Financial results webcast. Today, we'll be highlighting our results for the Q2. With me on the call today is John Riccitiello, President, Chief Executive Officer and Executive Chairman, and Luis Vesoso, Senior Vice President and Chief Financial Officer. So as we did last quarter, we will open with introductory remarks by John and Luis. And then we have collected and sorted questions from our analysts and investors.
And the goal here is, you know, is to really help investors understand our business model and outlook in the most efficient way possible. And finally, time permitting, we'll have the last 10 minutes or so for panelists to ask additional questions. So onto the, always popular safe harbor statement. I'd like to remind participants that during this conference call, we will be making forward looking statements, including our financial outlook for the Q3 and full year of fiscal 21, as well as statements about goals, business outlooks, industry trends, market opportunities, expectations for future financial performance and similar items, all of which are subject to risks, uncertainties and assumptions. Now you can find more information about these risks and uncertainties in the risk factor section of our filings atsec.gov.
We remind everyone that our actual results may differ and we take no undertake no obligation to revise or update any forward looking statements. We will also begin, be discussing non GAAP financial measures today and reconciliations between our GAAP and non GAAP financial results and a discussion of the limitations to our non GAAP financial measures can be found in our earnings press release, which was issued early earlier today and is available on our investor Relations website. And then finally, we will continue our investor conference schedule for the balance of the year. Tomorrow, we present at Oppenheimer's Virtual Conference. And we will also present and attend dinners at Piper Sandler's Conference on September 14th in San Francisco and Boston.
And then in December, we will present at Credit Suisse and Barclays. Now with that, Let me turn it over to John for some introductory remarks.
It's a pleasure to have you on this call with us today. Uniti reported a 48% year over year increase in revenue to $274,000,000 for the quarter. This quarter was the first in Uniti's history as we crossed A $1,000,000,000 revenue runway. We also raised our revenue guidance for the year by another $45,000,000 to a range between 1,000,000,000 and 1,000,000,000. We generated strong growth across all our product lines and geographies with important growth in both operate and create.
Within Operate, both monetization and multi play services posted strong growth. And within Create, we saw strong growth both in games and nongame verticals. As I've said before, we believe in the emergence of the metaverse and that Unity will be a major player in defining and help lead its creation and operation. We believe the adoption of real time three d will change the way people interact with digital content and entertainment. Just as digital replaced analog, HD replaced standard definition.
In the coming years, 5 gs will replace 3 gs or 4 gs and real time 3 d will Place linear and flat two d digital content. We expect more of the world's content to be 3 d real time and interactive. We believe this cycle will create an addressable market that presents us with decades of opportunity at Unity. Now, for me, the word metaverse is plural. When I say this, I'm trying to make an important point.
We don't think that one company will represent the metaverse as, say, for example, It was imagined in Ready Player 1. We believe there's going to be hundreds of thousands of destinations in the metaverse. Games like Roblox, Creation destinations from companies like NVIDIA, Unity and Adobe, social community communication destinations From companies like Snap, Facebook and some new companies. At Unity, we believe in interoperability and in an open Internet. Even as the Internet becomes more 3 d, more real time, more interactive and more like the metaverse we imagine.
Unity's mission And WorldView centers on a belief that the world is a better place with more creators. At Unity, we intend to support and shape the metaverse. We will emphasize content creation, cross platform access and narrowing the distance and reducing the friction between creators and consumers. Let's drill down on the quarter. In gaming, on the Create side, we enjoy a share exceeding 50% overall of the year ending 2020.
And as you know, our market share is even higher, the fastest growing sub segments of mobile gaming and VRAR. Each month, People in more than 190 countries around the world download over 5,000,000,000 applications built with Unity. We're going faster than the industries in which we compete, And we're gaining share in our key markets. We sometimes get the question that if more than 50% of all games are built using Unity, isn't our growth prospect limited? Well, no.
We believe we can 5x our penetration in games. Growing our penetration with artists is key to this effort. Let me pause and explain. When I worked in gaming, the ratio of artists to technical personnel on game teams was about 1 to 1. Today, artists outnumber technologists at least 2 to 1, and it's quickly heading to 5 to 1 or more.
As gaming devices become more powerful, More powerful GPUs, more memory, 5 gs Networks. Developers compete by making bigger, richer, more art filled games. The war among developers and publisher to win with consumers is over the best content. And in this war, the ammunition is art. This quarter, we won new customers in non gaming industries.
We added 3 new automotive manufacturers and 3 leading consumer product companies. And this quarter, we also offered, added 3 leading aerospace and defense manufacturers. Looking at this from a geo basis, we had some nice wins in Asia, 1 in Singapore and another in Korea. As we look forward to the future with Create, our view is that the creative processes will evolve From on premise devices to flexible and cost effective cloud architectures. There are 3 major trends driving this change.
The workplace is becoming more flexible. Teams are getting larger. Creators bring a myriad of new devices to the creation process, including tablets, Chromebooks and even smartphones. This is why we're investing in collaboration and moving more of our capabilities to the cloud. Now let's turn our side to the operate business.
If I had to instill the business challenge most game developers face every day, it's one equation. It would be how to ensure that the cost of a user. The cost of user acquisition is less than his or her lifetime value to the game. That's cost acquirers got to be below LTV. This is not an easy equation to master.
Our operations solutions help developers solve this equation. We offer an end to end platform for content creators to deliver the best player experience and build robust and profitable businesses. We provide a growing suite of services that content creators can use to acquire new users, optimize user engagement and LTV via our monetization platform. Additionally, our multi play services continue to reliably support some of the most notable cross platform game launches, including Knockout City and Valon. What is most important in our operating solutions are the connections between these components.
Foundational elements such as privacy controls, identity, payments, billing, Security are embedded in our offerings to make sure that each of these products work seamlessly with each other. Another critical part of this integrated system has been our ability to leverage context and data insights effectively through ML driven optimization From a reach of 3,400,000,000 monthly active users as of June 21, can deliver the best ROI for our customers. This combined with the tight linkage to our Create platform have enabled us to gain share across these important markets. At Unity, we have we have durable we have a durable business designed to deliver many years of exceptional growth. We enjoy fundamental advantages on our scale and gaming, Our ease of use and our extensibility for nongame verticals, our massive scale of our data footprint and the linkage between our create and operate platforms.
These advantages have led to 11 consecutive quarters of greater than 30% growth and as of late growth exceeding 40%. We're proud of our performance this year and the years prior. And I want to thank all of our customers for helping us get where we are today. We look forward to our journey together. And I very much want to thank Unity's 4,600 plus employees.
It's an honor to work with such a dedicated, talented and amazing team. Speaking of teams, today we take great pleasure in announcing the addition to Unity. Keisha Smith Jeremy is a new board member. Keisha brings decades of experience in human resources and talent management to our board. She is the chief people officer of Tory Burch, the iconic American lifestyle brand and previously served as the chief human resource at News, chief human resource officer at News Corp and the Global Co Head of Talent Management at Morgan Stanley.
She will serve on our compensation committee. Having Keisha on our board is a reflection of our understanding That Unity's innovative, hardworking, problem solving people are, in fact, our most important competitive advantage. Kiesha, welcome to Team Unity. Now let me turn the call over to Luis, who will briefly run through our financial results.
Thank you, John. We delivered another strong quarter with excellent execution by the Unity team, beating both guidance and Street expectations. The strong momentum and health of our business is enabling us to raise revenue guidance for the full year by another $45,000,000 Q2 'twenty one revenue of $274,000,000 increased by 48% year over year. While we saw strong performance across the board, I want to especially call out the outstanding work from the operating team. As I mentioned last quarter, we were well prepared for the Apple's Privacy changes and as a result of excellence in execution, we build market share this quarter.
We're proud to help customers thrive During the uncertainties of our platform change, our advanced analytics, context and insights are proving to be a competitive advantage. CREATE also had a strong quarter with revenue of $72,000,000 up 31% year over year. Operating revenue of $183,000,000 was up 63% year on year and Strategic Partnerships revenue of $18,000,000 was up 9% year over year. We continue to add new customers during the quarter with 888 customers, each generating more than $100,000 of revenue In the trailing 12 months as of June 30, 2021, up from 716 a year earlier. And our dollar based net expansion rate as of June 30, 2021 was 142% equal to last year.
Unity's customer base is becoming more diverse as we expand from games into other verticals at a fast pace. We expect to continue to see good progress in bringing Refine3D to new industries. Non GAAP gross margin of 81% was top 300 basis points on a sequential basis and on a year on year basis as we operate more efficiently and benefit from product mix. We remain confident that we can sustain gross margins above 70% for the long term. Q2 2021 non GAAP operating loss was $3,200,000 compared to $8,700,000 last year as we benefited from strong revenue growth.
We will continue to invest in our business with emphasis on R and D as we have many attractive opportunities to go after. We generated Q2 2021 free cash flow margin of minus 12% compared to minus 43% in Q1. This quarter includes a one time cash outlay for the termination of a lease equipment for previously planned occupancy of new office space. We had 4,613 employees at the end of the quarter, up from 3,379 a year ago. This brings me to guidance.
Given the strong business momentum, we are again raising revenue guidance for the full year from a range of $1,000,000,000 to $1,015,000,000 to a range of $1,045,000,000 to 1.06 $1,000,000,000 which represents 35% to 37% revenue growth year on year. This is a $45,000,000 increase from prior guidance. With the upside in revenue, we are also increasing our non GAAP income as we are reducing our fiscal year loss guidance from a range of $90,000,000 to $100,000,000 to a range of $55,000,000 to $65,000,000 We will continue to invest in driving the business with a focused on long term value creation. For Q3, we expect revenue of $260,000,000 to $265,000,000 which represents 29% to 32% revenue growth year over year. This year's Q3 compares against the 2020 quarter during which shelter in place and others boosted engagement more than in prior years.
For Q3, we expect non GAAP operating loss for the quarter to be between $15,000,000 $20,000,000 We remain committed to reaching non GAAP profitability in 2023, while we continue to invest to extend our technological lead and reach Sumeris. In terms of share count, we are forecasting 327,000,000 fully diluted shares outstanding for the quarter and $328,000,000 for the full year. With that, I want to welcome Pyxis and SpeedTree to Unity. We closed the acquisition of Metaverse Technologies, providers of Pyxis, a 3 d data preparation and optimization software in Q2. Acquisition means professional creators can more easily and quickly import 3 d data into Unity and Optimize Models for Real Time Development.
And we closed the acquisition of Interactive Data Visualization Inc, A popular SpeedTree environment creation suite in July. The acquisition enables a deeper integration of SpeedTree to the Unity ecosystem, enhancing artists authoring workflows and environment creation capabilities. This is another great step to enable artists with unity. In summary, we're very pleased with our performance and prospects. We're building a sustainable business with massive scale opportunities.
The strong first half gives us confidence to raise our guidance for the year and make us optimistic about 2022. With that, let me turn it back to John, who will announce another addition to the Unity family to enable creators, which is now pending customer closing conditions that we expect to close in Q3. This acquisition will not have a material impact to our fiscal year results. John?
Thanks, Luis. I'm excited to announce that we have reached a definitive agreement with the intent to acquire Parsec. I'll fill you on what Parsec does in just a minute. But an important reason we're optimistic and confident about the combination with Parsec is that it had become Truly viral inside of our development organization. And when we looked at some of our largest customers and saw the same rapid adoption curve of Parsec, We knew we had found something special.
Now, for those of you who are not familiar with Parsec, they are a remote desktop and streaming company It allows individuals and companies to work together from anywhere. What Parsec has done is deeply innovative because they have built a platform That can support the rigorous requirements of creative professional applications. As you likely can imagine, the work of game development and creative professionals is incredibly complex. It's high fidelity. It's immersive, rich in detail.
It's interactive. And it's only going to get more complex as creators shift more and more to real time three d. Creators need low latency, ultra high definition desktop streaming, and Parsec delivers this in spades, delivering very low lightning streaming at 4 ks 60 frames per second. But they also need more. Persec provides rich detail with the same sampling rate for all images like 444 colorspace and the privacy security quality of life management tools needed for companies to support Pleas of computer resources for all of their creators.
And with companies and their employees collaborating and working in fundamentally different ways, whether it's hybrid, remote or Distributed work environments. Parsec has addressed the unique requirements to support this top of high performance processing no matter where they are. So Parsec and their founders and leaders, Benjie Boxer and Chris Dixon, have been both highly innovative and precious with their technology. Parsec also focuses on simplicity and access. You can get started with a full professional grade creator class remote desktop link With just a push of a button.
And as individuals and companies use Parsa, they can drive a sort of incremental virality and further adoption with coworkers, Peers and Partners. As a result of their unique capabilities and the shift to new ways of working, Parsecs for Teams Subscription business is growing over 150% year over year with aggressive plan to accelerate even further next year. Subscription growth is driven by strong net dollar expansion rate of nearly 200%. They have a loyal customer base. Even before we entered into this agreement with Mark Parsec, as I mentioned, our own internal developers were adopting Parsec, but we're hardly alone.
Parsec has strong relationships with gaming companies like EA, Ubisoft, Square Enix and many of the industry verticals where we sell solutions, including media and entertainment, for Design and More. We see an opportunity to drive shared momentum with these customers through targeted cross selling and bundled solutions. Parsec is a key step towards Unity's expanded cloud vision based on our shared understanding that creators expect to be able to work from anywhere on any device And will require rich and powerful tools, a cloud infrastructure to deliver real time three d experiences for the future. When we think about the future through the lens of create, Our view is that creative process will evolve from on premise devices to flexible and cross cost effective cloud architectures. This is why we're investing in collaboration and moving more of our capabilities to the cloud.
We'll share more details after we close the transaction. And with that, I'll turn the call over to Richard, will run us through our questions.
Great. Thanks very much. So, we'll move on to the Q and a section. And so as we did in the last call. We collected and sorted questions from analysts and this allows us to get through almost twice as many questions as you get on normal telephone call ups.
Then at the end, we're going to open it up for open questions and stuff that you guys might have have for us as well. So as we approach the open question section, just raise your hand on the virtual System, and then we'll call on you guys. So first question, we'll start with financials. So this call is about earnings. So let's do some financials to start with.
So we we've remained, as you've just heard, active on the M and a front during the quarter. And Mario Lou at Barclays honed in on this with a couple of good questions specifically, you know, do you see potential for further M and a to drive growth? We've just announced some Any updates on recent acquisitions with regard to rest a r and Artematics? And then also he asked about Pixies Software Partnership with NVIDIA and Microsoft. Is there a possibility to expand there?
And then finally, Brent Bracelin at Piper asked, with regard to kind of how we're doing on pixies as well. So how are we doing cross sell and things like that? So, Louise, if you want to roll with the M and A questions, that'd be great.
Yeah. Thank you, Richard. And thanks for the question, Mario Lou and Brent. We believe that M and A will continue to play a role in our future. We use a disciplined approach to evaluate opportunities through what I would say 3 lenses.
First, does the acquisition significantly accelerate Our capabilities and our key strategic focus areas to strengthen our position in the market. 2nd, can we generate an attractive return on our investment? And third, can we execute with excellence? We track the performance of our acquisitions. In fact, we completed the last update about a month ago.
Overall, our acquisitions are in aggregate performing in line with expectations we set when we signed the deals. And we believe that many of these acquisitions have potential To accelerate our growth even further. As you would expect, there are some opportunities where we can do better, and we have plans to do so. On the point on Pyxis, Pyxis has been part of our offering for many years. And as I mentioned in my prepared remarks, Pyxis enables professional creators to more easily and quickly import 3b data into Unity and optimize models for real time development.
Said differently, Pyxis offers best in class tools to digest and optimize 3 d data for real life. This is a great capability that enables creators both in games and other verticals with strong customers across several industries. And to your point, we look forward to strengthening our partnership with Microsoft and NVIDIA.
Great. And then another question for luis Gal Munda at Berenberg has a good question. It says, quote, Now that you've been in the job for more than a quarter. What are some of the early observations of the low hanging fruit that you've seen and that you can focus on in the near term, either from a purely financial or strategic perspective.
Yeah. Thank you, Gal. You know, it seems like I've Been here for a little bit longer than that, but it's been a lot of fun. I'm very happy to be at Unity. As I've said before, I believe that this is what I would Call a once in a lifetime opportunity.
The team is outstanding with technical debt mastery, deep business expertise. The Culture is really unique and fantastic, and the passion for winning is as high as I have ever seen. Success for Unity is to enable more creators as the metaverse evolves. And as a result, we believe that we can sustain revenue growth At or above 30% per year for the long term, and we will do so while creating leverage to improve our operating margins and free cash flow over time. This requires us to operate with clear strategies and discipline and allocate resources to those ideas and projects that can generate businesses at scale.
Great. So now we're on the monetization. And as usual, we have several Jin's on IDFA. So we're going to hand these over to John. So we have a handful of questions.
So we'll start with, Stephen Ju over at Credit Swiss asked the following, what is Unity's relative advantage and making sure that publishers are well and or better compensated over time versus other networks.
So thanks, Stephen. Look, we started a monetization business 7 years ago with a thesis that The whole legacy buy low, sell high model and advertising at best delivered short term success and was reality in reality kind of a broken business Model. Our monetization program is based on a deep, deep understanding of user level LTV and engagement. And we succeed when we deliver superior ROI for customers. This means it's really about data.
We leverage 3,000,000,000 you heard me announce earlier, it's 3,400,000,000 at the end of last quarter. 3,000,000,000 MAUs producing petabytes of data from Unity's SDKs and integration with our engine. And we apply advanced analytics and machine learning algorithms to create and manage A true, ROI on behalf of our customers. So what we're optimizing for is engagement in LTV, not Fred, it's a really different business. Now, there's more going on out there.
It's complicated. And reading the media lately, It seems like the world may be moving into more of a closed and silent platform based on first party data. Here we have Advantage. We've got our own proprietary data. But I believe creators want options so they can choose the tools, services and monetization partners that are best for them.
It's important to note that our monetization tools are open. We have over 50 partners at our unified auction, and we have the goal of maximizing revenue for publishers. That's our North Sure. And at Unity, we believe more choices are better than less, better than fewer. And ultimately, if we optimize for the success of our creators, our publishers Will be rewarded for their business and growth.
We saw that this last quarter and the last several years. Our near and long term results are proof that it's true so far and we continue down that path.
Great. All right. Another question, John. This one comes from Matt Cost over at Morgan Stanley who asked about industry wide trends and ad spending. Because if you listen to different conversations and press releases and things, some people say it was pulled forward.
While other people say that it was reduced because of difficulty over attribution. So what's going on there? It seems like there's a lot of cross currents.
Well, we're definitely hearing some confusing stories from individual publishers. Each has their own truth, and I'm sure they're living their own truth. Look, if there's anything that's constant in gaming or constant in motivation, it's change. Sometimes the changes are small, sometimes they're big, but they happen Every quarter, every year. You know, what I would say really, on this is Longer term investment in advertising can't go a different direction than revenue in the industry.
Attrition is a reality In the video game world, and people need to invest in user acquisition in order to continue to have successful thriving game businesses. And of all the things I'm confident of, it's the gaming is going to continue to be a successful thriving businesses for companies based in North America, Europe and Asia. Now, our view As advertisers, publishers are going to continue to spend as long as they're getting quality players at a positive ROI. That's what we do. In fact, we've got tools like Audience Pin Power Pointer that allows advertisers to find what ROAS they'd like to target or based on retention or IAP or ad revenues.
So they can get a guaranteed return regardless of what's happening or changes in attribution. That's what we're delivering. Our results reflect continued increase in ad spending on the Unity Network, something we've been consistent with. But again, I don't think there can be maybe a quarter or 2 at a time, but there can't be material divergence between user acquisition, spent an industry growth. They go hand in
hand. Great. And then one last question on monetization. So Bhavan Siri at William Blair asks, How big of a factor is conversion postbacks now that advertising level, with the iOS 15 update this fall? You know, and to what extent does that impact companies like Facebook?
It seems to have a big impact on them. But how does that play out for firms like Unity?
Well, look, I wouldn't want to get so specific as to try to step into the Facebook executive team's view as to what How this affects them. But it's a good question. I'll give you my point of view. We've always been a proponent of open attribution ecosystem and supported all attribution Providers from day 1 in modernization. For Unity, adding another provider of protocols at normal course of business.
And when it comes to SCAD postbacks or other systems, We're there and ready to implement. And we're pleased to see a more level playing field and then move away of self attributing networks. We believe content creators and advertisers should have choices in what services they use. And that includes having an open ecosystem of Tribution providers rather than a single standard rapid reduction authority. But that's consistent with who we are.
We believe in open systems, Competition Choice. And no surprise, we really about here.
Great. Okay, we'll now move on to kind of some macro discussions and kind of return to normalcy. So we got similar questions or at least thematically from, Afir Gottlieb and kept from Capital Markets Laboratories and Bhavan over at William Blair. And it was basically the comment was, you know, can you talk about overall engagement trends that you see, you know, some people have concern expressed concerns about how reopening might impact gaming. Other anecdotal People say the shift is sustainable.
Maybe you could just give some color on what you're seeing and what you expect over the next few quarters. And maybe Luis, if you could run with that one.
Sure. Thank you, Ophir and Bhavan, for the question. We're actually very pleased with engagement metrics that we see. Globally, we're seeing more unique Users than ever before. And if I look back and look at 2020, the pandemic spike that started to decline a little bit in the fall of 2020, but then quickly ramped up over the wintertime and led to 2021 having all time high unique user count globally.
And what we're seeing year to date, these monthly active users have continued to grow somewhere in the excess of 20% year on year. We're seeing particularly growth in APAC, Japan, Korea during 2021. Europe is also doing great. America is a little bit but also growing very nicely. So we're we're seeing good growth across the board.
Great. We have a question on ESG. ESG has become an important topic of late. In fact, William Blair is a section on every report about ESG and Bhavan Siri asked about kind of what we're doing on the ESG Gfront. So maybe, Luis, if you want to run with that one.
Sure. You know, we're committed to SG to have a positive impact on the communities, employees, Creators, customers, the environment, our shareholders. And we have to recognize we're in the early stages of building our ESG program. We're conducting our materiality assessment and aligning with the Global Reporting Initiative and Sustainability Accounting Board Frameworks So that we can better understand our current position and opportunities to reach our goals. We have an internal team dedicated to measuring and coordinating our efforts.
And we have a full list of programs listed on our investor page. But let me highlight a few just for this call. So on the environmental side, We were currently conducting our greenhouse gas assessment. We're also supporting Unity customers to become more sustainable And thus make the world more sustainable with the power of our technology. On social impact, we empower employees and creators of all backgrounds to foster a more inclusive sustainable world.
In fact, we have donated time, technology and shares Now valued at over $75,000,000 to enable positive change in education and economic opportunity, sustainability and health. On governance, We're committed to an inclusive workplace and governance approach grounded in our values of empathy, respect and opportunity. We know that there is a lot more work to be done, but we continue to be committed on this front, and we'll be sharing more details at a later date.
Great. Well, why don't we move on to operate beyond monetization? So, I fear Gottlieb that Capital Markets Labs, picked up on the theme of social gaming and how that might play out in the broader addressable market. His question is, is can you comment on the progress of social games as it relates to multi play V box and Delta DNA? And more broadly, how should we think about the opportunity as you involve and extend multi play so that that becomes a backbone of a broader cloud product offering for both games and industry verticals.
John, why don't you take that one?
So first off, just a little, you know, sort of backdrop. If you go back, you know, on the order of 20 years, You'd see that most PC and console games for single player games, you played against the machine and you later played socially on the couch Sports game with the forefront of that. But gaming was largely a solo activity. As console and PC games got ready for had the capability of getting to be multiplayer products, That took over, and it's the dominant form of gameplay for most games out there in the world of PC and console. Mobile has lagged that partly because they're not on broadband networks and they haven't had the CPU, GPU, or the technology to support it.
That's changing. Social games and mobile games are becoming multiplayer. And with that, we see very substantial opportunity for Unity, because we're a leading provider of the back end resources, the operating resources enabled multiplayer and multi user gaming. These services, as you mentioned, include multi play, VBox, Matchmaker. And we're seeing healthy growth on this front with with more casual games, Knockout City, Economies, Super Bomberman and many, many others.
And they tend to use hosting matchmaking voice services. But there's also a lot of tricky bits to this. One area in particular is networking code. It's a very Simple thing to master for many mobile game developers, sudden traffic spikes, and they get they find themselves to have a hit, And they need 10, 15, 20 X hosting capacity than they planned for. And then there's management of toxicity.
And We see that everywhere in our environment, but it's also true in chat and gaming as people come together. And so we're building new tools on top of what we have at Multiplay To make it just as easy for 2 person teams to create these types of games to succeed as it is with 100 person studios. So it's a great question because Social and mobile are becoming a much bigger multiplayer experience they've ever been before. And I think it's an unstoppable trend It speaks to opportunity on the operate side.
Great. We'll get pivot over to create for games. So we have another question from Matt Cost over at Morgan Stanley. And he asked, quote, a large competitor recently took their game engine open source. How is the competitive landscape with other engines changing in gaming?
And do you believe the market will continue to consolidate to a small number of players? John, you have some obvious good perspective on this one. So maybe if you could play this one out.
Well, yeah, I'll start by saying, What do you mean by large? The company that owned them or both of the games that we're using that game engine? So I'm not sure that I'd call that a large competitor, but I appreciate the opportunity for humor. I hope you take it that way. But open source has been a business model and technology, and it's always going to be around.
Godot has been around forever, and that's an open source engine. The reality is game engines are really hard scalability, stability requires ongoing investment, commitment to QA. Another key bet is we're often working with builders of new platforms or existing platforms on hardware innovations that are going to take place next year or the year after and the year after that. We master those now So that when software creators or game developers show up with product that's supposed to be optimal for the new hardware, it works On the new hardware. That's really hard for an open source player to really get in front of that.
We're embedded in these companies and it's nearly impossible for folks on the open source side to do that. They have a role to play, but I think it's really tough. And then the competitive context, the landscape in gaming has been tough. We saw King externalize our engines several years ago. Autodesk used to be a direct competitor.
I believe you're referring to Amazon a little while ago with Lumberyard. It's not an easy industry. And we think that our investment is such that we believe we can continue to gain. We told you we got a 71 share of the top 1,000 games in mobile. Our next voice of competitor is far behind.
We have a very strong position in Nintendo on all the consoles, PC, ARVR, And we keep upping our R and D efforts. So we think we're in a really good position to deal competitively in the market. I believe we're going to see continued market share growth.
Right. We have a question from Brett Brayson at Piper Sandler. He's done some good fundamental work and asks, quote, based on new hiring intentions for Unity Developers at Apple, Facebook and Walmart to build new ARVR applications that we've picked up on. Could you spend some I'm articulating the opportunity for unity within the ARVR space and the pace of adoption you're seeing. John, if you could run with that one.
Yeah. I mean, look, I'm going to step back in time a little bit. Several years ago, I gave a presentation on, you know, called the Gap of Disappointment, which basically said that analysts were projecting Staggering growth in the world of AR and VR, particularly on the consumer side. I didn't think that was going to happen that because we didn't really have the right combination of hardware, Ease of use, content library, killer apps. I see that starting to change and you see that starting to change as well.
And the confidence that companies like Facebook and others, you mentioned Walmart, all sorts of companies across many of our verticals are getting really excited about ARVR because they're starting to see Traction on the selling of hardware. Facebook has announced some great numbers around Quest 2. I know there's been some setbacks at different points in time, but based on what I see coming from hardware players, I think I think this is about to happen. I mean, not tomorrow, but over the course of the next 3 to 4 years, we're going to see a sizable market in ARVR. And there's nothing that makes me happier.
It's a sizable market. We're digging around an area where we have a very, very, very strong position. So, people are hiring this time. It's real. I think that's for years.
It's really under watch.
Great. We have a question on new entrance and cloud opportunities. Bhavan Siri asked Microsoft Cloud Gaming. Microsoft recently announced the extension of their Xcloud offering. We'd love to get your thoughts on the cloud gaming opportunity, especially because there's been several attempts in the past with mixed levels of success and what that could mean for Unity with Project Tiny, etcetera.
And in a similar vein, Mario Lou asked, how do we look at the entry of Netflix into the market. So maybe I'll run with this one. So thank you both, Bhavan and Mario. These are two good questions. So look first at a high level, we'll start, then we'll drill down as a context.
First off, we benefit when new forms of connectivity to Games Emerge. More people come into the market. That means more games need to be built to fill the new entertainment needs. And so that's generally good for Unity because we they build games, we do better. So when we see a company like Netflix enter the market, we view that as a good thing.
Now double clicking down on the subscription question, game subscriptions have scaled out slower than we've seen in music and streaming services. So let's think about why that would be the case. You know, without going too far into the weeds, we believe there's really technical hurdles that have made it difficult to cost effectively deliver great user experience to consumers that evolve their consumption patterns. So as opposed to right now, what you have is basically delivering the same games to play in the same way. So think about how the way you consume movies and music differently now than the days when you bought a CD at a store and went to the movie.
So far, we just have not seen that evolution in game consumption. But at Unity, We believe we have a lot of the technological tools that solve those challenges. And subsequently, we will give game developers opportunities to change how they how games are consumed. And if we do that, we will unlock new business models and consumption patterns for millions of more people. So for example, our portfolio, as you know, includes You Tiny, Furios, Dots and several other modules that among other things make streaming game less CPU and GPU intensive.
So the big answer to the question is basically takeaways that we're broadly optimistic about the rise in gaming Script and Services and the ability for unity to help in that area and in the, create, for verticals. And as always, we save the best question for last. And that comes from the team of Tom Roderick and Max Osmo at Stifel. Quote, you often get asked about when verticals are We're going to be bigger than gaming. If you have an update on that trend line, this would be great.
But maybe a more interesting Question is what revenue model will get you there right now because you have Create, which is seat count based grow subscriptions, But you also have operate, which is chugging along with a usage based model like we see from Snowflake, Stripe and others. John, that's kind of, I think, a good question right up your alley. That'll be our last question for Open Mic.
Sure. So it's a great question because it really speaks to a lot of what we're working and working on internally With several of our initiatives. So you heard me earlier announce several new customer adds, significant number of major new customers on the vertical side. So we're seeing the uptake. And today we generate outside gaming, primarily a SaaS business and professional services business.
You're right. We sell seat licenses And we sell runtime applications like format and reflect to our customers. These companies also typically need help getting up and running with their new applications. And so with companies like Walgreens and Lowe's and the Nature Conservancy and many, many others, We offer professional services. In prior question, we talked about how they're hiring Unity developers.
A lot of these companies, they are, But they often need professional services from Unity to augment a smaller scale team than they have internally To build what it is they want. Hence, they engage with us on on professional services. But I do think you hit on a really important thing. When it comes to These verticals, they're not likely to scale in the same way that game companies are with 1,000 and 1,000 of developers. And here you'll see more usage based models.
We already work on a consumption model with Furious. We Pretty much all of our, operating services are based on a consumption model. You know, when we Price, and this is early stages around simulation or visual twin parts of our business. We We tend to focus up thinking about an individual server as a seat that makes it a consumption model on the basis of compute applied to the problem. So I would say that as we continue to evolve and grow in scale, we're going to continue to see strong Growth on the vertical side, and we'll see a shift over time, from professional services and seat licenses to consumption models.
It'll be based on a variety of metrics, sometimes how many servers are being used for something. Another will be for streaming. And there'll be a series of buzzer, but think of consumption models being significantly additive to verticals in time.
Great. Okay. Now we'll open it up to direct questions. I mean, I guess we'll get started with, Matt Cost at Morgan Stanley. If you want to open up your video, ask a question, then we'll roll to the other folks as well too.
Great. Thanks a lot for the question, guys. So I guess, operate obviously came in very strong for the quarter. You mentioned share gains That you picked up on that side of the business to do with monetization. I was just curious, what were the drivers in your opinion of those share gains?
And what trends did you see Over 2Q and can you give an update kind of quarter to date in Q3 on how those trends in the monetization side are going? Thanks.
So I'm going to reset my speakers and Luis, you want me to take that because that came across pretty jumbled for me. So Luis, can you pick that up and I'll Open and close my audio drivers, see if that helps.
Sounds good. Yeah, Matt, great question. And we talked about IDFA last quarter. And if you remember what I said back then is that we prepare for IDFA for over 2 years. And I also mentioned that our operator organization captures and analyzes 50,000,000,000 in app events each day.
No. And that's whatever, dollars 35,000,000 every single minute. So that's pretty amazing. And we do that across these 20 platforms. And I mentioned that our spending across our platform was really strong and I expected some market growth.
And really the reason for that is our contextual models, Which actually do not rely on IDFA. We're working very well. Our scale and depth provides us access to vast amounts of data, Which is really based on end users engagement and platform performance data. And the feedback we were getting even back then was very from our customers. No, I think some of our customers were saying things like, hey, we partnered with every single network out there and Unity's readiness Guidance are far above anybody else.
And and that that that allowed us a quarter ago to raise our guidance by about $50,000,000 And really what we continue to see is exactly the same things as we saw last quarter, the same advantages. And as John mentioned, IDFA is clearly having an impact in the industry, but it's impacting different players in different way. Now, some of them are accelerating, some of them are decelerating. We are fortunate to be prepared and to have the data and all this analytics audience being pointed, being a Q1, Where we're actually accelerating. And that is again allowing us to raise our guidance by this $45,000,000 that we talked earlier.
So it's the same message that we talked, Matt, a quarter ago. We just continue to see it play out, and it's we're performing very strongly in this environment.
And just to build on Luis's point, now better understand the question. Earlier, we got this question about On the advertising business, and I connected advertising revenues to the industry, the gaming industry. I really think the best way to think about this, and we have deep experience from what happened in Europe or on GDPR, is Disruptions affect relative market share. They affect 1 publisher different than another. We're a proxy on an industry while gaining market share.
So I think at the aggregate level, it's doubtless in my mind That we're going to see growth in the ads market. Will it affect every publisher the same? No. Because the The CAC to Elf TV calculation is different, not just for every publisher, but for every game within every publisher and often In every major geography for every game and every publisher, the aggregate is there. The harsh When you change some of the monetization mechanisms that are out there, as IDFA did and as GDPR did before, It affects the relative fortunes, who's at the top of the stack, who's second, who's third.
I'm happy to say through this, Whether it was GDPR or IDFA, we've anticipated well enough to be net winners in those equations. But I do expect to see some shuffling on Some other networks or some own networks having more difficulty adapting to these rules. And on a relative basis, Different publishers are going to end up with different stories. Great.
Great. Thanks guys. And sorry for any audio issues.
No, it wouldn't. It's fine.
If I can just add, Matt, just to compliment, our unique context and insight are really the competitive advantage for us. Developers come to Unity first when they are making their games, not to other platforms. Our runtime is in the app In addition to many of our operate services. So we have this scale, and that's all coming together very nicely.
Great. Hey, Tom, Roderick, do you want to pop in?
Outstanding. Okay.
Can you hear me okay?
Hey, Tom, I can hear you perfectly.
Wonderful. All right, away we go. So, John and Louise and Richard, I think maybe I'll try to put And even finer point on Matt's question because I think it's a great question and there's all these crosscurrents that everybody's trying to figure out. And when I weigh what's clearly a monster quarter that you just put up, really just tremendous trends there. 3rd quarter that you just put up, really just tremendous trends there.
And then sort of measure that against the forward guidance where you're looking at a sequential Down number. And so I guess the question you're going to undoubtedly get, you know, with a finer point on it from a lot of people is, Should we be nervous about that? Is that a reflection of sequential trends on engagement that are tougher? Is it a reflection of just Uncertainty around the advertising ecosystem or is it just, hey, we just put up a monster quarter, don't kill us. We're going to be a little bit conservative and keep the horse in the barn a little bit.
So I'm going to waste 30 seconds of an answer to give Luis time to prepare one. But I can assure you, Tom, we are not nervous. And if we're not nervous, I would not encourage you to be nervous. We feel great about our business. There's nothing about sequential guidance that has us feel any less good About where we are, where we're going in our long term growth trends and our short term growth opportunity.
So with that pre mumble, Luis might want to speak to seasonality and sequential quartering and how guidance works.
Yeah. I mean, if we were nervous, Tom, we would not be raising $45,000,000 again after doing that just a quarter ago. So we're not nervous. We are very bullish in the business. If you look at 2 years ago and you look at Q3 relative to Q2, you'll see that the other real seasonality.
Last year, Seasonality was overly impacted by COVID, so it's a little bit misleading. So we just we know that that's how the business operates. You know, summer and holiday Seasons have traditionally been peak months for us, particularly in the operate business, which is more of a consumption based model. So that's what's impacting us. But we're very we feel very good about the health of the business as we've said many times in the call.
Yes. So I'll add to this specifically, Tom. The lower months for summer vacation months,
for
a bunch of different reasons. But We've seen such dramatic growth that it's sometimes hard to parse seasonality from sequential growth.
Very fair. Okay. And then a really quick one, Luis, you touched on it. Just on Parsec, There's probably a Millennium Falcon joke to make in there. I'll let Richard make it later.
But, you mentioned it's not material, which I get, but that materiality has a lot of different levels. Is there any revenue associated with it at all inside of the guidance? If so, can you just kind of Give us a sense of that or is this strictly a product company that you're bolting on to the vision here?
Yes. There is very, very little revenue this year, Tom. Nothing nothing material in any way. So no, I wouldn't. It's that if the question is, is that why you were raising our guidance?
Absolutely. No, it is. It's a great company. We love it. The technology is amazing.
As John explained, we think that the future It's very it's great, but the impact to this year is very, very small.
To put a point on it, I always kind of never discussed Parsec as we were working on our guidance. Also, we don't we try not to include in the guidance anything that's not closed.
Very fair. Excellent. Thank you all. Appreciate
it. Hey, Brent Bracelin, are you up?
Hey, guys. Good afternoon. Thanks for taking the question. 2 quick ones here. You've got to start with operate, obviously crushing numbers here for 3 consecutive quarters in the face of IDFA.
Pretty impressive. I just wanted to ask, given the guide, which is Pretty consistent here in the last three quarters over 30% and and actuals are are much stronger. But, what was linearity, Monthly linearity in the quarter. Did you see kind of the operate business start to trend on a year over year basis down in month 3 or was it Kind of stronger in month 3. Any sort of color on operate linearity as we just think about kind of how it performed in the quarter and As, IDFA kind of started to be implemented.
Yeah. What what I would say, Brent, is while we don't disclose That we are very the linearity was good during the quarter. I mean, we feel very good about the linearity. And again, if it was not, We would not have raised guidance for the year by as much as we did, right? So we feel good about the health of the business.
We looked at By geo, by business, by month, anyway you look at it, and we feel good about it. So not a concern there, Brent.
Got it. Well, you're clearly clearly gaining share kind of post AFA. I guess my last question for you, John, on Parsec, as you think about that opportunity, Do you think that's going to be like part of this subscription offering and functionality of of the base package? Do you plan to kind of operate That as a as a separate kind of subscription offering. What are your initial thoughts?
I'm sure it'll change over time, but what are the initial thoughts on Packaging and bundling of Parsec.
First off, both. And let me let me trace back to that question. Remember, Right about half hour ago, I mentioned we said we can 5x our our cover inside of the gaming industry to pick up artists. There's a boatload of artists that are using Parsec now. Weirdly enough, I think with a lot of customers, they can draw unity into the seat more than the other way around, because they're $30 a month.
It's an easy, It's an easy and essential component for a game developer to have a remote system. The other thing is, a lot of developers are, and honestly, they need something like Parsec to be able to come in and use their tablet To do any sort of creation, and Parsec provides for that. And so my sense is that This is one of those Goldilocks deals where we can pull them into customers, they can pull us into customers, And we can bundle and gain penetration with customers that we both share with significant penetration. And, you know, with with with Benjie and Chris, I I met. I mean, I wish I was half as smart as they are when I was their age.
They're They're just killing it with deep insight and, just execution that, You know, I stand back and marvel at it. I feel really, really good about this one.
Got it.
Well, sounds encouraging. Thank you so much.
Hey, Stephen Ju, are you available?
Yes, sir. All right. Hi. So I guess following up on the Questions around the advertising business. There's the marketing spend from the video game developers, but there's also the larger opportunity from a broader set of advertisers across more verticals.
So can you talk about what you're doing to onboard more of the non endemic, non video game advertisers? Thanks.
Yeah, sure. So, you know, first off, we're experimenting at the margins on the supply side for non game advertisers. Think of us as being supply side game industry and demand side anybody, but mostly on the game side. And then we've got big partnerships with a number of aggregators that bind to our network, most notably Google. And they bring a lot of brand advertising, among other things.
So I frankly expect and based on what I see out there Is that we're seeing more and more sophistication on non game advertising is buying into game industry networks. And so we'll probably see more there. But, it's still the lion's share of this is still game advertising on both sides of the equation. But again, we're open to both sides. Does that get to your question, You want mute on me.
Okay.
Sorry. Yeah. I'm just thinking about the longer term opportunity
Look, I think the longer
term Yeah.
Let me be really clear. I think the longer term for Unity is a bigger box than we're operating with in monetization. We're experimenting constantly. We have a more data centric play in advertising that all but a Few of the players you've learned to love and admire like Google and Facebook. There are precious few companies anywhere with our sophistication around advertising and data.
And those are skills that we want to apply more broadly and will. But when you're posting 60% quarters, you're focused on the core, and that's
Hey there. Thanks for taking my question and thanks for the format, Richard.
You're welcome.
I wanted, I was hoping you guys could talk about DBNER. And I ask because in q2 and q3 of last year, the COVID quarters, we saw this unity saw Spike, right? Low 140s, mid 140s, and it didn't seem sustainable per se. Here we are, Q2 2021, and it's 142% again. Can you talk a little bit about what's driving that?
Maybe an update on Q3 or even longer term guardrails on that metric. Thanks
louis. You are me. Do you want to go john? Sure. Look, One of the things that helps, with our dollar base net mix.
So look, dollar base net expansion, I always look at these things a little bit like Whenever there's more than two numbers involved and you're doing multiplication and division, you have to understand what some of the underlying trend lines are. What's helping us keep that number up is we keep graduating customers from below the 100 threshold above the 400 threshold, and then they can bring A lot of growth. And then the second thing that's happening is we are taking our larger customers and continuing to grow them. So we're seeing Growth at the bottom of the stack, the top of the stack that we keep bringing people into the stack. To be honest with you, When we set up the guide for this year, we were guiding materially lower than we're currently realizing in our revenue number.
And a lot of that is our continued success with our customers above our plan and above our expectations. And so It's what you want to see as a CEO. It's kind of pleasant to wake up in the morning and you see something and it's usually good news, Almost always good news. And we're bringing new customers on the platform rapidly. And when they get to the platform, we're growing them rapidly.
It's a it's a good time to be at unity. It's why we're as bullish as we are.
All right. Thank you.
Right? And then we're just about done. Cash, did you have a question or do you want to chat when we do the callbacks? Which better for you?
I'll turn on the call back. Thank you so much for
the offer. All right.
Great. Well, that that wraps it up. We We did it in 61 minutes. So that's not too bad. So we appreciate everyone being on the call, and we definitely look forward to seeing you either at conferences or on our next earnings Gahl.
But thank you very much and we appreciate your interest and support.
Thank you. Thanks, everyone.