Thank you, and welcome everyone to Uniti's financial results webcast. Today, we'll be highlighting our results for the Q4 and for the full fiscal year of 2020. With me on the call today is John Riccitiello, President, Chief Executive Officer and Executive Chairman and Kim Jubbal, Senior Vice President and Chief Financial Officer. Now one of our goals on this call is to help investors understand our business model and we're going to try to do this in an efficient manner. So after the close, we published a shareholder letter with financial commentary and guidance.
And on this call, we will begin with brief remarks from John, then we will answer questions that we collected and consolidated from analysts and investors. And finally, time permitting, we'll have the last 10 minutes or so for panelists to ask additional questions. So let's go on to the Safe Harbor statement. And I'd like to remind participants that during this conference call, we will be making forward looking statements, including our financial outlook for the Q1 full year of fiscal 2021, as well as statements about goals, business outlook, expectations for future financial performance and similar items, all of which are subject to risks, uncertainties and assumptions. You can find more information about these risks and uncertainties in the Risk Factors section of our filings with the SEC atsec.gov.
And we remind everyone that our actual results may differ, and we undertake no obligation position to revise or update any forward looking statements. We will also be discussing non GAAP financial measures today. Reconciliations between our GAAP and non GAAP financial results and discussion of limitations of our non GAAP financial measures can be found in or earnings press release. With that, let me turn it over to John for some introductory remarks.
Thank you, Richard, and thanks for joining us today and for your ongoing support. Today, we're happy to share our Q4 and full year 2020 results. I hope you've had the chance to read our shareholder letter where we provided highlights for the quarter and the year as follows our 2021 guidance. Now we hope that you and your family and friends are safe and healthy in these challenging times. Our team at Uniti, More than 4,000 strong, extend these well wishes to our customers, partners and the end users of the products built with Unity and operated by Unity.
Now we believe we're in the early phases of a once in a generation technology transition. In this case, a world in which The majority of digital content is 2 dimensional and moving to real time three d. Those of you who have followed history of technology And revolutions don't happen organically. You need change agents. For real time three d, we're seeing a virtuous cycle of software and hardware innovation trade agents.
For example, faster GPUs, 5 gs bandwidth, 4 ks displays and new XR devices are making real time three d from any endpoint a reality. At Uniti, our software development platform and services is a change that lets creators build engaging real time three d applications and environments. And we're privileged to lead in this new world and are investing to realize the massive opportunity we see in our future. We just reported a strong Q4 with revenues of $220,000,000 up 39% to prior year and 2020 revs 772, up 43% versus 2019. These strong results were a result of a combination of strong execution and the great work of our teams delivering innovation across the board for our customers.
And we also recognize that we benefited from some COVID related tailwinds and estimate this contributed a net of around 25,000,000 for total revenues in 2020. In our shareholder letter, we included some statistics which speak to the growth of our ecosystem, Including Unity's market share among the top 1,000 games, the number of monthly downloads of apps built with Unity and the number of monthly of users and engagement content built with or operated by Uniti. All of these metrics hit record levels with our market share of the Top 10.58 countries reaching 71%. Download averaged 5,000,000,000 times per month in Q4 And MAUs reached an average of $2,700,000,000 per month in Q4 2020. These record results don't directly translate to revenue in many cases, but they're indicative of the strength of our franchise and the ecosystem we support.
We're thankful that our amazing customers are realizing great success in the marketplace. Now at Uniti, good metrics and outcomes come from one source, innovation. At Uniti, we expand the boundaries of innovation. In 2020, we delivered hundreds of improvements to our core create platform and our Actrate team help studios optimize for lifetime customer value with new services like game growth. We upgraded and introduced applications for our customers beyond gaming.
For example, in December, we highlighted Volkswagen's innovative use of our vertical application Form a to build an engaging virtual e commerce showroom. We're laying the foundation for a future in which most of the world's content will in time be real time 3 d. Today, we're also providing our guidance for 2021. We're projecting revenues of $950,000,000 to $970,000,000 here. This guidance takes into account multiple factors.
I'd like to reference 3. 1, Underlying revenue growth of 30% plus, which is our long term goal. 2, the recognition that 2020 had somewhat elevated revenue due to COVID tailwinds and 3, the recognition that we estimate a one time hit in 2021, Approximately $30,000,000 of revenues or just over 3% as advertisers become accustomed to the new IDFA approach being implemented by Apple. We look forward to a strong 2021 knowing that none of this would be possible without the incredible, dedicated and innovative employees at Uniti. It's an honor for me to be part of this world class team.
And with that, I will turn this over to the operator and Kim and Richard, and we will take questions.
Great. Thanks very much. Well, why don't we start with a question on IDFA. Kim, do you want to get us started on that one? And the question was, just so you know, because what we did is collected all these questions.
Specifically, what do we have any update on the expected timing around IDFA, iOS 14 changes? Have you changed? What impact do we see on our businesses and is that factored into our guidance?
Great. Hi, everyone. Thank you for joining us today. With respect to IDFA, this is a question I think we got by all of you got from all of you. The changes related to IDFA are going to require that our customers Recalibrate much of what they're doing related to their acquisition, their monetization and their marketing strategies.
And we've been working really closely with customers to help them do this. And I would say that we've been preparing for this for a long time. We are leveraging our learnings from GDPR, from our contextual advertising product, which does not rely on the IDFA. And we're working hard to mitigate the risk both to Uniti and to our customers. So as John mentioned in our earnings release, we estimate that the IDFA changes will impact our revenue by about $30,000,000 this year, assuming a rollout in the spring.
And this estimate is not a perfect science, but we have very detailed models that help us forecast here. We leverage country to country data, including impression levels for iOS versus Android. We look at current and historic opt out rates, The adoption rates of our contextual ad products and our experience with GDPR. So we feel pretty confident in our estimates here.
Let me look at a little perspective, because I know this is a really important question in the mind of many investors. When we do a forecast, we're very analytical at Uniti. For example, when we're trying to estimate revenue or say create seats, We'll look at a customer level, an individual publisher. We'll look at how many teams are using our product, how many people on each team, The job classification for each person on the team that might or might not use Uniti, individual features that help us understand What the uptake rate can be across those classification of users on a by team basis. And it's on that basis that we formulate An aggregated forecast for the business, it's not entirely science, but it's really close.
We're even better at that when it comes to the monetization and services side because we have a lot more data. In this case, I just want to give you a couple of highlights Just to let you know, we did build our model up in a very detailed way. We have a handle on this. A point to start with in the beginning of the model It's only about 30% of our impressions are from iOS. In many of these, a significant portion have already opted out from limited ad tracking.
So we take data like that. We take information, extreme detail on our experience with opt outs when people are presented with new user flows for a game or other application. And we build it up step by step. We have a good understanding. Now we don't know if advertisers are going to respond with incremental advertising spend to drive installs.
That's a possibility. We can't quite get every last nuance in this, Nor can we understand precisely what our market share offset will be, but we feel confident that we're growing our advertising business with market share growth that's going on for many years on the basis of strong data insights. So net net, it's an estimate, but we're not guessing. We've got a very detailed model in place, and we think we understand where we're going.
Great. Thanks. So the second question is the thing thing that all of us have to deal with this year. It was about COVID and about half the analyst asked this, but Bhavan Suri asked first, He gives a shout out. So Ken, the question is, how did COVID impact your 2020 results?
And more importantly, how are you thinking about the impact kind of a normalized environment on gaming as COVID recedes. And then more broadly, what is the impact you see from COVID on your overall business, particularly beyond gaming.
Sure. So as you saw in our earnings release, we called out a net $25,000,000 of to revenue because of COVID alongside $40,000,000 in net expense savings after some reinvestment. We see less of an impact in 2021 related to COVID. On the revenue side, we're entering the year with lots momentum across both gaming and new verticals. In gaming, we gained share in a market that experienced a trifecta of user engagement.
We had new gamers entering the market. We had lapsed gamers coming back and we had existing gamers playing a lot more often. And so as a result, as John mentioned, as he saw in our release, our monthly active users who consumed content Creator operated with Uniti reached an average of $2,700,000,000 per month in Q4 and that's up 63% year over year. And interestingly, new players we gained in 2020 had a 27% higher rate of in app purchase versus existing users. So these are new valuable users that are coming into the ecosystem.
And for 2021, our view is that this momentum quarter and is now larger than the film and music industries combined. And we believe this is because a game is so much more interactive. You control the character, the next frame is something nobody's ever seen. And now with the increasing levels of network based connectivity, you're also engaging with other players with your friends. So we see a lot of momentum heading into 2021 in gaming.
In new verticals, our year started out slowly in 2020 as companies adjusted to working in a COVID environment, but we ended really strong and have great momentum heading into 2021. In Q4 of our 793 customers with revenue over $100,000 a year, 13% of those were driving revenue for us website gaming. And this is up from 8% just a couple of quarters ago when we filed our S-one. The other thing I would say on the expense side in 2021, we are Seeming continued reductions in travel and facilities and marketing event spend with some uptick by the end of the year. And we're generally though planning to reinvest those savings into headcount and initiatives that will drive revenue growth across R and D and sales and marketing.
The last thing I'll note, an interesting dynamic from COVID is that it made hiring a bit more back end loaded for some of our teams and the start dates For many of our Q4 hires flowed over into 2021, so we have a stronger than usual start in for the year on our hiring. Over 3 quarters of our projected and headcount growth for Q1 is tied to offers that were accepted last quarter. So we have a really strong running start and this is reflected in our Q1 guidance for sequential drop in operating margin.
Okay. Let's move on to kind of business highlights. So let's start with kind of create for verticals. The first question there is from Mario Lou at Barclays and he asked, can you talk about Uniti Pharma and what the opportunity set is for that product beyond kind of the virtual auto showrooms and into maybe e commerce site brands beyond slide.
Sure. So for those of you who don't know, we created and launched Uniti Pharma towards the end of last year. And Let me just describe what it is for those that maybe not being as close to it. When a creator works in Unity, they're working in an enormously powerful tool. It's got pull down menus that allow you to do content creation.
There's hundreds of these pull down menus within the editor And it is for a professional developer, it's straightforward to use. For someone that's not familiar with real time three d content development, It is a chore. It can take a year or more to learn. We create these runtime applications So we can bring all that power to a user that so they can get everything they need with 4 or 5 buttons, Easy to use, easy to roll out, easy to get new customers up in the platform. The first of the tools we launched that were like this was Reflect.
We've seen really good traction with architecture and construction using that tool and we talked about that on the last call. Here we're talking about Uniti Form a and up until this point, The state of the art for most visual showrooms or e commerce was few JPEGs in a video. They're really nowhere near what they can be. And what Uniti Performer does it democratizes and enables business users to create engaging real time three d environments. We conceived a former for the challenges associated with manufacturing customers and consumer brands that want to deliver interactive and marketing content including product configurators.
We've talked extensively about Volkswagen and what they're doing. Our first customers already include a luxury good manufacturer, a company in Aeronautics and a leading hospitality chain. Call. We've really got it going on verticals and this is a way to really get people up on the Uniti platform. Just in the last months, we've added Newell Brands, Walgreens, Liberty Productions, Show Studio and Nick Knight.
A lot of folks are coming on to our platform verticals to take advantage of tools like Form a, like Reflect and there'll be more.
Great. Okay. So staying on create for verticals, Brent Bracelin, Piper Sandler asked the following question. And I can take this one. And he said, in some markets, It makes sense to go it alone.
In other markets, it's better to kind of work through channel partners or professional services companies. How are you thinking about your go to market strategy and other verticals like manufacturing? So the response really is, first off, It's a good question. Look, we try to start at the top, which means that we target kind of the most innovative companies in the sector. And so what they become is kind of beacons and reference customers when we shift from kind of a land to expand model in a particular vertical.
And so our go to market motion depends on kind of where the customer is in terms of embedding real time three d into their business model. So that really means kind of 3 components: direct sales, engage our own in house professional services or kind of work with VARs and channel partners. So for example, on the direct front. We sell Reflect alongside Autodesk's AEC platform. With Esri, we are providing a joint go to market strategy with them with geospatial and 3 d technology to the Department of Defense.
With Continental Electrobit, Our work is focused on kind of in car entertainment systems. But sometimes customers need help standing up a project. So in that case, we either bring in our in house specialists like finger at Finger Foods, which we have as our internal group, or we tap a growing network of value added resellers or managed delivery providers. So let's go to the 5th question back to John. So a couple of you had sent us questions about the recent hiring of Peter Moore.
So maybe John, you could talk about that new hire and any other announcements that we've made of late.
Sure. So We see the opportunity in front of us at Uniti is just massively significant. We think it's a once in a generation opportunity and we're a once in a generation company. And we've signaled many times that we're investing to realize this opportunity. Now, I'm really proud of our team at Uniti.
The team you saw in our S-1 and the IPO is for the most part, the team that I brought on 5 6 years ago Take this company from the amazing start of the founders and a small team to what we are today. Now part of my job is to make sure that leadership team has all the capacity and capability to realize the opportunity in front of us. And so from time to time, I'm a bit like A football or a soccer coach, I make changes to win championships. And that's part of my job here at Uniti. Now with Peter Moore, we see A significant opportunity in the arena of sports and live entertainment.
We don't have specific announcements to make today. Many of you probably know Peter, he's well storied in in the industry and he'll have some things to talk about in future calls. I think it's also worth noting, we announced internally today, but not externally, that will come in a couple of weeks, We've hired Mark Witten from Amazon to lead our Create Solutions business. Mark is an incredible leader in the world of tech and entertainment. He leads a large GM team in Amazon now.
He's also essentially the founder of Xbox Live there from the very beginning, Both a large organization that realized everything that is Xbox 5. He brings a lot to Unity and his leadership will add to our ability to grow and grow faster in the months years to come. So there is always something going on at Uniti, but in this instance, what we're trying to do is map to make sure that the opportunity is met with the ability to realize it.
Okay, so let's move on to create for gaming. John, you can take this one. So Ryan Gee at Bank of America Merrill Lynch asked, Cyberpunk 2,077 was a high profile launch that was unfortunately filled with bugs, but CD Projekt is far from the only studio space this issue. So to what extent do you think this will be kind of a wake up call, not just for AAA, but also pretty much everyone in the industry about whether or not to build bespoke game engines.
So this is my day to day lives these days. Just as a background, I've been leading teams that build game engines going back to the In 1997 and been involved in creation of over duds and game engines including leading the organization at the time we created Profitability at Electronic Arts. And I completely get the allure of creating new technology if you're a game company. But I think we've reached the point that it's probably a negative return on investment for most people to create their own technology. It's expensive, it's challenging to get to a number of platforms.
And at times, it gets in the way of What consumers really want, which is great content, well polished, well finished and bug free. So at At Uniti, we built a game engine that gives developers all the tools they need to create gameplay that works, photorealistic visuals on any endpoint and a full suite of monetization, content delivery and hosting options through our operating services. As you've watched this, our market here across all platforms has been rising dramatically in recent years and again recent quarters. I think more publishers and developers are coming to realize the power of Yes, I think that will continue. I think there's a lot of love for self built engines and I think over time we'll see fewer.
Great. So we've got another one here for you, John. So Tom Broderick at Stifel asks, so on the creative side, By our estimates, your addressable market, at least in terms of seat count for game artists, is approximately double that of gaming programmers. Could you update us on the progress you're making here with ArtEngine, but more broadly on penetrating this market? What's the competitive set?
Is this a replacement sale, add on sale and who makes the buying decision.
So for the most part, when we're closing new seats on teams, it's artists. And they come onto the platform in a pretty deliberate way. So the first thing we've been investing in is better workflows. So the Unity engine, the Unity editor is a lot more intuitive for earnings. And we've made great progress in that front.
What I mean by intuitive is, when years gone by, an artist would go to their program and say, hey, I've created this amazing file. Can you import it into the game form. Can you integrate into the game? Can you help us build these hard artifacts of animation or other things? In other words, Unity was too hard to use for them as is any game engine.
By enhancing the simplicity of the workflows, a lot of artists are able now to use Uniti directly. Second thing we do is we create specific tools that enable the developer, the artist developer to create directly in Unity without the complexity of invoking the more nuanced parts of the editor. These are tools like the VFX Graph, Shader Graph, some of our environmental authoring systems. You can work directly with the editor, but the complexity is removed. So here what we're doing and ArtEngine is among these, given them enormously powerful tools that sit on top of Uniti, they can get more with less complexity.
Last thing we're doing is, we're working hard on specialized tools to really help an artist feel like they're catalyst. Now ArtEngine is also part of this, but it's about allowing them to easily find to the asset store or other services, assets that they can directly employ in the game without creating them from scratch and tools that they can use to transform those to be able to be directly used inside the game, so inside the application in the building. So we have a, if you will, a 3 fund assault on helping developers, particularly artists feel much more productive and be much more productive. 1 is in workflows, Make it simpler, but the core engine. Other is tools to advance them without the complexity of the editor to be able to do things in a productive way.
And 3rd is to bring assets directly to them, so they're not starting from scratch. If it were baseball metaphor, they're starting on 3rd base. And that's the notion and that's why we're seeing a lot of growth in the creative side.
Great. Thanks. All right. Well, let's pivot over to operate. So let's do operate for gaming.
So John, Andrew Erkowitz at Oppenheimer asked, one of the strengths of Uniti is that you all have lot of data that gives you differentiated insights into gamer behavior. You have a strong presence in the long tail of AA and A developers. So the question is, how do you see the evolution of your market for monetization and back end services with AAA Studios?
So, let's see. First off, if you go back 4 5 years, Uniti really wasn't a good choice for AAA studios to use for content creation. That's no longer true. And so that's one of the reasons we've seen so much market share growth in Double I and AAA. And to constantly support Xbox and Sony PlayStation on launch date and well before that launch titles.
So first, we had to have the basics in place to take the capability of mobile and then make it just as well in Dublin AAA. But one of the things to understand, AAA content It is very engineering centric and there's a lot of engineers on the team. And with that comes a very justified mentality that I can build everything from scratch. I've seen developers that build their own ERP systems from scratch. And they do it because they're engineers, they always imagine they can do it better.
What Unity gives them is really 2 things, increasing flexibility to start with Unity, again, puts you on 3rd base on content creation and just as well, We bring them advantages. On the monetization side as an example, some of our customers might have data on 20,000,000 MAUs or 30,000,000 or 1,000,000 or even 100 if they're at significant scale. As you heard, we're $2,700,000,000 The data advantage is very sizable and very important. So we bring tools to them. So increasingly, they don't have to create from scratch every time that they need, they can use Unity.
On the service side, we bring scale both on the data side and the infrastructure side that they can leverage. It's worth noting Some of the most important games as they moved into online mode post launch, they fell over. The products that were launched with Unity, Apex Legends and others, They had smooth scaling and successful launches on Uniti's back end. So it's a great question. In our past, Willie has been mobile to AA to AAA on Create and now we're just getting into AAA on Create in a more successful way.
And operate is usually the echo, which right behind it and we're coming up fast.
Great. So we have a question on the recently announced game growth program. I'll take that one. That's from Yao Chu and Brad Zzelnick at Credit Suisse. And the question is this.
You announced Game Growth program late last year. Can you talk about the origin of the concept and what is your value proposition for indie developers? So First off, look, this is a very early days for this program, but even so, we're very excited about the operate that the operating team kind of created this gain growth program. And the idea sprang from our view that great gains often go unnoticed, especially in the indie segment. So as you know, Unity has always been on the side of creators and it just didn't seem fair that Creators would have to choose between their entertainment vision and tactical execution to build audience and Make Money.
So think of game growth as a way to kind of bring to bear the best practices that we've seen succeed over the course of many years through the accumulation of literally petabytes of data from 100 of 1000 of applications and millions of tests run by our tools. So we think This is a win win model for a select group of our customers because the game growth program lets them focus on building great games and we help them succeed on the monetization front with an enhanced revenue share model. So let's go to the 10th question and this is operate for verticals for John. So Brent Bracelin at Piper asked, how would you describe the opportunities to monetize non gaming verticals within the operate system. It seems that multi play has applicability outside of gaming.
So first off, is that a correct assumption? And more broadly at a high level, how would you think about the drivers for this part of your business?
So first off, I would say that I'm Truly excited about the opportunities for Opera outside of gaming. Starting point though is most non gaming applications you see today, whatever for app you're using. They're not presently real time 3 and they're increasingly becoming real time three d. And what we've done with products like Forma and Reflect is we've lowered the bar to take your application into 21st century. If it's architecture and construction arena that's reflect, If it's many, many industries, but where you might get involved with a configurator or real time three d website, that's formal.
And in both cases, by way of example, We also simplified the process not only for creating a site, but supporting the site with our own Furos service for delivering real time content to these new applications that are out there. Once an application is real time three d, it's no longer static. It needs data, it needs Streaming, it needs support and that's where we come in. If it's multiplay, we can host it. If it needs content updates and content on a streaming basis, that's Furios.
We see a lot of opportunity in e commerce, which is an area we're starting to focus on increasingly now. And again, if you're I want to see a real time three d view of a dining table or customizing the wood or the hardware. Those are the kinds of things you're going to need back end support for. And with Uniti, it's literally just a checkbox. You don't need to bring in an engineering team to make it work.
It's because of circumstances like that and many more We feel really good about the operate opportunity outside of gaming.
Great. So let's pivot over to kind of R and D and kind of core technology, John. So Bhavan Siri at William Blair asked, a big part of your competitive strategy is a focus on R and D led innovation. Could you talk about what progress you made in 2020? Where you're headed, particularly in regard system projects that you've talked about in the past such as Netcode and DOTS.
So Netcode and DOTS are examples of Super important innovations at Uniti, but they take a different form and let me address them separately. So netcode, this is The code that a developer needs to bring multiple players in the same instance of the game. It's the networking code that Brings people from an RPG and FPS, a sports game into the same environment so that they're playing the same game and everything synchronized effectively. Now What many people probably don't realize is what is important for a first person shooter game is Different than what actually might support an architecture or an engineer at head office. You worry about 10 milliseconds of latency on an FPS With an application like Reflect, you don't.
It's 10 milliseconds wouldn't be noticed. And it also wouldn't be noticed in an RPG or a puzzle game. What we noticed in an RPG game is bandwidth. Can you get all that beautiful art, all those beautiful textures onto the screen fast enough? But it's really about a bandwidth issue and how it manages that.
The point that I'm making is you need different types of netcode or different specific executions depending on the application that you're supporting. And we've already put some of our new netcode product in the market. We'll be adding a lot to it this year. 2021 is sort of our near of netcode. And it is complex and this is one of those situations where virtually every game makes it from scratch.
And so it is a very difficult thing for developers to do and we're going to make that go away. And this will enable them to be successful with multiplayer games. It will get around the issues of lag and cheating and other things because that's what's built into our product that will enable them to scale more. We also connected directly to Multipline, making it very easy for developers to use our operating services. It's literally one continuous proposition inside the Uniti editor.
Now, DOTS is a very different thing. DOTS is our data oriented technology package. A handful of technologies that has you has a developer thinking fundamentally different about how data is organized. And let me be clear what I mean by data. Every character or the art behind them, every code set or script that supports animation, Every environment, all the physics, all of that is content.
And if you think about some of the larger AAA teams or if you look at the content behind our car configurator, what we're talking about is the work of sometimes hundreds of people for a couple of years creating all that content. There's a lot of content out there. And traditionally, in object oriented programming, it's bound by how much of that Content can go through an individual core and an individual GPU. And to be honest with you, for high performance, it's a mess. And so by Getting out of object oriented and slicing everything into thin slices of data, we can see 10 to 100 times more performance for rich environments that have a lot of content, lots of interactive objects, lots of real time three d objects.
And it's our intent over the course of the next 2 to 3 years to continue to bleed into our core technology, sort of easy to use versions of DOTS where you can Offload something to a DOTS system, so you can get all that performance without having to work for it. I think it's the future of the way most games have worked in years to come. And it's certainly a massive horsepower addition to the Uniti technology set.
Right. So we got an M and A question from Andrew Urquowitz at Oppenheimer. So you acquired REST AR in mid December, but you also in the past have made a series of tuck in acquisitions and today you have a bit of a cash war chest, but as we know sellers also have high valuation expectations. Could you just talk at least at high level. How you think about M and A as a means to accelerate go to market strategies and your technology roadmap?
Yes, sure. So as a starting point, going back from the beginning, we spent approximately $300,000,000 in M and A. So It's not been a gigantic investment on our end. We've been acquiring companies mostly in an acquihire orientation To get capability that we think we want under the platform and it's been mostly a build versus buy tuck in orientation. Now, this idea of a war chest, I'm a believer that most M and A is a bad idea.
And so we've got really high hurdles for clearing on strategic criteria, tactical criteria, execution, culture, it's all got to match. So the bigger the price, The more hurdles we're going to put in front of it, obviously, I don't have anything specific to say I wouldn't rule something out. But our notion is that M and A to get us something that we can't get another way cheaper or more effectively. I feel really good about what we've done so far when we do reviews for our Board on the M and A we've done so far that it's almost all work and worked really well. We want to keep on that.
But think of us as primarily organically oriented, but we look at things to take advantage of where we can go in the market.
Team. And this is, I know in my opinion, the best written question we've cut all through all of call you guys sending us stuff. This is from Yaochu and Brad Zelnick at Credit Suisse. And so I just have to read this word for her because it's too good not to. So John, you're pretty quotable as it relates to your comments on XR.
I'm not sure which I like more, gap of disappointment for analysts are idiots. Being a former analyst, I like that line. Anyways, but what are your latest thoughts here between the Bear camp who says if COVID didn't bring FXR to the forefront nothing will and the Bull camp which says this time is different. What's different today? What are the key moves in the landscape?
And what are the platforms that you're watching?
My first presentations on XR at Uniti go back 5 years. At the time, Products like Oxulus were winning CS and other awards as being the product of the show. And it was then that I was coming out at this gap of disappointment. What I was explaining is in the market, A lot of the analysts were projecting this staggering growth taking off really the next year or the year after that. And what I was explaining was that wasn't going to happen.
The gap of disappointment was I expected a much slower growth in the initial years. And the reason I felt that is successful consumer platforms need to meet a number of criteria. The hardware needs to work, starting point. It needs to be simple. If it's as challenging as programming a VCR back in the day, it's not the kind of thing that's going to yield mass adoption.
I can remember trying a number of these devices early on and I'm pretty familiar with this space and it would take me hours to set it up And sometimes hours to get it going the second time and I'm running around with a cable in the back of my head and that's not an easy thing to do. So I felt that it was wanting at that level. It's got to have a consumer price that works. Probably more than anything, people need to remember that People don't buy hardware for hardware. They buy hard for what you can do with it, the software that you can plan.
So there needs to be a vibrant in a rich ecosystem of content. And for that to work, you also need to have developer economics that bring people onto the platform. So those are a handful and there are other criteria. And I haven't seen the combination yet, where it's all brought together. Now Facebook has made really good progress with Quest 2.
It's an impressive device. They've announced that more than 60 titles generated over $1,000,000 in revenue. But for people to develop content that's really going to be beautiful, $1,000,000 doesn't cut out. It needs to be $100,000,000 or multiple 100 of 1,000,000 and that will happen. I'm highly confident.
Now think about this for a minute. I owned an early MP3 player, many of us did well before the iPhone. That didn't make me think when I got that, that low penetration products that were produced by a number of manufacturers, that Music wasn't going to make it to my pocket someday. I was pretty sure it was going to make it to my pocket someday. It's just that wasn't the right product.
And if you remember that one of the big innovations from Apple and Steve Jobs was getting all the music publishers on to the Apple platform, which is what ignited the massive growth in that arena. The point that I'm making is simply this. I am highly confident that the experience is spectacular with XR devices I've seen. I am highly confident that the larger players that are operating in the ecosystem see what we see and they're going to get it right. And if I were to give that same presentation around the gap of disappointment that I gave 5 years ago with no real endpoint in sight for when all this was going to come together.
I'd say I can start to see that it's going to come together. So Thank you for all the early investors in XR to get it off the ground. You made the industry possible. I think now we're going to find that there's more opportunity in the years to come. I feel good about it, but it's still tomorrow for scale.
Great. Thanks. So we'll finish up with a couple of finance questions. So first, let's start for Kim. Tom Roderick at Stifel asked, Can you provide some detail around which areas you're focusing your sales and marketing investments on between gaming and goals.
And more broadly, how should we think about operating leverage versus revenue growth?
Sure. So thanks for the question. We see huge opportunities in both gaming and in new verticals. And so we are definitely investing aggressively in both. Currently, the majority of our sales and marketing investments are still in gaming, particularly if you look across both create and operate.
But we're actively growing our investment in other verticals, especially on the Create side as we did in gaming. We'll start with Create and then expand to Operate. John talked about some of the opportunities for other verticals within operate. So we built out a multi channel go to market model that enables us to Push the right products through the right channels to optimize sales and marketing effectiveness. We have a direct sales team in addition to inside sales.
We have Lower cost sales development team. We have indirect reseller channels. We have strategic partnerships that enable demand gen and we have our online store. So We're moving quickly to grow both in gaming and verticals with this approach. In terms of operating leverage, we're very focused on meeting our revenue goals and maintain our gross margins so that we can both invest in future growth, revenue growth as well as increasing operating leverage.
And one thing I should point out that's important to understand is that if we exceed our revenue expectations, we will reinvest in a disciplined way, the upside into revenue driving initiatives rather than accelerating our path to profitability, which we hope to achieved on a free cash flow basis by the end of 2023.
Great. Thanks. So I'll take the kind of last kind of tactical question. So Franco Grande at D. A.
Davidson asked, so hey, you increased prices by about 20% on Pro Plus tiers in last January. What has been the reception of this pricing hike by users in the 1st year? How should we think about the percentage of accounts that now fall under the increased pricing plan in terms of upside for 2021. So as you pointed out, yes, we raised prices just over a year ago and the large majority of the price increases rolled through our numbers and those factors are embedded in our guidance. Now for context, just so you know, we got very little pushback from our customers and a price increase.
And that's a good sign because it says that our developers see a lot of value in our technology. And more even stepping back further, our view is that You earn your way to market leadership and you do that by delivering better functionality at lower cost of ownership. So our goal right now is to focus on those factors rather than kind of getting some sort of short term pop that we would get from raising prices. So now we're going to open it up to open Q and A. Let me open up this and I I think we can do this right.
So the first person would be Yao Chew at Credit Suisse. I think you yes, there you are. You can ask a question there.
Hey, can you hear me? Yes.
That's great. Hi, thanks everyone. Thanks for taking my question and congrats on a great close to the year. In particular, thanks for helping break out the COVID and IDFA impacts. My question is on that $30,000,000 either John or Kim.
Really wanted to double click here in 2 parts. Number 1, is this $30,000,000 number consistent, worse or better with the way you were thinking about approaching the situation 90 days ago. A lot has changed, there's been a lot of new announcements from key players in the space. Just trying to understand the cadence and the approach to that. And second question is, how you're thinking about the shape of the recovery and the impact on that?
Is this a 1 year issue when most of it goes away by the end of the year or should this lag a little bit more into 2022 at this point? Thank you.
John, you want me to start and you can jump in? Sure. Yes. So I don't think a lot has changed in terms of our thinking around the impact. We were planning potentially for some impact in Q4 and then it was delayed.
But In general, I wouldn't say a lot has changed in the last 90 days. We have been working on this honestly for years. We've been preparing for this. We knew that This risk that this was a risk of not this moment could come. We've dealt with this with GDPR.
So I wouldn't say that things have materially changed in the last 90 days. As we mentioned earlier, we feel very confident in our ability to forecast our business. This does certainly introduce some uncertainty, but we So confident that we're able to predict the impact to our business. In terms of the shape of the curve, John, I'll maybe let you take that one. I would just say that there will be a short term impact.
Initially, as advertisers adjust To the changes, we feel that there will certainly be an impact in the year and that's why we've articulated the $30,000,000 but we do believe over time there's a real opportunity for us to gain market
Chair. Yes, just a little color. I would say, obviously, we 2020 2021 have 2 unusual impacts, right? IDFA is a pretty big deal and COVID is a pretty big deal. Deep analysis from COVID tells us that Consumers accelerated the future.
People came into the present. We'll probably see some declines or at least slowing in growth on engagement. But I don't think we're going to be impacted by that much. And of course 2021, we're likely to be home for another 6 months or so, which is Not the way any of us want it to be. And we can validate that with China.
So China gives us a really good early read. So we don't really see anything there that's particularly disruptive to us going forward. On IDSA, There is it is important as this is and it's certainly made a lot of crash. From our perspective, the It's one of 3, when I think about it, one of 3 factors. 1 is overall growth in the industry around user acquisition driven engagement and growth.
I don't see that going anywhere. The game industry is very robust. It's growing. We feel confident in that. Within that world, we're gaining market share and have been Growing market share based on a better product and better service.
And within that, there is a bit of a shift in the force with IDFA and we quantified you today. And as you can tell, it's not a major part of our revenue stream in terms of its impact. So we feel pretty confident that we're in the right place doing the right things.
Great. Thank you very much.
Hey, Tom Broderick at Stifel. You're up next.
All right. Can you hear me, Richard?
Yes.
Victory. All right. Thanks for giving me a question here. So congratulations everybody. Great year, a lot to work through and fantastic finish.
Kim, you noted I think the net dollar retention number was and 38% for the year. And I was hoping you could kind of help us square that with some of the positive benefits you saw from COVID during the year. In other words, maybe give us sort of a level set for how that might play out in a normalized year. I know it's not a metric you necessarily guide to, but perhaps you could set the table for us with with help thinking about what some of the one time benefits were this year in that number.
Yes, sure. So overall NER has been a very Strong metric for us as you've seen it's been well over 120% for the last 2 years. What we saw this year if you look at the Sequential trends is in Q2 and Q3 we saw a pretty healthy jump in NER as the shelter in place orders drove that higher end user engagement that we talked about. And so within our operate solutions business in particular, it really drove that metric in Q2 and Q3. And then what you see is it coming down a bit in Q4.
Some of that had to do with a tough compare over Q4 2019 in which We had a more typical seasonal lift. We benefited from a number of product and algorithm enhancements within operate Solutions. So that's some of what's going on within that trend throughout the year. And then as to answer your question, thinking about next year, we do expect That metric to moderate, particularly given those tailwinds that we had in 2020 and the impact of IDFA in 2021. So Moderation, we expect that metric to have some volatility, but we really believe it will be a very strong metric for us as we just continue to see the growth within all of our customers across both create and operate.
Excellent. That's it for me. Thank you.
Thanks, Franco Granda at D. A. Davidson.
Hi, yes, good afternoon. Thanks for taking my question. I had 2 very quick ones, If I may, one for Don and one for Kim. The first one for Don really, there's been a lot of questions about user engagement as we answered 21, right? There's 2 big trends that could potentially impact user engagement, particularly in the mobile side of things.
1, obviously being COVID, which you talked about in detail and then to the launch of the new consoles. So my question really is on the latter. Have you seen a slowdown in engagement across your platform as a result of the new console launches or are the supply issues acting as a small benefit today since a lot of people haven't gotten their hands number 1. And then really the second one for Kim, can you break out what percentage of your total revenues for our advertising revenues and then perhaps if you do that, what are the margins associated with those? Thanks.
So the answer to that Somewhat lengthy first question is no. You might want some color on that. So just a starting point, when we do monthly engagement on it's mostly mobile because most of the world's players are mobile. And let me just give you some way to think about that. In aggregate, adding all the consoles together in any given month, you might have 100,000,000 players.
Now they're Obviously, very engaged players and they spend a lot of money, a lot of them spend $60 for titles, upcoming 70 dollars per title, my videos off. And so those are very important customers. But engagement is over 2,700,000,000 users, most of them mobile. Role. So I would say that the console launches has relatively little effect.
What typically happens and is happening now Is those that were able to get an Xbox and PlayStation, the new generation of products in the end of last year, is they shifted themselves From prior consoles to the new consoles, there's definitely always a big kick up in engagement for those users that managed to get the new hardware. But if you look at the numbers in the scheme of things, we're talking about something that was already 3% 4% of the total user base and then of those a tiny portion of them managed to get an upgrade to the new hardware. What I expect to happen, I think this is important, is that the market for console and PC Has been losing market share at the hands of mobile for quite a while now in dramatic ways. And typically Around a new console launch, new hardware, there's a reinvigoration of console and I fully expect that to happen. I'm looking forward to playing more of the console games on the new devices.
But no, we haven't seen any sort of net reduction in engagement.
Yes, in terms of the advertising revenue, so we don't break out our revenue by product. We have a mix of product and services and services within both Create and Operate. I can say that it is the largest piece of our Operate Solutions business primarily because it was the We've been building that business for several years now and some of the other products and services within operate are just relatively newer. So certainly, so it is a larger portion of that business, but we're not breaking it out. On the question around margins, that's also something we're Not disclosing.
We actually as a company don't really look at our margins by business line. We look at the total company margin and then we do look at product by product margin profiles. And we're not breaking that out, but I can say that when we look across all of our products and services, 2 of the highest gross margin products are our subscription product and our monetization service.
I want to add one last nuance on the engagement point. People buy higher end phones definitely correlates to increased engagement in mobile gaming. And most people install more applications around new hardware. You've all done it. You get a new phone, you install a bunch of new stuff.
The numbers on the new Samsung and the new Apple phones are numbers that Our orders of magnitude bigger than consults launches are in terms of user households. So don't forget What we've just witnessed is not just in the world of console, it's also in the world of mobile.
Brent Bracelin at Piper Sandler, used to be Piper Jaffray, but now Piper Sandler.
Bethune, good seeing the team here. I had one question I wanted to kind
of drill down into a
little bit more It's really around the Beyond Gaming segment and the momentum you saw there. I mean 6 months ago, this was what 8% of the CREAT mix. It's now 15% that puts it by my math on a year over year basis close to triple digit growth. So Accelerating growth in kind of beyond gaming, why now? Is this a form a reflect product bump 1 quarter, is this auto configurations just taking off, what walk me through, What are the drivers of this what looks like sharp inflection point around momentum for 3 d beyond gaming?
So let me start with some initiation points. So what typically happen in non gaming verticals As we start by saying hello and telling them what we do for a living, that often leads to curiosity and the technologists there that already knew how to use Uniti. There's A few of them around because they make games on weekend or whatever. They start messing around with the project. What happens after that is we engage in some level of professional services support Because they can't quite figure out how to use it at scale to get them some sort of meaningful application underway.
And then they start scaling seats. Now, this is what we talked about 2 years ago when we were private. That was our model that we take a while to develop. In a way, I was sort of warning about the gap of disappointment, if you want to think about it that way. In other words, great idea.
It just takes a while to get through the process. Form a and reflect our runtime applications, meaning you're not engaging this 747, control system, this giant airplane with 1,000,000 buttons and levers in front of you. You're dealing with 4, 5, 6 buttons and you can get the benefit of real time three d. And that leads to people buying more seats because you need the seat to get the app and services behind it. And I fully expect that we will have we only talk about 2 now.
A big chunk of verticals come faster because of real time applications It dramatically take reduced complexity to getting up on the platform. And I think that's going to be our path forward for some time. And then sometimes what we might work on a custom basis with a developer will turn into a real time or runtime application that we can provide for developer. By way of example, Formos started with us initiating conversations with the auto manufacturers about helping them build car configurators And of course, tractor configurators, boat configurators, plane configurators, God knows that you can configure Para Levi's these days. And The point is, we realized it was the same thing over and over and over again.
So let's enable it, simplify it, take the speed bumps out of the way. And really it's that insight that made me a lot more comfortable believing that we had long term very rapid growth in verticals outside of gaming. Certainly good to see and appreciate the color. Thank you.
Thanks. Last but not least, Mario Lou at Barclays.
Great. Hey guys, thanks for taking the questions. So I guess I'll ask the boring ones on guidance. So in terms of the 1Q guide, if we assume a sequential growth for the Create segment in 1Q, I believe that implies mid to high single digit growth sequentially for the operating segment versus historically it was growing around 20%. So, if we're only assuming like a $2,000,000 to $3,000,000 hit from IDFA in 1Q, are there any other factors to kind of call out regarding this lower sequential growth versus historical.
I kind of give you a really high level and maybe Kim can come in with more. So high level, we saw an acceleration of our business on Create after the COVID transition. And we're actually while we're not giving specific numbers, we expect Create to grow faster than operating in 2021. So All in and that's a function of the fact that we saw a slowdown in the middle of the year and now we're seeing things like A really robust pipeline in verticals and in gaming for growth around the new products that we've been announcing. Obviously, The road bump on IDFA is specifically to operate.
So those are enough to tip the balance in favor of Create for 2020 was an operating story.
And Nicholas, I don't have anything to add
program. Okay, great. So just one more on the full year guidance. So the operating income margin guide of at the midpoint negative 10% versus this year, a negative 7%. I think, Kim, you mentioned that headcount It's particularly stronger early in the year.
Is it evenly distributed between sales and marketing, product development, G and A? How should we think about that and what are your updated thoughts on long term OI margins for the company?
Yes. So I think I may have mentioned earlier, we do have a profitability goal for 2023. We are going to keep moving on that path. Keep in mind that last year we had all those COVID savings that really drove our operating margins. And This year, we thought very carefully around that balance between investing and continuing to drive profitability.
And to answer your question, we are investing as much and as fast as we can, 1st and foremost, always in R and D. You'll continue to see that. Then comes sales and marketing and we're continuing to work on driving leverage in G and A. As we scale, as we find efficiencies as a young company, We've been focused on growth and we're shifting now to get more leverage out of our G and A line and continue to drive those investments in R and D and sales and marketing. So, in terms of the Q1, yes, I mentioned that the headcount growth is coming really strong in Q1 and that will moderate throughout the year.
But like I said, we're balancing and We are focusing on maintaining our gross margin so that we can both make these investments and continue to move toward profitability in 2023.
Thanks, Ken.
Great. All right. Well, I've done it 6:0:2 Eastern Time, so it's 8 minutes shorter than last time. So we tried to help you guys out. So thank you very much for everyone and we really appreciate all your Great questions and insight and support.
And so we'll talk to you soon and hopefully, again, during the quarter and then the next quarter. Thank you so much.
Thank you.