inventory, meaning maybe max revenue as a network is growing, but really only because there's just more apps and more inventory, but existing clients, existing publishers d don't necessarily see this you know, increase of revenue. That's another thing to think about, I think. Josh Chandley: It's true. I I do still think consumer spend is driving incremental growth. you know, having having that spend be growing twenty eight percent in essentially six months, and it's from a peak and trough is up twenty eight percent from the p what's supposed to be the peak. I think that's I think that's promising. but I I think go ahead. Warren (Upptic): Really dump dumb question for clarity, Josh. Do you know when they say consumer spend, do they you know, d does that mean like from their e com segment or or do they just mean Josh Chandley: Everything non gaming, non-gaming Warren (Upptic): Okay. Josh Chandley: app and e commerce and everything. Which it Warren (Upptic): Okay, so I I I said something wrong then, 'cause I know historically they've been hesitant to share numbers specific to their e com and it sounds like this cycle they actually did. So Josh Chandley: yeah, but it's very to be clear, i it's very hedged. It is over two quarters, Warren (Upptic): Okay. Josh Chandley: not quarter over quarter or year over year, Warren (Upptic): Mm-hmm. Josh Chandley: and there's no actual number. In theory, this Warren (Upptic): Got it. Josh Chandley: could be five percent or twenty-five percent of their revenue. It's probably sp neither. Yeah. So the Warren (Upptic): We don't know we don't know the baseline that they're saying that twenty eight percent growth from. Josh Chandley: I wouldn't I would say in spirit what your comment was is is probably ninety-nine percent correct. We we gotta we gotta cherry pick the stat. Vincent: I mean the stats I want to see is, as we just mentioned, is the percentage of the total revenue or advertiser spend that is coming from non gaming slash consumer, whatever you call it, right? And that we don't know, right? So you can show Warren (Upptic): Yeah. Right. Vincent: all day you want, you know, quarter of of quarter percentage growth, but what is the baseline and what how much it represents against the total? That we don't know. Warren (Upptic): And that's a good point, Vincent. Josh Chandley: Correct. Warren (Upptic): And, you know, let's talk about like why that's that's important. You know, if we go back, you know, we're all old enough to have seen the trajectory of App Levin over the last call it decade. And for a while it was just this, you know, growing monster that was eating more and more of the mediation stack and continuing to grow quarter over quarter that way, eating share from from Iron Source, level play and and the other smaller players. Part of why I think they've got to dangle and we're talking so specifically about growth into either e-com or IAP, is it feels like they've gotten about as much of that land grab as they can get. Would you guys do you guys agree with that? Like or do you still think that they're is my thesis off that the reason they're talking about these other segments so much is there's not much more land to to grab in the ad route driven game segment. They basically own it all at this point. Josh Chandley: I think that's that's go ahead, Vincent. Vincent: No, I mean it's a good question. I I don't have the answer. but for sure they're not growing you know, one hundred percent quarter over quarter on the existing segment we're mentioning, right? So I think Adam mentioned talking about consumer growth being fast or slow. He you know, he openly said essentially to buy some time and manage expectation. It took twenty years or two or three decades, you for Meta and Google to establish themselves into social and such, and it took fourteen years for Applovin. I'm I'm quoting. So it's gonna take a lot of time for them to, you know, grab a substantial market share and consumer. but on gaming, yeah, maybe they are at the ceiling, or maybe there's only a few digit points, you know, to win there. that's an open question. And for sure, when you diversify in consumer, it's of course because you want to continue to grow for super, super fast. And you do you need a new playing field, you need a new playground, right? So yeah, that gives you a hint, right? to answer your question I would say Josh, go ahead. Josh Chandley: Yeah, I I would say the The the the gaming s ecosystem as a whole is quite mature, in my opinion. what what we're seeing is, you know, ig ignoring IAP, ignoring downloads, like time spent playing mobile games is about as flat as flat can get. now, the good news for them is that we are seeing ad rev grow way faster than IAP. The the the problem Is that if you're gonna sustain massive revenue growth and your category is only, let's say, growing, I'll just synthesi if you're I'll synthesize the number. I don't know that this is growing this fast, but if ad revenue is growing 20% a year and you're trying to grow 50% a year, that's really challenging. And so I think that they do need to find growth from new areas as well. And from my perspective, that's why they're pitching the hybridization of IAP games so much, especially casual IAP driven. Because even if you can get to 10%, 15% ad revenue, the ability to enable a hybrid ROAS campaign creates a whole new entry point into the max ecosystem, into like the max inventory ecosystem, which of course Axon has the best access to. I think it's also why. consumer is so critical to their success. partially because it's new inventory or new demand. The other reason is that it's something that Unity and other NF ad focused networks can't quite do as quickly with their data. And so it's differentiated. I do think that gaming demand will continue to become more and more competitive over time. And so the way I think about Unity, or the way I think about AppLovin, is it's a race. Can App Levin execute against this consumer strategy faster than gaming gets comp competitive or or commoditizes? Whatever, whatever you think. However you want to phrase that. And I think you know timing's a timing's a bitch. can can they do that and keep this beautiful sm smooth year over year growth curve. Or or is there a like a bumpy transition? I think that's the the risk. And it really comes down to whether or not you believe in the consumer segment. And so my question to you both is, you know, do you believe non-gaming and e-com, you know, consumer can one day be close to as big or even bigger than gaming on in app ads? Warren (Upptic): Well, I'll I'll answer that question in a little different way, which is like, you know, talking it through and hearing the experience of both of you guys, Josh and Vincent, it's like the app love and growth story, there's part of it that's very real and there's part of it that's aspirational or hopium, right? And the very real part is it it does seem like from any perspective from the buyer or seller side that the algorithm is getting better, that it's providing more value. For the games that meet this profile that we talked about of being adrev driven on Macs, to both those monetizing, like your team, Josh, and those buying, like you know, like my team. but what is then we get to the hopium, which is like, and the future growth is gonna come from you know e-com and breaking into IAP or or hybrid. And I feel like this is wildly unproven. So I think credit where credit is due, it's amazing the efficiency that they've been able to get out of the algorithm. Like I've traded notes. With Josh and so other peers of like, man, these ECPMs that I'm paying, like, are you getting something close to this? And it's been like, yeah, actually we are in in in these cases. So I guess that's that's my take on it. Like that's where I see like real growth. But I am skeptical how much more they can juice it, how much better they can make the algorithm. But they have continued to impress on that front. for me, nothing's proven though, on the hybrid and e-com side. Vincent: Mm-hmm. so I think for me I mean I I'm just simplifying things, but on gaming now they they're entering a phase of playing defense. And obviously on consumer they are on the offense aggressively, right? And this is probably not survival, but for their ambitions, they have to win on consumer, right? Because that's the way to go. is the market there on consumer? Can it be as big as gaming? Yes, one hundred percent. So I think I saw that, you know, YouTube advertising business per quarter is like eleven billion, right? Aplovin did n nearly two billion only on games, right? Obviously, YouTube is like T V, C T V, but it's it's brands slash non-gaming consumer. So it includes, of course, more than just consumer and non-gaming apps business. But still, the opportunity is there. Can you grab it? It is obviously the big question mark. And to what you mentioned, Warren, that maybe, you know. it's wishful thinking or maybe you know they have low chance. I it just strike me when I was looking at the earning calls was the you know the brand awareness. So my plumber next door knows Google and Meta and he's gonna spend to find clients. And obviously nobody knows Applov in in the Josh Chandley: Okay. Vincent: you know in the my neighborhood. All right. So real people outside of Adtec. And I think yeah at some point that will be potentially a blocker. And I don't see Apploving, you know Doing brand advertising for their own brands. As a reminder, they launched this app, you know, GIST recently. I mean, either it was just like, you know, RD testing things, or they're gonna just buy Reddit at some point, right? plenty of data. And I think they mentioned during the earning call that, yeah, they do acknowledge that the model for consumers needs to improve and they need more data sets. More data sets can only can just mean, you know, more campaigns, but it also can mean also like user. Consumer data, right? So maybe to materialize those ambitions, they will need to make some moves like that because of the lack of data set slash brand awareness for those, if not long tell, even just mid-tail clients, right? otherwise it's gonna be slow in terms of materializing this. Josh Chandley: I I think ignor ignoring the timing, like how fast or how slow it will be, I think fundamentally I most of the time I'm playing mobile games, it's on the couch. And I just refuse to believe when I switch from YouTube and scrolling on the reels to playing a game. suddenly all of that e-commerce stops being relevant to me because the same person in the same two-minute period changed applications. I I really do believe that it it it makes sense. That what what changes is I'm a little bit more engaged in the game and the placement has changed. And so maybe which cons like e-com product will change. I I just really believe in the product long term. I I just worry about how aggressively they're acquiring customers and all these challenges. And that that creates to me, it doesn't it doesn't create viability issues, it creates it timing issues. Warren (Upptic): I hear that, Josh. I think the sense that I get for what the strategy is here though, I think is The thesis is likely a little different on their end. And I'm project I'm projecting a little bit here, but I I also feel kind of confident in this. It you know, they are selling inventory from games. your your analogy makes sense, but I would argue that like that that you're always still gonna be likely to convert more, for the most part, for a game advertising to you on the couch. and also there's usually savvier media buying teams behind games versus e-commerce. I shouldn't say savvier. There's games get those buyers are better armed. They have better data. they can target better. My my take on what App Levin is trying to do is as the algorithm gets better and better, which we can validate, and props to them for that, they've got all those this crap inventory that they can't sell, that's not, you know, perfectly matching buyers and sellers in gaming. Enter brand awareness. Where can we sell all these crap impressions that our algorithm is not matching within gaming? And I I Josh Chandley: What are you saying about my impressions, Warren? Warren (Upptic): I'm sure your impressions are great, but that's I I believe you know that's my take on what they want the strategy to be is like we have this really powerful algorithm matching buyers and sellers for gaming for our core, and then everything that's you know, the mid tail and long tail as Vincent as and Vincent put it. Where can we sell this where people are not valuing performance and are gonna be happy with the metrics they get of okay, look how good my CPM was, look how many clicks I got, look at my share of voice. that seems to be what the the strategy is they're aspiring to. Vincent: I disagree. yeah. I Josh Chandley: To push, I'm gonna, yeah, I I've Warren (Upptic): You disagree? Mm-hmm. Josh Chandley: been triggered. I I would say I would Warren (Upptic): Yeah. Josh Chandley: say that Vincent: Yeah. Josh Chandley: there's an incredibly large grain of truth there. I think I would reframe my crappy inventory to be more my inventory of players that while they play a lot of games, they don't spend a lot on in-app purchases and games, and so as targeting improves, they're increasingly not targeted by by IAP monetized games. And that's an opportunity for Vincent: Mm-hmm. Josh Chandley: pla advertisers who want that player, that user for something different. Warren (Upptic): want to advertise to all the broke people that can't buy their products? Josh Chandley: Bro, I I don't spend much in mobile games. I play mobile games all the time. I'm I'm I'm not broke, but I don't I don't think. But Vincent: You're an ad well, not an IP world. Let's put it that way. You're watching a lot of ads. Period. Yeah, yeah. Josh Chandley: Yeah, yeah. Now to be Warren (Upptic): There we go. Josh Chandley: fair, I don't think I've bought anything off of an e com ad in Apple, although I ha I have seen them, but I've definitely bought like hoodies and stuff off of off of Mesa and YouTube. Warren (Upptic): Yeah. N no, I'm I'm trolling you, Josh, but I'm I'm exactly the same way. Like I I do a ton of Josh Chandley: Good. Yeah. Warren (Upptic): e com purchases from mobile, but I never I har hardly there's like one game I buy I IAPs in like over the last many years. So mm. And Josh Chandley: But I do play a lot. I do play a lot. Warren (Upptic): and Vincent, you said you also disagree. Like what's your what's your take? Vincent: Yeah, no, I mean matching the right user with the right advertiser on the right inventory. And so context, I can buy the context thing, right? So you what you're saying is hey, I'm when I'm playing a game, I'm not in a frame of mind to do some shopping, right? Or to download Uber or Revolute or whatever, you know, app related. so that I can buy, you know, the contextual element, but that's part of the algorithm and the targeting to do a good job there, right? Is it more relevant to expose my, I don't know, Uber or Revolute ad in a game or somewhere else, up to the algorithm of the buyer to do so. but but yeah, on obviously on the quality of the inventory or the fact that they can get away by selling not performing inventory to, you know, advertisers who are less performance, I don't buy that because we're talking about consumer and again app centric buyers, as you know. It's all about the ROAS, the subscription, the CPE, and it's pure performance. So again, unless I'm wrong, but App Lovin is addressing or willing to capture those app performance dollars rather than brand-oriented, you know, visibility, brand awareness campaigns. where yeah, potentially you can buy a different type of infrared, although you need to be verified by, you know, attention metrics. And by the way, publicists spend I think what was it, two billion on acquiring double verify? That is a big move on the measurement of brand campaigns. it's off topic, but again, that's more related to that. But again, here we we're mentioning and we're talking about pure performance advertisers who are not gonna buy your cheap inventory if it's not converting basically. Josh Chandley: All right, let's let's look at how they're guiding forwards. I think one other thing sticks out. They partially blamed Q2 on a material model lift shipping just into Q3. But the the Q3 guide still steps down to, I believe, 46 to 48% year over year from 53%. so the lift isn't enough to maintain that growth rate. Additionally, they did disclose that Max publisher earnings grew double digits quarter over quarter and so ten percent plus and that their share in the waterfall held. That's interesting because if publisher revenue is up ten percent, let's say, their share is the same. Does that does that mean that their take rate is declining on a per impression basis? If there's ten percent more and they're only making four percent more, is that why the Q three guide might be a little down? Vincent: It's yeah, it's a math problem. I'm not the best in math, but again, for me, either they make more money, absolute value, so more revenue, same shadow foilet, bigger pie. They they should increase their revenue accordingly, like double digit. or it's just more inventory. So again, existing publishers don't make more money. It's just more and new publisher, like AI based, you know, apps who monetize with app and I don't know, who have traffic. So that's the pie growing. Right. So their share is the same, but again, here their revenue should be growing. Or of course, yeah, again, playing defense to maintain their shadow of water, they have to reduce their tech rate. Having said that, I don't buy that either because again, look at the margin rate. 84%. We didn't mention it yet, right? So 1.9 billion revenue, 1.6 million adjusted Ebida. how is that possible when you're reducing your tech rate? I don't know. Warren (Upptic): My my assessment is much dumber, which is just if you've ever worked much with App Levin, I can't imagine them ever lowering their take rate. Josh Chandley: Fair enough. All right. Well, let's move on to vector unity. this is very surprising. they they beat their 13% sequential guide and hit 23% quarter over quarter growth. they projected a billion dollar run rate by Q4, they hit it in Q2. Do you both view this as, you know, acceleration, or is this like a one-time pull forward from the D twenty-eight campaigns and other improvements? Vincent: I think we just start to see the narrative being materialized. Again, there's always a timing difference between any announcement, any sell, and then, you know, potentially materializing it. so I do see it's a solid and real growth or signal of growth to come, which is interesting because of again, they obviously just sold supersonic and they shut down Iron Source. I mean, high level. and still, you know, they're announcing revenue growth. but by the way, the margin rate is twenty-nine percent, right? So here they're squeezing their take rate to actually windows market share, make vector work, something like that. And again, I think this is all aggregated numbers between create and grow. What we're mentioning here is obviously the the only the network, right? But we do have, I believe, the growth of the air network as well. and I believe it's a two twenty four percent year over year growth. And I think the market appreciated with the stock being you know valued and and and jumping a little bit, which I think is is good because it was super low. so overall, yeah, good signal. probably the impact of D28, maybe you know, opting in into sharing your engine data, right? but I don't really know the opt-in rate overall of the market, right? I'm not sure everybody's happy to share that. I think the majority will be happy, but maybe not all publishers. And so that's I think all of that is materializing here in those numbers. Josh Chandley: Lauren, do you care about Unity yet? Warren (Upptic): Yeah, I mean Josh, I remember we talked some months ago and yeah, I think it was it was actually another podcast we did with with with you also, Vincent. And I posited, does does vector actually Josh Chandley: DOF. Warren (Upptic): exist? Yeah. And it it Vincent: Yeah. Warren (Upptic): good s science point that it exists. Like I think Vincent, you said it well. It's just they got ahead of themselves with the marketing of it, right? And you know, cards on the table, like I you our team at UpTech, we manage, I think we're pace manage a little over like a hundred million in UA spend this year. I have never been less exposed to Unity than I am right now. And that's not so much to say that it doesn't work right now. It's more that we're a year in to them saying, Vector is here, guys, the campaigns are gonna be they're gonna perform well now. Come back, do a fresh test. And it's the boy that cried wolf at a certain point where it's just like, guys, we've retested this, you know, every quarter. As you keep saying this, like we're we we gotta put our money elsewhere where we're seeing returns. but I I think you know the numbers speak for themselves, assuming they're truthful. And it is, you know, I don't believe that they weren't actually building something compelling with vector. I think it's just complex, it's a hard problem to solve. And you know, science point that now it's starting to materialize. So it does you know, the thesis that I think all of us have talked about in different different combinations of us on podcasts and in conversations of, you know. this is their unfair advantage to attack the other side of gaming that's more I P driven, more core. this is the first like kind of really material signs of life. Josh Chandley: Yeah, I I don't believe that they're really using the engine data yet. So that's still an untapped possibility. My my expectation is that most of the gains we saw on Q two were from day twenty eight campaigns and and other just more less headline grabbing algorithm improvements. Is that your takes as well? Go ahead. Warren (Upptic): My my understanding is they've had like it's not material, but that they have been talking about like they have like proof of concept of of I think they have like some beta case studies with engine data. Vincent: Well, me personally, I feel there is a party next door and I'm not invited. Because Warren (Upptic): Ha ha. Vincent: because I see those numbers, but in my numbers, I don't see yet an increase of share of wallet on monetization Warren (Upptic): Mm. Vincent: side. And I don't really see my ROAS improving on my spend taking off on the Unity Warren (Upptic): Mm. Vincent: Vector side. So I don't know, maybe I'm doing something wrong. And I've again I have some FOMO. I want to be part of those Warren (Upptic): well, you're making me feel better, Vincent, 'cause I was having FOMO for not not being in the arena buying right now if it yeah. Vincent: Right. So we are two out of three. Josh, you need to st tell us. do you see that in your numbers? Josh Chandley: I mean we're we're we're definitely seeing the the rollouts of D twenty eight have impacts. they definitely work as advertised. we're hearing, you know, just a lot of reports of better better retention, basically, better maturation long term. And that makes a ton of sense. I mean, D twenty eight campaigns they do help the algorithm kind of dance around other bidders who are only looking at day twenty day seven maturation. So that that's a a really positive thing. What surprises me most is how quickly we're seeing growth. a day twenty-eight campaign, you know, I mean this isn't twenty fifteen anymore. There you don't have ridiculously long training periods anymore. But the reality of a D28 is still that you you need to spend for 28 days before the algorithm has a single user that's matured to the target for it to correct against. It does take some time to to train. And so my expectation was that we didn't we would not see crazy growth from vector until potentially Q three this quarter. But just because it it they it just takes so long. but now we're Warren (Upptic): So how much of it is that the day twenty eight campaigns are actually bet producing better UA results versus people have to spend a lot of money to run these day twenty eight tests, therefore revenue from UA is going up. Josh Chandley: I don't know. what what I would expect is that I would I would assume advertisers who are spending on Unity would be absolutely insane to not also be spending on app lovin'. Like the idea that you're you're spending on Unity but not app levelin is is a very like a surprising choice. and so go ahead. No? Vincent: No, no, no. Go ahead. Warren (Upptic): I I I disagree with that. I I'd say there's there's two ends of the ecosystem. It's Josh Chandley: Okay. Okay. Go ahead. Yeah. Warren (Upptic): that's kind of what kind of what I was saying when talking about app levin. If you are on the the josh side of the coin, more IAP driven or i IAA driven games on max ads, you're bowing at the altar of app levin. It's be all end all. It's gonna crush Unity. But if you're on the other side, IAP driven, app Levin has been subpar in essentially not saying Unity is great in those cases recently. But Applevin has always fallen short for that end of the spectrum. So it really depends on if you're which side of the the spectrum that you're on, where you're likely to see better results in my experience. But we skew our portfolio is more Vincent: Mm-hmm. Warren (Upptic): IAP driven. So that biases our perspective a bit. Vincent: and by the way, anybody monetizing did notice, I think in Q1, Q2 that Unity ads step up the aggressiveness of their template, right? and obviously it's no coincidence. I guess more signals, sending more users towards the stores, probably helping Vector or just playing attribution games. that's one thing. And the other thing to mention here is we still have Google Mintegral. I believe Meta, who is not yet on D twenty eight, right? So, you know, we only have Applovin and now Unity being on Warren (Upptic): Mm. Vincent: D twenty eight, which is good, but the rest of the market's gonna catch up. And to your point, Josh, now it's only, you know, maybe dancing around those networks who are still on D seven, right? helping Applovin and now Unity being a little bit ahead of the curve. But again, it's coming. Minte Gold, Google gonna do it just a little bit slower than the others. It's a time window opportunity. Josh Chandley: Yeah, and I believe Mesa will as well. I believe liftoff of Moloco will as well. It's just hard. Hard. so Applevin guided 8% sequential growth next quarter. Unity guided that vector would grow 19 to 21%. Do you believe those numbers? Warren (Upptic): Cautiously? Yes. Because I think they're coming from a pretty low base. And if they have actually shipped a materially compelling update to Vector that improves UA performance, like I mean, just based, I'm I'm kind of buying the hopium here. I'm like, okay, I want to run some fresh tests. I assume, you know, other people that are monitoring these trends or or seeing initial promising results themselves are going to be migrating budget over there. So I would, I would, I would bias towards yes. Josh Chandley: That was my next question. You kind of you kind of stole my next question, which is Warren (Upptic): Mm. Josh Chandley: Warren, you just said you've never been less exposed to Unicy. Warren (Upptic): Mm-hmm. Josh Chandley: Does that mean you're thinking about retesting? Warren (Upptic): Yeah, I mean this is kind of what I was waiting for is some s I mean we're we're on we're on mobile signal, right? I was waiting for some signal, I think, to say like I like Josh Chandley: Yeah. Warren (Upptic): I'm not gonna be first jumping back in this time. I want I want some other UA teams to jump back in and give some some points of results. Yeah. Exactly. Well put, yeah. What do you think, Vincent? Yep. Yeah. Josh Chandley: You you wanna see some people in jump in the pool and not drown before you get in the pool too. Yeah. Vincent: You don't want to be the first. Yeah. for the next quarter, yeah, I do believe those numbers. Again, UDT is starting super low, they can continue to grow twenty percent. Aplovin plus eight percent. Yeah, a realistic understanding and knowing that Q two was low. It was super low on my end from what I saw, particularly in April. so beginning of the quarter. So hopefully it can only grow. And yeah, the model improvement, I didn't see any improvement in July on my end, on my campaign running or shadow wallet. But again, maybe I I'm too small or maybe not the right subgenres or of categories. So but yeah plus eight percent sounds reasonable quarter over quarter. Josh Chandley: Yeah, I mean for for for Applevin, I just don't know personally. I but what I can say is what I'm what I'm hoping for as an ad monetized business is that they can execute more and more against the consumer and that they can beat that. I I I think that the eight percent is a a hedge where it's not totally clear how fast they can grow the consumer segment. And I I I really believe that that is the the biggest kind of growth piece for them. I just don't I hate my own question because the timing is the part that confuses me the most right now. I thought that self-serve, like I said, I think I said this before, was that I thought that self-serve was going to be potentially like a watershed moment where everyone can now buy into AppLovin. And I totally confused like a distribution change with like a top of funnel demand change. and so for me, timing I I I I I really do believe consumer can be almost as big or as big as gaming. I just don't understand the timing. So let's move on and talk about liftoff. Liftoff, this was their first public earnings since the IPO. They're the one with no first party engine, no runtime data, no mediation. In in a market where the moat is proprietary data, you know, how how do you two think about liftoff? Vincent: I mean the numbers look good to me, what they reported. and again, those programmatic DSPs like Moloco lift off has already always been you know a little bit different. and they both acquired an SDK footprint. So it's really proof that you cannot only be on demand, no access to you know max header bidder. You need to have this SDK footprint to one collect data to render your ad properly, right? so But yeah, it's interesting that they surely probably have less data, less advertised accounts, but they are historically super, super strong on IAP, right? So again, to Warren's point that okay, if your IAA, Aplovin is your network, is your guy, if your IAP maybe Unity, for sure Liftoff and Aplov and Moloco have been king of the hill of IAP span and chasing those IAP wells. something that again, others are maybe less strong or or you know a little bit weaker. so they are strong on this you know ta category and type of campaigns and they're probably gonna continue to be. but yeah when this when their growth's gonna slow down, maybe they're gonna have to make a move and I don't know, acquire more data, have more SDK footprint and do something. For now the growth seems all right to me. Warren (Upptic): Vincent, for my own education, you you mentioned they acquired SDK footprints. there was the Vongol acquisition some some years back. Did was there another acquisition that I I that the increase kinda like they're owned and operated? Okay. Mm-hmm. Mm-hmm. Vincent: From a lift don't think so. From a lift off perspective, no. I think it was just Vanger and Moloco acquired Aquarius. but I think that's it. Josh Chandley: Yeah, the one other advantage I would throw in there too is like Vincent, you're totally correct. You know, data collection and ad rendering are are huge advantages when you own that whole pipe. But the other one isn't it's very simple. Pricing. If you have an SSP, if you have an SDK, you're paying max five percent. If you don't, you're paying an an index, you know, you're Vincent: Thirty. Josh Chandley: you're you're more, yeah, 15 or 20 percent for for that SSP access. Vincent: Correct. Josh Chandley: So are they are they structurally behind? Like Warren, like how do you think about them ver like and Moloco as well, Warren (Upptic): Yeah. Josh Chandley: I suppose? Warren (Upptic): Yeah, I'm I'm just confused right now, to be honest. So to explain, like, yeah, I am the biggest DSP skeptic in the world, probably. You know, my my take on DSP is just like if it's good shit, you can probably just buy it directly anyway through Unity or AppLove, and you don't need Josh Chandley: For cheaper. Warren (Upptic): to put an another middleman taking another, you know, double digit percentage in between. And for everything else, you probably don't want to buy it, like mobile web and stuff like that. So on one hand You know, that's my crotchety old view on DSPs. On the other hand, I'm probably spending more meaning my team profitably, to Vince's point, profitably on DSPs right now for the are more core IAP driven games on liftoff, on Moloco, as a far as percentage of the portfolio than at any other time in history. And I do not understand why it's working better right now than it has historically, to be completely honest. So I'm not sure if you guys heard any insights from the call of like, you know, what is moving the needle, like what is driving more more growth. Educate me. Josh Chandley: For Lyftoff specifically, it's all about the Cortex AI. both of you know, both Moloco and and Lyftoff are making a lot of gains. I think liftoff is coming from a is maybe this is unfair, you can call me out like a more outdated AI product to something that's pretty cutting-edge, Cortex. And Moloco, they've always been pretty advanced, but apart from Parts of the SSP, they've really built everything internally themselves. And so everything has been organically grown. And it's just easier for everything to work together synergistically when you've built it all together with one architect rather than acquiring multiple different businesses and trying to like make them kind of connect, especially when the the data pipelines are this just ridiculously complicated. And so Vincent: We're talking about digital turbine here. Trying to put together a product suite of ten Josh Chandley: yes, yes. I mean and and you know, and lift off Vungle to a degree a couple of years ago. That is an effort, you know, because Vungle was a DSP as well. It it was a DSP and an SSP. and so when they acquired Vungle, they had to basically cut the head off that dragon and lob on the lift off DSP. That's not as simple as what Moloco did. In my in my view, maybe I'm totally wrong on that, but that's that's I think that's different. Warren (Upptic): I mean what I'm hearing is the problem before was their algorithm didn't have a name. You know, it's like Applevin Applevin had axon and Josh Chandley: of course. Vincent: Marketing. Back to marketing. Put a name Warren (Upptic): then it got better. Unity shipped vector and then it got better. And we got the cortex branding for liftoff and then it finally started getting good. So that that's all I'm hearing. But I mean you know Vincent: Magic of marketing, yeah. Warren (Upptic): being facetious, but I mean it does seem and it makes sense, you know, these These networks have essentially their product is their algorithms, right? And we've never had more powerful technology to power these algorithms than we do right now. So it's just it's just kind of seeing who is part of part of why it's always difficult to unpack what's real when you're talking with your networks and deciding what to test, is no matter what week you get in a call with them. Why do I need to retest with you right now? Is the question like, we just did a big update to our AI and our algorithm and it's really good now. It it's been the same thing for the last like eight years. But but Vincent: Always. Warren (Upptic): what's different is like there's technology available now that seems to be improving them in a way, and the pace of improvement seems maybe faster than at other points in in our careers. Vincent: One thing to note, I believe Liftov mentioned the World Cup. That was also instrumental in their good queue too. And again, the World Cup is, you know, not every quarter. And I believe they just met expectation, meaning you removed the World Cup, they were below. So just as a caveat. Josh Chandley: Rounding this all up, I think the big question is app leveln is the thousand-pound gorilla. With everything that we're talking about, is competition genuinely increasing for apple in gaming? Or is is this just a blip? Vincent: For me it's a tickling runner, it's a small blip. They start to feel a little bit of competition, but not enough to the level it should be to just like question their dominance. Warren (Upptic): The theme that I see here, you know, this is kind of the first time talking through all of these earnings and the trends for this businesses in one conversation. And the theme that I see here is everyone is getting more efficient within their segment. But I don't see necessarily that they are stealing from each other. With the with the nuance that I do think the the D SPs that we're talking about and Unity, they have more direct conflict fighting for these IP and purchase driven campaigns. As I think we're gonna get to, you a little spoiler for our next segment. Like the the market of games is not necessarily growing overall. So it seems like the near term story of growth is rather than grabbing more land, just leveraging the state of AI technologies to get more efficiency within your within your segment. And that seems to be the theme between all three companies right now. Just just getting better at the segment they're already servicing rather than taking over new segments. Josh Chandley: Distributing the right player to the right game or app. All right, well, let's transition over to it then. So in our next segment, sensor tower reported half one data for 2026. Key highlights: downloads are down 12% year over year. IAP is roughly flat, and time spent is literally flat. Bella's What does that mean? Vincent: We're all scratching our heads really to understand and how to correlate, you know, those. I mean, this this study particularly, which I believe is a monetization, right, centric one, with you know, our numbers and what we see. and of course, we all agree there are a couple of blind spots, right? obviously D2C and the revenue, IEP revenue specifically, that is may being made outside the stores. We all agree, you know, there is less download and you know. You we're trading a volume business to a more qualitative, right? You know, higher quality users, higher CPI, but higher LTV. and we still have the competition of the attention, right? So you mentioned flat time span and engagement. I mean, I'm still pretty convinced that you know, the TikTok of the world, the YouTube are eating, you know, the gaming conception, for sure. and then yeah, there are obviously some movements, interesting movements going on, you know, with hybrid casual, and some games really scaling and and doing super well, but it's a little bit concentrated, right? The rest of the market might be left a little bit behind. So that's very quickly my two cents. Warren (Upptic): Yeah, Vincent, you you touched on one of the big trends. for anyone listening to this podcast, if you haven't checked out the Matthew Ball state of gaming report that came out early this year, there's some really good analysis on this trend that is mirrored in the Sensor Tower report, which is people are installing and trying less new games. There's never been less new apps shipped to the store and new games, but people aren't interested. Their time is being fought for and distributed. TikTok is a big one. OnlyFans, sports betting, prediction markets, and doing stuff with LLMs. These are all kind of fighting for the same share of time that traditionally gaming held a bigger slice of. That being said, you know, the revenue is close to fat flat. Depending on the quarter and the report, there's been some small growth. So where is that growth coming from? It's coming from old games. And this has been very reflected directly in the portfolio of games that Uptick runs UA for. We have, you know, the two lines of business at Uptick. We have our UA software and then we have our gaming UA agency. We this will be by far the most as far as like profitable UA spend that we have managed, but it looks wildly different than any other year we've been in business. It is like 90% concentrated with very old games. And these are some of these games are having their best year, best quarter. And first I just thought it was like a weird subset of sample of like who we were doing business with. And then when I've been seeing report after report showing the same trend that people are not trying new games, but the revenue is being carried by old games. And, you know, putting it all together, what it seems like is like people's mindshare, people still want to do some gaming, but their mind share that they want to allocate to gaming is shrinking. So they don't really want to try new stuff. They want their game time to be quickly satisfied by something they're already familiar with, with maybe a new app. update or in some cases just sequels in it that are similar or nostalgia driven. more play there. So this trend is real. We've seen it from multiple angles. And it prevents it it presents new opportunities in the industry. Some of these companies you know some of the companies that we do UA for they prefer we not disclose but you know one that we're pretty public with is is our partner Ludia. Ludia had their best year in in a very long time, the first year reacquiring their titles from Jam City. And they did a lot of work on their side to revive the titles, put fresh content into them as well. And so there's there's kind of a interesting moment in there's opportunities emerging in the market of these companies that were acquired, the MA kind of bubble of 2021, 2022, I think we're gonna see more of doing what Ludia did of reacquiring their studios when they didn't have the growth stories after acquisition and reviving beloved older games that have like they're not the shiniest, newest thing, but they have these established, loyal audiences that is happy to come back and play if you remind them that they exist. And the other side of this, and I'll stop rambling after this, I've never spent more money on retargeting and been happier with it than I am right now. I am Yeah, I I'm crossed y and skeptical of a lot of parts of the UA ecosystem and retargeting is another one of those areas historically. But it's working now better than it ever has been. And it has to do with these themes of where is the revenue coming from? It's coming from older players and established games. and so that's what we've been seeing on our side. Josh Chandley: For for Ludia was D to C your web shops part of that story. Warren (Upptic): They do use w web shops in in their games. See, I think you know, I don't wanna give sp specifics as far as like anything related to to to data, but they definitely like, you know, you can that's that's part of their monetization stack. Josh Chandley: Yeah, and so I think that we've long complained about web shops being very material and not being visualized in these reports. And on the on the app love and earnings call, it was the first time I I heard an ad exec literally warn us that I the IAP market has some like they called it misleading data out there. I think I'm saying I think he's saying because analytics prof providers can't track purchases moving off the platform. that tracks really well with the idea that we're focused more and more on these big mature games because those are the games that can do this. If you're a brand new game, it does not make sense for you to build a web shop Warren (Upptic): Yes. Josh Chandley: on day one. But if you're in year five, this starts to be super material. it Warren (Upptic): That's a great point, Josh. Josh Chandley: yeah, and it it I also think about the definition of a download. downloads are down 12%. I was like, well. Is it? because are we even talking about the same thing? So I looked into the the definitions and the sensor tower definition of a download or an install is if you install a game in 2015 and you delete it, then you reinstall it in 2026, that is one install. a according to like MMPs, that is very clearly two installs. I I subscribe to that second definition. Do you guys think that if we were using that second definition and we were measuring that, do you really think downloads would be down? Vincent: Not to the same extent for sure. again, the definition of an install is obviously critical here. I'm a little bit surprised actually by what you say, but I trust you if you check that Tensor Tower is counting only one install, even if the user installed the same game five times. I'm Josh Chandley: I believe so, yeah. Vincent: a little bit confused by that because I mean, I don't know, we need to ask them how they collect, if he's just scrapping the stalls and stuff. But yeah, of course it's critical. But again, I like Warren, your point on reinstall or re-engagement, you know, whatever you call it. but again, for that you need to have a a a good enough LTV to afford two CPIs, right? So pure IA games sometimes cannot afford to re-engage and re open, you know, pay for a reopen. not everyone can do that. But of course, if you can afford, if you have IAP revenue and you have a good enough LTV, of course you absolutely should do that. otherwise it's really, really difficult and struggling. but yeah, reinstall is a topic, one hundred percent. To your question, yeah, I I would assume he will still be down, but maybe to less extent, right? If you count those reinstalled, Josh. Warren (Upptic): Yeah, Vincent, you you touched Josh Chandley: So I'm I'm not con Warren (Upptic): on you touched on a really good point, and it's probably something worth calling out just tactically for listeners. You know, what we are currently finding is just sort of the because if you ask the retargeting networks, they'll say, you want to retarget all your players all the time. That's definitely what you want to do. And that has not been the strategy that we have generally been implementing. It's been a very conservative strategy in the sense of these are old games, you know, where we're seeing a lot of these returns. So it's been like, let's only target people that have monetized historically but have not spent in some time. So their LTV curve is basically done for the time being. And that's part one of the strategy that we see we're working. Part two is putting a heavy burden on the payback because you're not starting someone from day zero of their LTV curve. You're starting them from some arbitrary point in their journey. so we put a much heavier burden on retargeting to pay back. You know, some some fraction of what we would do for a new user. So say that we want a new user to pay back in 180 days, we might say we expect our retargeting user to pay back in 30 days for for contrast, because you you can't rely on your traditional L T V curve. It's not a new user. So you have to throw that out the door. Vincent: Mm-hmm. Very interesting. Josh Chandley: Interesting. And so you're saying that in that way it is would you actually are you saying that your retargeting spend is generally more profitable per dollar than the new user spend? Can you disclose that? Can you disclose that, first of all? Warren (Upptic): I I can say this. It pays back faster, but it's by design. We will only allow it to spend if we are 'cause there's no you know, if you're operating off of a d you know a day three sixty payback and you're reacquiring people at random places in their journey and you you have no com point of comparison to know that this mixed group of people are gonna have an L T V curve. in any way resembling what a brand new user is. So you just have to have a healthy amount of skepticism and ask more from Vincent: Mm-hmm. Warren (Upptic): those users. Vincent: So you have a higher target ROAS, you demand more in terms of profitability Warren (Upptic): Yes. Vincent: when you reactivate someone in his, you know, user journey. That makes sense. Josh Chandley: The last thing that just is screaming out at me in this reports Everyone keeps telling me that hyper casual is dead. If that's true. Why is time spent in hyper casual games up seven percent year over year, while casual and hybrid casual are both down in time spent? Vincent: Yeah, correct. That is a a weird thing and a little bit counterintuitive. I mean, if you look at the charts in this report where it's broke down per genres, you can see in hypercasual it's actually the match pair which is you know growing, whereas some many others are down, pretty much all others, like block, salt, some platform runners. So maybe again it's just a taxonomy anomaly where Hey, there is a specific sub subgenre of Apicasual which is doing well, but the everything else is down, right? So that would be my my very quick guess to reconciliate this counterintuitive point that you're making. Josh Chandley: Here's here's my take. I think the definition of hyper casual is bizarre and silly and useless. when I say hyper casual is up seven percent, we think about these zero percent day thirty retention games with 14 10 day break-evens. What hypercasual actually means in these reports is add monetization only. I I think when we we went through a a CPM pinch period a few years ago that really hurt ad monetized studios, those died. And what came out is is games that can really retain. And some of them moved to hybrid casual with an IAP focus. And we we saw that growth very quickly. But as CPMs are coming back, and we're seeing this with like literally Apple and just this qu just this quarter, you know, IAP flat, ad rev up 10% Q over Q. Well, maybe some of that's inventory, but some of it has to be CPM and ARPDAO. with that coming back, that really supercharges that inventory type or that get that game type. And so I think that what we're seeing is that the 2021 hyper casual that did 17 billion hours spent, and the 2026 hyper casual that did 35, more than double the time spent in five years, I think those are near as makes no difference, two different kinds of games. I think what we see now is very retentive, very engaging, hyper casual games that truly do focus on monetizing attention and maximizing attention rather than focusing on how fast you can break even and cycle the cash. does that track or do I do I sound like a crazy person? Warren (Upptic): I I believe that a lot more than y y the the the theory that today's hyper casual is actually like yesterday's hybrid casual in a trench coat, I believe that a lot more than that like kind of traditional hyper casual games are coming back. And I think that jives with some of the apps that we have seen succeeding in the last year. Vincent: Yeah. I agree. Yeah. No, I mean I agree. Yeah, of course. Josh Chandley: So that that makes me go ahead. All right. Vincent: It's again because so I I work for fifty two entertainment and we do evergreen games like tabletop and we are n you know, super super high percentage of IAA monety monetization, right? But we do have super super strong retention. So what are we? Are we casual? No, because the share of IAP is too small. Are we hyper casual? No, because our retention is way too high. So again, I I think Card games, and I mean you know a thing or two about card games, definitely is a good example of your point of the definition, right? so yeah. Josh Chandley: Yes. And for those who don't know, Vincent and I are sworn enemies competing against each other. Warren (Upptic): Yeah. Vincent: Correct. But friendly enemies, right? Josh Chandley: yeah, frenemies. okay. And so this is what I'm I'm building towards here, and it's something that I think no one has a good beat on. So How big is ad revenue? So we we can size IAP fairly easily. You know, Censor Tower has 2026 half one IAP at 40 billion. That's gross. So net is 28. there's some app charge data that, you know, while of course app charge is a horse in this race, you know, you can probably say that there's about 7 billion that's occurred in D2C in half one 2026. So you can kind of call it. Maybe in twenty twenty six, path won thirty-five billion in IAP revenue nets after all the fees. How how big is ad revenue? You know, just just looking at the public talked about today. I I'm thinking about it now. We have you know, Applevin did almost two billion in revenue. Liftoff did two twenty million. Unity did three thirty. So they just those three to two and a half billion in revenue just in Q two. if you had to guess both of you, how much ad revenue was paid out to publishers in half one? Warren (Upptic): I don't have a good read on that. I mean, I th I've seen reports about it. I don't want to throw out a number that I don't feel confident in. I mean if someone asked me, I would probably just ask you, Josh. I'm like, Josh, you know more about ad revenue games than me. How big is it right now? Vincent, what's your read? Vincent: no, I mean it's a good question. I don't I'm always amazed between I mean the discrepancies in in some numbers you can look at. I mean, if you Google the size of the mobile market, it's usually between two hundred and fifty and three hundred billion per year. But then if you actually look at real numbers that we Josh Chandley: Gaming. Vincent: do know and see and game, it's actually, you know, way less, like ten percent of that, right? and then your question is, you know, how much is paid to publisher? Well, way less, obviously. when you look at you know the margin rate of all those great addict companies slash middleman, way less than that. So yeah. It's really, really painful to watch and to address, Josh, this topic. Josh Chandley: It is, it is. And so I I I asked Sensor Tower this recently, and their best kind of floor guess was twelve billion last year. And it was a floor. And I Vincent: Total markets. Right. Yeah. Josh Chandley: yeah, for no for gaming ad revenue. Yeah, and I Vincent: Okay, so what is paid? The payout? Josh Chandley: yeah, what is paid? And I just thought that sounded so low. And so I'm looking at these numbers today, you know, okay, so those three participants did two and a half billion in revenue in Q two. That means they didn't five billion in revenue run rate. I'm not gonna go back and look too much for half one. they're assuming that they're assuming, which is not necessarily true, that they're maybe half of the waterfall share. That means on the network side there was, you know, maybe ten billion in revenue to the network side. Assuming their take rates are high, let's say 40%. That means for every four dollars they games generate six. So if they did 10 billion, that puts us at around 15 billion, which is completely different from you know halving the center tower estimate of twelve to six. So it could be six billion, in which case it's a small share of the the thirty five IAP. Or it could be like fifteen, which is like almost half as big as IAP. Warren (Upptic): I mean, I think your your larger point here, Josh, is like it's it's crazy that as mature as the industry is and as much of it that's driven by in game ads, how little clarity we have about what's going on in that segment and how separate the pool of data is from, you know, the IP Josh Chandley: Yeah. Warren (Upptic): data that we can get from the stores. Josh Chandley: Yeah, it legitimately could be ten percent or thirty percent. that that's crazy. Okay. Moving on to our final segment, probably considering how long this is going. Google and Epic walk away. Web shops and limbo. So we we just talked about web shops. but over the summer in mid-July, Google and Epic walked away from their lawsuit. And that reverts the court's original injunction. essentially forcing Google Play in the US to host rival third-party app stores directly in Google Play. Warren, your team's been researching this a lot. What exactly Is happening with payment fees on Google Play and how is this gonna be impacting like the teams, like how you manage your games day to day? Warren (Upptic): So this topic is potentially mind-numbing. I'm gonna try to cover it as concisely as possible. we have to understand this because we're doing UA at scale. So it's a game of arbitrage. We're trying to put a dollar in the UA machine and get more than a dollar out. And so these things really matter when the percentages are changing. And with with this lawsuit, with both parties walking away, it yeah, as Josh said, it basically defaulted to the prior ruling of the courts. And so as of late July. There are new rules. the good news is it's mostly in the favor of developers. So I'm gonna try to walk through this at a high level what all these changes are. I recommend to everyone please research this. You need to adjust your UA buying models. The good news is it's mostly in your favor, but there's some hoops you need to jump through to make the most out of it. So the traditional 30% fee that the stores have been taking, it's it's not dead, they just unbundled it. So Google now is splitting this into a base service fee that at the highest is 25%. And a 5% play billing fee. So what this means is you're now they've now introduced other variables. and rather than one fee set that you're paying the whole time, it's this piece together thing that's gonna depend on where your office is, where your players are, how you're processing payments, and some other things. So what actually changed? and I'm gonna kind of bundle in some of the recent changes altogether. This first one is older, but it's very important, and not everyone is taking advantage of it, which is at your first one million dollars on Google Play, the base fee goes down to 10%, and then again that 5% billing, which is optional. We'll come back to that. So it means that you can actually bring your rate down by half from 30% to 50% on your first million, but there's a catch, you have to enroll Josh Chandley: Is that is that per pub or per game? Warren (Upptic): per pub. but you need to enroll. In to the your point, Josh, you need to enroll in something called the play console account groups. It's not automatic. And this is basically grouping together all of the apps that you publish. If you don't enroll in this, you're not gonna be getting that discount. subscriptions are handled with with a little different logic. I'm gonna largely set that aside because there's so many other moving pieces more focused on games, but for an app purchases over one million dollars of revenue. Another confusing element is your new installs are different from your legacy installs. So your new installs are going to be billed at the 20% base and 5% of play billing. So down to 25%. And then your old players, if they installed prior to this July change, those are basically continuing to be at the old 30% effective fee, but now it is unbundled. It's 25% base, 5% billing. Now we keep talking about this 5% billing fee. This is the part that's related to web shops. So Google is basically saying: hey, you're welcome to use your own billing. and we will remove our 5% fee if you want to bill externally. You still have to pay us at least that you know base fee, which, as we covered, varies between 10 and 20%. So this is all to say what we're fighting for in the web shop space on play right now is really. Effectively comes down to call it a couple of percent. Because if you're using another payment provider, your savings is essentially the delta of the 5% payment processing fee you can play pay Google or whatever you're paying your payment provider. Like if it's Stripe, it might be like 2.5 to 3.5%. there's other little fees like sales tax compliance, chargebacks, customer support, stuff like this. the the next nuance I want to touch on is user location versus account location. So the million dollar and below discount, this is based on where your company is registered, but the transaction fee rules are based where the player sits. So this means US users follow the unbundle rules that we talked about before. But if you are Canadian, Australian, or Japanese, it's a different set of logic to make it even more confusing. You there, there's something called the 4% user choice billing discount, which means Google just discounts your bundled fee if you're using an alternative payment provider by 4%. I know this was extremely mind-numbing, but the point you should take away is you can be saving between zero and fifteen percent of the fees, with 15% being half of the the traditional 30% take from Google if you learn these systems. And then the second part is that you are enriching your data models to account for these. so I will do a very brief plug for some of Uptick and we've had to build this on our side for the uptick software. So that's part of part of the new complexity is you can't just operate off of what the MMP is telling you. So we've had to build ability to kind of f kind of fine-tune and enrich the data streams, treat I IP and IA differently as they're coming in, and now account for all of this additional complexity of Play Store because at the end of the day, we're just trying to get the math correct to where when we're putting a dollar in the UA machine and apps flyer or whatever is telling us we got a dollar back. That's not the truth, and the truth has all these layers of complexity of these new billing systems. And we only touched on Android today. We're not gonna even try to touch on an iOS yet. But high level, there's things that have changed in your favor if you bother to learn the mind-numbing complexity of all the nuance and opt-in systems that you need to do to get these discounts. I'll pause there. Is this making sense, guys? Have you have you guys dug into this previously and tried to untangle it? Vincent: No. my two cents is they're buying time and they are just securing the duopoly and their stored dom dominance, right? and yeah, it's obviously it's it's very confusing if you try to understand what's the opportunity, how much more I'm gonna win, I'm gonna gain. it is really not easy to to figure out. And probably as you pointed, everybody who is doing a lot of IEP needs to improve or change their buying model for sure. but again, at the end of the day for me it's just like killing the off store payment by making the opportunity way less attractive, right? To if you wanted to do a web shop, now it's you know, considering the hurdle is way less attractive by unbundling the the the fee, right? Josh, what do you think? Josh Chandley: I have Maybe maybe a a grouchy take. And I think first it it seems like what they're actually doing is trying to make it deliberately complicated to minimize how many publishers attempt to reduce Google's revenue. do either of you disagree with Vincent: Agree one percent. Warren (Upptic): That's definitely the end effect. You know, the I mean the the single biggest savings for small developers is doing that play console account grouping so you get the fifteen percent rate instead of thirty. But a ton of teams aren't doing this. It's literally cutting in half what you're paying the Google Play Store. But it's been so they're not shouting it from the rooftops to to make this change, yeah, to your point, Josh. Josh Chandley: Yeah, and then so my my question for you, Warren, because you are the true expert here. Apple played their own games trying to limit web shop adoption. And that that caused well critics and developers blasted it as bad faith compliance. And more importantly, a a federal judge found Apple in contempt for for undercutting the purpose of the injunction. On a scale of one to Apple. where where do you think this Google policy lands? Warren (Upptic): I would say it's such a weird question. I would say we're at like six sixty percent of an apple. Yeah. We're at sixty percent of an apple, Josh. That's that's my that's my final answer. But my I think my actual answer is Josh Chandley: A scale of one to apple? That's a completely no that's a completely normal rating scale. I don't know what you're talking about. Sixty percent of an apple? Like half an apple. Okay. Warren (Upptic): like to your point, like there is still a ton of thrash. Like these stores are gonna fight for every penny, and Apple has been the more belligerent of the two by far. so the takeaway is like you can no longer operate off of a buying model for UA. Where you're saying our IAP is at this historical 30% fixed percentage. You have to know that it is a variable and complex set of rules adjusting this and potentially adjusting this in meaningful ways. The kind of dirty secret about a lot of UA, even for the most successful and biggest teams running UA at scale, is it's not really high margin, which might sound like UA is not worth it, but it's like if you have a vending machine that spits out one dollar bills. People are gonna outbid each other up right up until the the precipice of that, you know, to buy those $1 bills. So a lot of UA teams, even at the the top, top UA based studios, they're operating off of single or low double-digit profit margins of the UA that they're driving. And so freeing up an additional five, 10, 15% in UA buying can make you competitive where you weren't before, or can potentially double the returns if you were operating, you know, just above break-even. so this is really worth, you know, digging through the documentation, learning how it affects your studio, and either, you know, updating your models to reflect this or licensing some technology that can do this for you. Vincent: Sounds like Formula One or high frequency trading, where what even just one percent is huge. Warren (Upptic): Exactly. Josh Chandley: Which is tough for hard for small teams. Vincent: Yeah, to compete, yeah. Josh Chandley: All right. Well, we we don't have time to cover Reddit today. anyone listening, let us know if you want to talk about it next time and we certainly can. if this is the kind of decode you want to see more of, subscribe. This is just an experiment and so we need feedback to know if we're gonna keep doing it or not. but Vincent Warren, thank you so much for for joining us today. This was great. Vincent: Thank you. Was awesome. Warren (Upptic): Yeah, my pleasure. Thanks for thanks for setting this up, Josh, and we hope to be back for for some more. Vincent: See you next time. Josh Chandley: All right. Thanks all. See