The podcast discusses the emergence of game-enabling software platforms like Epic, Unity, AppLovin, Discord, and Roblox. It explores their strategies, market value, and Wall Street response. The evolution of Epic Games and Unity is explored, highlighting their adaptability and success. The rise of Apple Oven in the ads business and Discord's evolution into a communication platform are also discussed. The hosts reflect on the pitfalls of industry maps and offer advice for entrepreneurs.
Companies like Epic, Unity, AppLovin, Discord, and Roblox have become powerful game-enabling software platforms by providing tools, advertising tech, and communication software instead of producing content.
Unity has become a dominant game engine by expanding into the ad business and offering customer acquisition and monetization opportunities for developers.
AppLovin has established itself as a major player in mobile gaming growth and monetization by providing advertising solutions, acquiring gaming studios for first-party data, and developing innovative targeted advertising products.
Deep dives
The Rise of Platform-Based Publishers
In the podcast episode, the rise of platform-based publishers is discussed. These publishers combined the ideas of platform software with publishing, resulting in network effects and significant market power. Companies like Valve, Riot, and Tencent became prominent in the gaming industry by curating and publishing content on their platforms.
The Evolution of Unity
Unity, a popular game engine, started out as a tooling company focused on casual games for mobile and web. They became the go-to engine for mobile games, with 50% of mobile, PC, and console games being made with Unity. Over time, they expanded into an ad business, providing customer acquisition and monetization opportunities for game developers. With the acquisition of Iron Source, Unity has further strengthened its position in the ad tech space.
AppLovin's Growth Engine
AppLovin, founded in 2011, recognized the need for game developers to acquire and monetize users. They built a business around providing advertising solutions for games, enabling developers to generate revenue through ads and acquire users through ad campaigns. AppLovin strategically acquired gaming studios to gain first-party data, allowing them to develop innovative targeted advertising products. Today, AppLovin is a major player in mobile gaming growth and monetization.
The Story of Discord
Originally a tablet gaming developer, Discord pivoted from game development to building a communication platform for gamers. It started as a voice chat app and evolved into a comprehensive communication platform that enables gamers to chat, share content, and form communities. Discord's focus on creating a user-friendly and community-driven platform has garnered millions of users and positioned it as a game-enabling software platform.
Discord: An Evolution of Communication for Gamers
Discord was built as a modern communications platform for gamers, offering a better user experience than previous options like TeamSpeak and Ventrilo. By utilizing sophisticated voice APIs and incorporating URLs for user connection, Discord simplified the process of voice chats during gaming sessions. The platform quickly gained popularity among the gaming community, becoming the go-to hangout spot for gamers to interact, share memes, and play games together. With over 180 to 200 million monthly active users, Discord has expanded into various businesses beyond gaming, such as serving as a platform for cryptocurrency and AI-related projects.
Roblox: The Digital Third Place for Kids and Gamers
Roblox, a UGC gaming platform, emerged as a digital hangout community for kids and gamers. By allowing users to build games and fostering a social environment, Roblox achieved network effects on both content creation and social interaction. The platform's success relied on aggregating a younger demographic and creating a safe and appealing environment that resonated with preteens and teens. While there are concerns about whether users will graduate to other more sophisticated games as they get older, Roblox has showcased its potential to attract and retain players, evidenced by its immense user base, strategic brand evolution, and the growing number of Roblox developers transitioning to success outside the platform.
Mitch and Blake expand on last season's discussion of platform-based publishers by introducing a new kind of company: the game-enabling software platform. The five companies they discuss (Epic, Unity, AppLovin, Discord, and Roblox) are all pursuing customer aggregation strategies similar to the platform-based publishers, but -- with the exception of Epic, which has attributes of both a publisher and software platform -- they are doing so with enabling technologies (game engines, advertising tech, and communications software) rather than by producing content.
Your hosts talk about the evolution of what had previously been considered "tools" businesses into bona fide platforms. They discuss the differences in strategy of these five companies, why they have become so valuable (a combined $80 billion in market value), and how Wall Street has responded to the three that have gone public. They discuss how these companies have established themselves as key players in the marketing and distribution of games, and what that means for the industry.
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