This Week in Apps: OnlyFans bans sexual content, SharePlay delayed, TikTok questioned over biometric data collection

Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.

The app industry continues to grow, with a record 218 billion downloads and $143 billion in global consumer spend in 2020. Consumers last year also spent 3.5 trillion minutes using apps on Android devices alone. And in the U.S., app usage surged ahead of the time spent watching live TV. Currently, the average American watches 3.7 hours of live TV per day, but now spends four hours per day on their mobile devices.

Apps aren’t just a way to pass idle hours — they’re also a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus. In 2020, investors poured $73 billion in capital into mobile companies — a figure that’s up 27% year-over-year.

This Week in Apps offers a way to keep up with this fast-moving industry in one place with the latest from the world of apps, including news, updates, startup fundings, mergers and acquisitions, and suggestions about new apps and games to try, too.

Do you want This Week in Apps in your inbox every Saturday? Sign up here: techcrunch.com/newsletters

Top Stories

OnlyFans to ban sexually explicit content

OnlyFans logo displayed on a phone screen and a website

(Photo Illustration by Jakub Porzycki/NurPhoto via Getty Images)

Creator platform OnlyFans is getting out of the porn business. The company announced this week it will begin to prohibit any “sexually explicit” content starting on October 1, 2021 — a decision it claimed would ensure the long-term sustainability of the platform. The news angered a number of impacted creators who weren’t notified ahead of time and who’ve come to rely on OnlyFans as their main source of income.

However, word is that OnlyFans was struggling to find outside investors, despite its sizable user base, due to the adult content it hosts. Some VC firms are prohibited from investing in adult content businesses, while others may be concerned over other matters — like how NSFW content could have limited interest from advertisers and brand partners. They may have also worried about OnlyFans’ ability to successfully restrict minors from using the app, in light of what appears to be soon-to-come increased regulations for online businesses. Plus, porn companies face a number of other issues, too. They have to continually ensure they’re not hosting illegal content like child sex abuse material, revenge porn or content from sex trafficking victims — the latter which has led to lawsuits at other large porn companies.

The news followed a big marketing push for OnlyFans’ porn-free (SFW) app, OFTV, which circulated alongside reports that the company was looking to raise funds at a $1 billion+ valuation. OnlyFans may not have technically needed the funding to operate its current business — it handled more than $2 billion in sales in 2020 and keeps 20%. Rather, the company may have seen there’s more opportunity to cater to the “SFW” creator community, now that it has big names like Bella Thorne, Cardi B, Tyga, Tyler Posey, Blac Chyna, Bhad Bhabie and others on board.

U.S. lawmakers demand info on TikTok’s plans for biometric data collection

The TikTok logo is seen on an iPhone 11 Pro max

The TikTok logo is seen on an iPhone 11 Pro max. Image Credits: Nur Photo/Getty Images

U.S. lawmakers are challenging TikTok on its plans to collect biometric data from its users. TechCrunch first reported on TikTok’s updated privacy policy in June, where the company gave itself permission to collect biometric data in the U.S., including users’ “faceprints and voiceprints.” When reached for comment, TikTok could not confirm what product developments necessitated the addition of biometric data to its list of disclosures about the information it automatically collects from users, but said it would ask for consent in the case such data collection practices began.

Earlier this month, Senators Amy Klobuchar (D-MN) and John Thune (R-SD) sent a letter to TikTok CEO Shou Zi Chew, which said they were “alarmed” by the change, and demanded to know what information TikTok will be collecting and what it plans to do with the data. This wouldn’t be the first time TikTok got in trouble for excessive data collection. Earlier this year, the company paid out $92 million to settle a class-action lawsuit that claimed TikTok had unlawfully collected users’ biometric data and shared it with third parties.

Weekly News

Platforms: Apple

Image Credits: Apple

  • ⭐ Apple told developers that some of the features it announced as coming in iOS 15 won’t be available at launch. This includes one of the highlights of the new OS, SharePlay, a feature that lets people share music, videos and their screen over FaceTime calls. Other features that will come in later releases include Wallet’s support for ID cards, the App Privacy report and others that have yet to make it to beta releases.
  • Apple walked back its controversial Safari changes with the iOS 15 beta 6 update. Apple’s original redesign had shown the address bar at the bottom of the screen, floating atop the page’s content. Now the tab bar will appear below the page’s content, offering access to its usual set of buttons as when it was at the top. Users can also turn off the bottom tab bar now and revert to the old, Single Tab option that puts the address bar back at the top as before.
  • In response to criticism over its new CSAM detection technology, Apple said the version of NeuralHash that was reverse-engineered by a developer, Asuhariet Ygvar, was a generic version, and not the complete version that will roll out later this year.
  • The Verge dug through over 800 documents from the Apple-Epic trial to find the best emails, which included dirt on a number of other companies like Netflix, Hulu, Sony, Google, Nintendo, Valve, Microsoft, Amazon and more. These offered details on things like Netflix’s secret arrangement to pay only 15% of revenue, how Microsoft also quietly offers a way for some companies to bypass its full cut, how Apple initially saw the Amazon Appstore as a threat and more.

Platforms: Google

  • A beta version of the Android Accessibility Suite app (12.0.0) which rolled out with the fourth Android beta release added something called “Camera Switches” to Switch Access, a toolset that lets you interact with your device without using the touchscreen. Camera Switches allows users to navigate their phone and use its features by making face gestures, like a smile, open mouth, raised eyebrows and more.
  • Google announced its Pixel 5a with 5G, the latest A-series Pixel phone, will arrive on August 27, offering IP67 water resistance, long-lasting Adaptive Battery, Pixel’s dual-camera system and more, for $449. The phone makes Google’s default Android experience available at a lower price point than the soon to arrive Pixel 6.
  • An unredacted complaint from the Apple-Epic trial revealed that Google had quietly paid developers hundreds of millions of dollars via a program known as “Project Hug,” (later “Apps and Games Velocity Program”) to keep their games on the Play Store. Epic alleges Google launched the program to keep developers from following its lead by moving their games outside the store.

Augmented Reality

  • Snap on Thursday announced it hired its first VP of Platform Partnerships to lead AR, Konstantinos Papamiltiadis (“KP”). The new exec will lead Snap’s efforts to onboard partners, including individual AR creators building via Lens Studio as well as large companies that incorporate Snapchat’s camera and AR technology (Camera Kit) into their apps. KP will join in September, and report to Ben Schwerin, SVP of Content and Partnerships.

Fintech

  • Crypto exchange Coinbase will enter the Japanese market through a new partnership with Japanese financial giant Mitsubishi UFJ Financial Group (MUFG). The company said it plans to launch other localized versions of its existing global services in the future.

Social

Image Credits: Facebook

  • Facebook launched a “test” of Facebook Reels in the U.S. on iOS and Android. The new feature brings the Reels experience to Facebook, allowing users to create and share short-form video content directly within the News Feed or within Facebook Groups. Instagram Reels creators can also now opt in to have their Reels featured on users’ News Feed. The company is heavily investing its its battle with TikTok, even pledging that some portion of its $1 billion creator fund will go toward Facebook Reels.
  • Twitter’s redesign of its website and app was met with a lot of backlash from users and accessibility experts alike. The company choices add more visual contrast between various elements and may have helped those with low vision. But for others, the contrast is causing strain and headaches. Experts believe accessibility isn’t a one-size fits all situation, and Twitter should have introduced tools that allowed people to adjust their settings to their own needs.
  • The pro-Trump Twitter alternative Gettr’s lack of moderation has allowed users to share child exploitation images, according to research from the Stanford Internet Observatory’s Cyber Policy Center.
  • Pinterest rolled out a new set of more inclusive search filters that allow people to find styles for different types of hair textures — like coily, curly, wavy, straight, as well as shaved or bald and protective styles. 

Photos

  • Photoshop for iPad gained new image correction tools, including the Healing Brush and Magic Wand, and added support for connecting an iPad to external monitors via HDMI or USB-C. The company also launched a Photoshop Beta program on the desktop.

Messaging

  • WhatsApp is being adopted by the Taliban to spread its message across Afghanistan, despite being on Facebook’s list of banned organizations. The company says it’s proactively removing Taliban content — but that may be difficult to do since WhatsApp’s E2E encryption means it can’t read people’s texts. This week, Facebook shut down a Taliban helpline in Kabul, which allowed civilians to report violence and looting, but some critics said this wasn’t actually helping local Afghans, as the group was now in effect governing the region.
  • WhatsApp is also testing a new feature that will show a large preview when sharing links, which some suspect may launch around the time when the app adds the ability to have the same account running on multiple devices.

Streaming & Entertainment

  • Netflix announced it’s adding spatial audio support on iPhone and iPad on iOS 14, joining other streamers like HBO Max, Disney+ and Peacock that have already pledged to support the new technology. The feature will be available to toggle on and off in the Control Center, when it arrives.
  • Blockchain-powered streaming music service Audius partnered with TikTok to allow artists to upload their songs using TikTok’s new SoundKit in just one click.
  • YouTube’s mobile app added new functionality that allows users to browse a video’s chapters, and jump into the chapter they want directly from the search page.
  • Spotify’s Anchor app now allows users in global markets to record “Music + Talk” podcasts, where users can combine spoken word recordings with any track from Spotify’s library of 70 million songs for a radio DJ-like experience.
  • Podcasters are complaining that Apple’s revamped Podcasts platform is not working well, reports The Verge. Podcasts Connect has been buggy, and sports a confusing interface that has led to serious user errors (like entire shows being archived). And listeners have complained about syncing problems and podcasts they already heard flooding their libraries.

Dating

  • Tinder announced a new feature that will allow users to voluntarily verify their identity on the platform, which will allow the company to cross-reference sex offender registry data. Previously, Tinder would only check this database when a user signed up for a paid subscription with a credit card.

Gaming

Image Source: The Pokémon Company

  • Pokémon Unite will come to iOS and Android on September 22, The Pokémon Company announced during a livestream this week. The strategic battle game first launched on Nintendo Switch in late July.
  • Developer Konami announced a new game, Castlevania: Grimoire of Souls, which will come exclusively to Apple Arcade. The game is described as a “full-fledged side-scrolling action game,” featuring a roster of iconic characters from the classic game series. The company last year released another version of Castelvania on the App Store and Google Play.
  • Dragon Ball Z: Dokkan Battle has now surpassed $3 billion in player spending since its 2015 debut, reported Sensor Tower. The game from Bandai Namco took 20 months to reach the figure after hitting the $2 billion milestone in 2019. The new landmark sees the game joining other top-grossers, including Clash Royale, Lineage M and others.
  • Sensor Tower’s mobile gaming advertising report revealed data on top ad networks in the mobile gaming market, and their market share. It also found puzzle games were among the top advertisers on gaming-focused networks like Chartboost, Unity, IronSource and Vungle. On less game-focused networks, mid-core games were top titles, like Call of Duty: Mobile and Top War. 

Image Credits: Sensor Tower

Health & Fitness

  • Apple is reportedly scaling back HealthHabit, an internal app for Apple employees that allowed them to track fitness goals, talk to clinicians and coaches at AC Wellness (a doctors’ group Apple works with) and manage hypertension. According to Insider, 50 employees had been tasked to work on the project.
  • Samsung launched a new product for Galaxy smartphones in partnership with healthcare nonprofit The Commons Project, that allows U.S. users to save a verifiable copy of their vaccination card in the Samsung Pay digital wallet.

Image Credits: Samsung

Adtech

Government & Policy

  • China cited 43 apps, including Tencent’s WeChat and an e-reader from Alibaba, for illegally transferring user data. The regulator said the apps had transferred users location data and contact list and harassed them with pop-up windows. The apps have until August 25 to make changes before being punished.

Security & Privacy

  • A VICE report reveals a fascinating story about a jailbreaking community member who had served as a double agent by spying for Apple’s security team. Andrey Shumeyko, whose online handles included JVHResearch and YRH04E, would advertise leaked apps, manuals and stolen devices on Twitter and Discord. He would then tell Apple things like which Apple employees were leaking confidential info, which reporters would talk to leakers, who sold stolen iPhone prototypes and more. Shumeyko decided to share his story because he felt Apple took advantage of him and didn’t compensate him for the work.

Funding and M&A

? South Korea’s GS Retail Co. Ltd will buy Delivery Hero’s food delivery app Yogiyo in a deal valued at 800 billion won ($685 million USD). Yogiyo is the second-largest food delivery app in South Korea, with a 25% market share.

? Gaming platform Roblox acquired a Discord rival, Guilded, which allows users to have text and voice conversations, organize communities around events and calendars and more. Deal terms were not disclosed. Guilded raised $10.2 million in venture funding. Roblox’s stock fell by 7% after the company reported earnings this week, after failing to meet Wall Street expectations.

? Travel app Hopper raised $175 million in a Series G round of funding led by GPI Capital, valuing the business at over $3.5 billion. The company raised a similar amount just last year, but is now benefiting from renewed growth in travel following COVID-19 vaccinations and lifting restrictions.

? Indian quiz app maker Zupee raised $30 million in a Series B round of funding led by Silicon Valley-based WestCap Group and Tomales Bay Capital. The round values the company at $500 million, up 5x from last year.

? Danggeun Market, the publisher of South Korea’s hyperlocal community app Karrot, raised $162 million in a Series D round of funding led by DST Global. The round values the business at $2.7 billion and will be used to help the company launch its own payments platform, Karrot Pay.

? Bangalore-based fintech app Smallcase raised $40 million in Series C funding round led by Faering Capital and Premji Invest, with participation from existing investors, as well as Amazon. The Robinhood-like app has over 3 million users who are transacting about $2.5 billion per year.

? Social listening app Earbuds raised $3 million in Series A funding led by Ecliptic Capital. Founded by NFL star Jason Fox, the app lets anyone share their favorite playlists, livestream music like a DJ or comment on others’ music picks.

? U.S. neobank app One raised $40 million in Series B funding led by Progressive Investment Company (the insurance giant’s investment arm), bringing its total raise to date to $66 million. The app offers all-in-one banking services and budgeting tools aimed at middle-income households who manage their finances on a weekly basis.

Public Markets

?Indian travel booking app ixigo is looking to raise Rs 1,600 crore in its initial public offering, The Economic Times reported this week.

?Trading app Robinhood disappointed in its first quarterly earnings as a publicly traded company, when it posted a net loss of $502 million, or $2.16 per share, larger than Wall Street forecasts. This overshadowed its beat on revenue ($565 million versus $521.8 million expected) and its more than doubling of MAUs to 21.3 million in Q2.  Also of note, the company said dogecoin made up 62% of its crypto revenue in Q2.

Downloads

Polycam (update)

Image Credits: Polycam

3D scanning software maker Polycam launched a new 3D capture tool, Photo Mode, that allows iPhone and iPad users to capture professional-quality 3D models with just an iPhone. While the app’s scanner before had required the use of the lidar sensor built into newer devices like the iPhone 12 Pro and iPad Pro models, the new Photo Mode feature uses just an iPhone’s camera. The resulting 3D assets are ready to use in a variety of applications, including 3D art, gaming, AR/VR and e-commerce. Data export is available in over a dozen file formats, including .obj, .gtlf, .usdz and others. The app is a free download on the App Store, with in-app purchases available.

Jiobit (update)

Jiobit, the tracking dongle acquired by family safety and communication app Life360, this week partnered with emergency response service Noonlight to offer Jiobit Protect, a premium add-on that offers Jiobit users access to an SOS Mode and Alert Button that work with the Jiobit mobile app. SOS Mode can be triggered by a child’s caregiver when they detect — through notifications from the Jiobit app — that a loved one may be in danger. They can then reach Noonlight’s dispatcher who can facilitate a call to 911 and provide the exact location of the person wearing the Jiobit device, as well as share other details, like allergies or special needs, for example.

Tweets

When your app redesign goes wrong…

Image Credits: Twitter.com

Prominent App Store critic Kosta Eleftheriou shut down his FlickType iOS app this week after too many frustrations with App Review. He cited rejections that incorrectly argued that his app required more access than it did — something he had successfully appealed and overturned years ago. Attempted follow-ups with Apple were ignored, he said. 

Image Credits: Twitter.com

Anyone have app ideas?

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The truth about SDK integrations and their impact on developers

The digital media industry often talks about how much influence, dominance and power entities like Google and Facebook have. Generally, the focus is on the vast troves of data and audience reach these companies tout. However, there’s more beneath the surface that strengthens the grip these companies have on both app developers and publishers alike.

In reality, software development kit (SDK) integrations are a critical component of why these monolith companies have such a prominent presence. For reference, an SDK is a set of software development tools, libraries, code samples, processes and guides that help developers create or enhance the apps they’re building.

Through a digital marketing lens, SDKs provide in-app analytics, insights on campaign testing, attribution information, location details, monetization capabilities and more.

Through a digital marketing lens, SDKs provide in-app analytics, insights on campaign testing, attribution information, location details, monetization capabilities and more. In the case of companies like Google and Facebook, their ability to provide these insights dovetails with their data and reach.

While that does deliver useful capabilities to developers and publishers alike, it also perpetuates the factors contributing to their perceived monopolistic status — and the detriments a lack of competition fosters.

Almost all (90%) ad-monetized Android apps have Google’s Admob SDK integrated, data from Statista showed. Additionally, the Facebook Audience Network SDK is present in 19% of all global Android apps utilizing mobile ads. It’s worth noting that the large majority of alternative “leading” advertising SDKs outside these two players are used less than 13% of the time in Android apps.

As the app ecosystem rapidly expands beyond the borders of mobile, app developers and publishers would benefit immensely from identifying economical and secure ways of adopting more SDKs.

The state of SDK adoption

While there are many SDKs available in the market today, a few key factors contribute to Google and Facebook’s overall dominance. The most basic is around the respective organizations’ reach and industry notoriety. However, a larger component here is the lack of resources and time app developers have.

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Bear and bull cases for Unity’s IPO

In the first part of my outline on the company, I explained the scope of Unity’s multidimensional business, its R&D efforts and competitive positioning, and its grand vision for interactive 3D content across every industry.

In the conclusion, I’ll dig into Unity’s financials and how it is marketing its public listing before turning to discuss the bear and bull cases for its future.

Key data points from Unity’s S-1 filing

  • Revenue grew 42% year-over-year from $381 million in 2018 to $542 million in 2019 with operating losses of $130 million and $150 million respectively. It hit $351 million in revenue by June 30 this year. That pace suggests a 2020 total around $700-$750 million (+30% year-over-year).
  • The company has gross margins of about 79%, although costs are overwhelmingly centered in R&D and sales and marketing, which account for 47% and 32% of revenue, respectively.
  • The company has cumulatively lost $569 million up to this point, including a $163 million net loss in 2019.

The geographical source of Unity’s revenue in 2019 was:

  • 34% EMEA
  • 28% U.S.
  • 21% APAC — excluding China
  • 12% China
  • 5% Americas — excluding U.S.

Unlike many other Western tech companies, Unity operates freely in China.

In Part 1, I explained each of Unity’s seven main revenue streams. During the first half of 2020, revenue by segment broke down to:

  • $216.9 million (62%) from Operate Solutions (products for managing and monetizing content), the “substantial majority” of which is from the ads business.
  • $101.8 million (29%) from Create Solutions (products and consulting for content creation), two-thirds of which is from Unity Pro subscriptions.
  • $32.7 million (9%) from Strategic Partnerships and Other (Unity Asset Store and Verified Solutions Partners).

The S-1 discloses that less than 10% of overall revenue is from “newer products and services, such as Vivox and deltaDNA” (referencing key 2019 acquisitions for its Operate segment).

Some takeaways from this data:

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How Unity built a gaming engine for the future

Last week, Unity Software Inc. filed to go public on the New York Stock Exchange, but the 16-year-old tech company is universally known within the gaming industry and largely unknown outside of it.

Unity has expanded beyond gaming, pouring hundreds of millions of dollars into a massive bet to become an underlying platform for humanity’s future in a world where interactive 3D media stretches from our entertainment experiences and consumer applications to office and manufacturing workflows.

Much of the reporting about Unity’s S-1 has mischaracterized the business. Unity is easily misunderstood because:

  • Most people who aren’t game developers don’t understand what a game engine does.
  • It has numerous revenue streams.
  • There’s only a partial business overlap between Unity and Epic Games, its closest competitor.

Last year, I wrote an in-depth guide to Unity’s founding and rise in popularity, interviewing more than 20 top executives in San Francisco and Copenhagen, plus many other professionals in the industry. In this two-part guide to get up to speed on the company, I’ll explain Unity’s business, where it is positioned in the market, what its R&D is focused on and how game engines are eating the world as they gain adoption across other industries.

In part two, I’ll analyze Unity’s financials, explain how the company has positioned itself in the S-1 to earn a higher valuation and outline both the bear and bull cases for its future.

For those in the gaming industry who are familiar with Unity, the S-1 might surprise you in a few regards. The Asset Store is a much smaller business that you might think, Unity is more of an enterprise software company than a self-service platform for indie devs and advertising solutions appear to make up the largest segment of Unity’s revenue.

What is a game engine?

Unity’s origin and core business is as a game engine, software that is similar to Adobe Photoshop, but used instead for editing games and creating interactive 3D content. Users import digital assets (often from Autodesk’s Maya) and add logic to guide each asset’s behavior, character interactions, physics, lighting and countless other factors that create fully interactive games. Creators then export the final product to one or more of the 20 platforms Unity supports, such as Apple iOS and Google Android, Xbox and Playstation, Oculus Quest and Microsoft HoloLens, etc.

In this regard, Unity is more comparable to Adobe and Autodesk — which both have integrations with Unity — than to game studios or publishers like Electronic Arts and Zynga.

What are Unity’s lines of business?

Since John Riccitiello took over as CEO from co-founder David Helgason in 2014, Unity has expanded beyond its game engine and has organized activities into two divisions: Create Solutions (i.e., tools for content creation) and Operate Solutions (i.e., tools for managing and monetizing content). There are seven noteworthy revenue streams overall:

Create Solutions (29% of H1 2020 revenue)

  • The Unity platform: The core game engine, which operates on a freemium subscription model. Individuals, small teams and students use it for free, whereas more established game studios and enterprises in other industries pay (via the Unity Plus, Unity Pro and Unity Enterprise premium tiers).
  • Engine extensions/add-ons: A growing portfolio of tools and extensions of the core engine purpose-built for specific industries and use cases. These include MARS for VR development, Reflect for architecture and construction use with BIM assets, Pixyz for importing CAD data, Cinemachine for virtual production of films and ArtEngine for automated art creation.
  • Professional services: Hands-on, specialized consulting for enterprise customers using Unity’s engine and other products, beefed up by its $55 million April acquisition of Finger Food Studios (a 200-person team that builds interactive media projects for corporate clients using Unity).

Aside from these three product categories, Unity is reporting another group of content creation offerings separately in the S-1 as “Strategic Partnerships & Other” (which accounts for further 9% of revenue):

  • Strategic Partnerships: Major tech companies pay Unity via a mix of structures (flat-fee, revenue-share and royalties) for Unity to create and maintain integrations with their software and/or hardware. Since Unity is the most popular platform to build games with, ensuring Unity integrates well with Oculus or with the Play Store is very important to Facebook and Google, respectively.
  • Unity Asset Store: Unity’s marketplace for artists and developers to buy and sell digital assets like a spooky forest or the physics to guide characters’ joint movements for use in their content so they don’t each have to create every single thing from scratch. It is commonly used, though larger game studios often use Asset Store assets just for initial prototyping of game ideas.

Operate Solutions (62% of H1 2020 revenue)

  • Advertising: Via the 2014 acquisition of Applifier, Unity launched an in-game advertising network for mobile games. This expanded substantially with the Unified Auction, a simultaneous auction that helps games get the highest bid from among potential advertisers. Unity is now one of the world’s largest mobile ad networks, serving 23 billion ads per month. Unity also has a dynamic monetization tool that makes real-time assessments of whether it is optimal to serve an ad, prompt an in-app purchase or do nothing to maximize each player’s lifetime value. While the Unity IAP feature enables developers to manage in-app purchases (IAP), Unity does not take a cut of IAP revenue at this time.
  • Live Services: A portfolio of cloud-based solutions for game developers to better manage and optimize their user acquisition, player matchmaking, server hosting and identification of bugs. This portfolio has primarily been assembled through acquisitions like Multiplay (cloud game server hosting and matchmaking), Vivox (cloud-hosted system for voice and text chat between players in games), and deltaDNA (player segmentation for campaigns to improve engagement, monetization and retention). Unity Simulate trains AI models in virtual recreations of the real world (or testing games for bugs). These are structured with usage-based pricing, with an initial amount of usage free.

Unity versus Unreal, versus others

Unity is compared most frequently to Epic Games, the company behind the other leading game engine, Unreal. Below is a quick overview of the products and services that differentiate each company. The cost of switching game engines is meaningful in that developers are typically specialized in one or the other and can take months to gain high proficiency in another, but some teams do vary the engine they use for different projects. Moving an existing game (or other project) over to a new game engine is a major undertaking that requires extensive rebuilding.

Epic Games

Epic has three main businesses: game development/publishing, the Epic Games Store and the Unreal Engine. Epic’s core is in developing its own games and the vast majority of Epic’s estimated $5.6 billion in 2018 revenue came from that (principally, from Fortnite). The Epic Games Store is a consumer-facing marketplace for gamers to purchase and download games; game developers pay Epic a 12.5% cut of their sales. In those two areas of business, Unity and Epic don’t compete. While much of the press about Unity’s IPO frames Epic’s current conflict with Apple as an opportunity for Unity, it is largely irrelevant. A court order blocked Apple from punishing iOS apps made with Unreal. Unity doesn’t have any of its own apps in the App Store and doesn’t have a consumer-facing store for games. It’s already the default choice of game engine for anyone building a game for iOS or Android, and it’s not feasible to switch the engine of an existing game, so Epic’s conflict does not create a new market opening.

Origins: Unreal was Epic’s proprietary engine that was licensed to other PC and console studios and became its own business as a result of its popularity. Unity launched as an engine for indie developers building Mac games (an underserved niche) and expanded to other emerging market segments considered irrelevant by the core gaming industry: small indie studios, mobile developers, and AR and VR games. Unity exploded in global popularity as the main engine for mobile games.

Programming language: Based in the C++ programming language, Unreal requires more extensive programming than Unity (which requires programming in C#) but enables more customization to achieve higher performance.

Core markets: Unreal is much more popular among PC and console game developers; it is oriented toward bigger, high-performance projects by professionals. That said, it is establishing itself firmly in AR and VR and proved with Fortnite it can take a AAA console and PC game cross-platform to mobile. Unity meanwhile dominates in mobile games — now the largest (and fastest-growing) segment of the gaming industry — and has kept the largest market share in AR and VR content.

Ease of authoring: Unity has prioritized ease of use since its early days, with a mission of democratizing game development that was so concentrated among large studios backed by substantial budgets. This is why Unity is the common choice in educational environments and by individuals and small teams creating casual mobile games. Making Unity easier to use, including among nondevelopers remains an R&D focus. Unreal does have a visual scripting tool to conduct some development without needing to code, but it’s far from a no-code solution to developing a high-quality game (no one offers that). Unreal isn’t dramatically more complex but, as a generalization, it requires more work and technical skill.

Pricing: While Unity operates on a freemium subscription model, Unreal operates on a revenue-share, taking 5% of a game’s revenue. Both have separately negotiated pricing for companies outside of gaming that aren’t publicly disclosed.

In-house game development: Aside from its first two years of existence operating out of a Copenhagen apartment, Unity has never focused on creating its own content (aside from short films and demos to highlight new technology). Epic argues that building games informs them to build a better engine that has been more heavily tested for bugs. Unity argues that creating games in-house would put it in competition with customers and that it builds a better engine for the overall market by focusing solely on that and not repurposing an engine built first for a specific use case (e.g., MMOs).

M&A: Like Unity, Epic has made acquisitions to strengthen Unreal’s technical offering to game developers and to industrial customers, like its purchases of Quixel (a library of 3D scanned real-world assets) and Twinmotion (for bringing BIM and CAD assets into an engine).

Proprietary engines

Many large gaming companies, especially in the PC and console categories, continue to use their own proprietary game engines built in-house. It is a large, ongoing investment to maintain a proprietary engine, which is why a growing number of these companies are switching to Unreal or Unity so they can focus more resources on content creation and tap into the large talent pools that already have mastery in each one.

Others

Other game engines to note are Cocos2D (an open-source framework by Chukong Technologies that has a particular following among mobile developers in China, Japan and South Korea), CryEngine by Crytek (popular for first-person shooters with high visual fidelity) and Amazon’s Lumberyard (which was built off CryEngine and doesn’t seem to have widespread adoption or command much respect among the developers and executives I’ve spoken to).

There are many niche game engines in the market since every studio needs to use one and those who build their own often license it if their games aren’t commercial successes or they see an underserved niche among studios creating similar games. That said, it’s become very tough to compete with the robust offerings of the industry standards — Unity and Unreal — and tough to recruit developers to work with a niche engine.

UGC platforms for creating and playing games like Roblox (or new entrants like Manticore’s Core and Facebook Horizon) don’t compete with Unity — at least for the foreseeable future — because they are dramatically simplified platforms for creating games within a closed ecosystem with much more limited monetization ability. The only game developers they will pull away from Unity are hobbyists on Unity’s free tier.

I’ve written extensively on how UGC-based game platforms are central to the next paradigm of s.ocial media, anchored within gaming-centric virtual worlds. But based on the overall gaming market growth and the diversity of game types, these platforms can continue to soar in popularity without being a competitive threat to the traditional studios who pay Unity for its engine, ad network, or cloud products

What’s at the forefront of Unity’s technical innovation?

DOTS

In recent years, Unity has been developing its “data-oriented technology stack,” or DOTS, gradually rolling it out in modules across the engine.

Unity’s engine centers on programming in C# code, which is easier to learn and more time-saving than C++ since it is a higher level programming language. Simplification comes with the trade-off of less ability to customize instruction by directly interacting with memory. C++, which is the standard for Unreal, enables that level of customization to achieve better performance but requires writing a lot more code and having more technical skill.

DOTS is an effort to not just resolve that discrepancy, but achieve dramatically faster performance. It makes use of the ability to add annotations to C# code to further customize the code’s instructions and automatically recompiles code written by humans to be optimized for how a computer carries out instructions. The standard programming languages in use by humans are all oriented around how humans think (object-oriented); Unity claims a proprietary breakthrough in understanding how to reorganize object-oriented code into data-oriented code (optimized for how computers think) so that when it is compiled into the lowest level languages that provide 1s-and-0s instructions to the __, it is orders of magnitude faster in processing the request. This level of efficiency should, on one hand, allow highly complex games and simulations with cutting-edge graphics to run quickly on GPU-enabled devices, while, on the other hand, allowing simpler games to be so small in file size they can run within messenger apps on the lowest quality smartphones and even on the screens of smart fridges.

Unity is bringing DOTS to different components of its engine one step at a time and users can opt whether to use DOTS for each component/step of their project. The company’s Megacity demo (below) shows DOTS enabling a sci-fi city with hundreds of thousands of assets rendered in real-time, from the blades spinning on the air conditioners in every apartment building to flying car traffic responding to the player’s movements.

[megacity demo]

Graphics

The forefront of graphics technology is in enabling real-time ray tracing (a lighting effect mimicking the real-life behavior of light reflecting off different surfaces) at a fast enough rendering speed so games and other interactive content can be photorealistic (i.e., you can’t tell it’s not the real world). It’s already possible to achieve this in certain contexts but takes substantial __ [processing power?] to render. Its initial use is for content that is not rendered in real-time, like films. Here are two videos from __ by Unity and Unreal, each demonstrating ray tracing that makes a digital version of a BMW look identical to video of a real car.

To support ray tracing and other cutting-edge graphics, Unity released its High Definition Render Pipeline in 2018. It gives developers more powerful graphics rendering for GPU devices to achieve high visual fidelity in console and PC games plus nongaming uses like industrial simulations. By comparison, its Universal Render Pipeline optimizes content for lower-end hardware like mobile phones.

Next-gen authoring

The Unity Labs team is focused on the next generation of authoring tools, particularly in an era of AR or VR headsets being widely adopted. One component of this is the vision for a future where nontechnical people could develop 3D content with Unity solely through hand gestures and voice commands. In 2016, Unity released an early concept video for this project (something I demo-ed at Unity headquarters in SF last year):

Game engines are eating the world

The term “game engine” limits the scope of what these platforms are already used for. They are interactive 3D engines used for practically any type of digital content you can imagine. The core engine is used for virtual production of films to autonomous vehicle training simulations to car configurators on auto websites to interactive renderings of new buildings.

Both Unity and Unreal have long been used outside gaming by people repurposing them and over the last three to five years have made expanding use of their engines in other industries a big priority. They are primarily focused on large- and mid-size companies in (1) architecture, engineering and construction, (2) automotive and heavy manufacturing, and (3) cinematic video.

In film, game engines are used for virtual production. The settings, whether animated or scanned from real-world environments, are set up as virtual environments like those of a video game where virtual characters interact and with human actors captured through sets surrounded by the virtual environments on screens. The director and VFX team can change the surroundings, the time of day, etc. in real-time to find the perfect shot.

Since assets can be imported from CAD, BIM and other formats, and since Unity gives you the ability to build a whole world and simulate changes in real-time (on a screen or in AR/VR), there are a vast scope of commercial uses for it. There are four main use cases for Unity’s engine beyond entertainment experiences:

  1. Design and planning: Have teams work on interactive 3D models of their product simultaneously (in VR, AR or on screens) from offices around the world and attach metadata to every component about its materials, pricing, etc. The Hong Kong International airport used Unity to create a digital twin of the terminals connected to Internet of Things (IoT) data, informing them of passenger flow, maintenance issues and more in real-time.
  2. Training, sales and marketing: Use interactive 3D content so staff or customers can engage with photorealistic renderings of industrial products, VR trainings for risky construction situations, online car configurators that render custom designs in real-time or an architect’s plan for new office space with every asset within the project filled with metadata and responsive to interaction, changes in lighting, etc.
  3. Simulation: Generate training data for machine learning algorithms using virtual recreations of real-world environments (like for autonomous vehicles in San Francisco) and running thousands of instances in each batch. Unity Simulation customers include Google’s DeepMind.
  4. Human machine interfaces (interactive screens): Create interactive displays for in-vehicle infotainment systems and AR heads up displays, as showcased by Unity’s 2018 collaboration with electric car startup Byton.

Unity’s ambitions beyond gaming ultimately touch every facet of life. In his 2015 internal memo in favor of acquiring Unity, Facebook CEO Mark Zuckerberg wrote “VR/AR will be the next major computing platform after mobile.”

Unity is currently in a powerful position as the key platform for developing VR/AR content and distributing it across different operating systems and devices. Zuckerberg saw Unity as the natural platform for building “key platform services” in the XR ecosystem like an “avatar/content marketplace and app distribution store” for this next paradigm.

If the company can maintain its position as the leading platform for building mixed-reality applications in the coming era I envision where mixed reality is our main digital tool, Unity’s IPO will help it build a solid foundation.

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