Episode 25

full
Published on:

16th May 2022

25. Playboy Metaverse, P2E Cockfighting, Roblox Tough Quarter, Unity Falls

In this episode, we discuss Playboy making their entry into the metaverse, Roblox shares falling by about 10% after an underwhelming quarter, Unity Software's stock falling by almost 30%, Irreverent Labs closing out a $40 million funding round for play to earn rooster fighting, and so much more!

Episode 25 Keywords: Playboy, metaverse, stock, Roblox, shares, Unity Software, Irreverent Labs, $40 million funding round

Transcript
Unknown:

Welcome to the metaphysics podcast. The

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Metaverse and web three are bringing about the biggest

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revolution since the internet itself. With your hosts Paul the

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prophet Dawalibi And Jeff the juice Cohen. We will be bringing

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you the latest Metaverse, business news and insight into

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what it all means. The meta business podcast starts now.

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From the boardroom

Paul Dawalibi:

to the metaverse. This is the meta business

Paul Dawalibi:

podcast. I am Paul the Prophet Dawalibi. I'm joined today by my

Paul Dawalibi:

friend and co host, Jeff the juice Cohen, those of you who

Paul Dawalibi:

are new here, welcome to the official podcast in the

Paul Dawalibi:

metaverse what we do is we cover the most pressing, Metaverse,

Paul Dawalibi:

stories and news of the week, but we look at all of it through

Paul Dawalibi:

a business and C suite lens dissect. We analyze the business

Paul Dawalibi:

implications of everything happening in this incredible

Paul Dawalibi:

industry. For our regular listeners. Thank you guys for

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tuning in every week. Thank you for leaving a five star rating

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and review on the podcast. If you haven't already. Hit

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subscribe. Leave a Review share the podcast with a friend or

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colleague. This is how we've grown. We really appreciate it.

Paul Dawalibi:

Jeff, how you doing this week?

Jeff Cohen:

I'm doing well. I'm doing good week. I know we're

Jeff Cohen:

both both actual we're both moving. And I don't want to

Jeff Cohen:

Doc's, you on the pipe. We're both all as also, Paul's move is

Jeff Cohen:

bigger than me as much rather than mine.

Paul Dawalibi:

We are both moving not into the metaverse so

Paul Dawalibi:

we can at least confirm that Not yet. Not yet. But I have been

Paul Dawalibi:

thinking about it. You know, I will say I was playing with

Paul Dawalibi:

epics like Unreal Engine today a little bit. I had a little bit

Paul Dawalibi:

of time in between calls and I was toying with Unreal Engine

Paul Dawalibi:

five and their meta human integration in Unreal Engine

Paul Dawalibi:

five. So I'm thinking at some point we'll have to create meta

Paul Dawalibi:

humans, and do this whole thing as unreal, Unreal engine powered

Paul Dawalibi:

meta humans.

Jeff Cohen:

I agree with that I was gonna make the joke. And

Jeff Cohen:

this is why you're so much more successful than me. Because in

Jeff Cohen:

between your calls, you go on Unreal Engine five and innovate

Jeff Cohen:

in between my calls, I go get a snack and try to play with my

Jeff Cohen:

dog. So this is why we're not the same.

Paul Dawalibi:

Well, I'm gonna get you a meta human avatar

Paul Dawalibi:

here. And we're going to do this at some point. You guys will can

Paul Dawalibi:

look forward to that because it is cool. I am Will's I will say,

Paul Dawalibi:

I have been very bearish on Tim Sweeney, but I am thoroughly

Paul Dawalibi:

impressed with Unreal Engine five, I think. You know, for

Paul Dawalibi:

someone I'm not a 3d designer, like I thought what I do for a

Paul Dawalibi:

living, obviously, but you know, tech savvy enough to go in and

Paul Dawalibi:

get a good feel for what this thing can do. And I was very,

Paul Dawalibi:

very impressed. Let's put it that way. So interesting

Paul Dawalibi:

anecdote. We often talk about things like gaming and stuff

Paul Dawalibi:

like that. So let's start with a story. Jeff that is short to

Paul Dawalibi:

attract attention. I'm sure we're going to turn it into a

Paul Dawalibi:

very click baby headline for the podcast here. But the article

Paul Dawalibi:

here is from Seeking Alpha and the headline says Playboy, and

Paul Dawalibi:

the metaverse could imply significant stock

Paul Dawalibi:

undervaluation, so Playboy, it says PLB why? Well, I guess PLDI

Paul Dawalibi:

group is the group that owns Playboy, obviously one of the

Paul Dawalibi:

most recognizable brands in the world. They recently launched a

Paul Dawalibi:

virtual Playboy Mansion in the metaverse and and what they're

Paul Dawalibi:

saying is, if management is successful in its efforts in

Paul Dawalibi:

this industry in the gaming industry, Metaverse, whatever

Paul Dawalibi:

net revenue could trend north. So not a whole ton of detail in

Paul Dawalibi:

this article. They're just saying, you know that the

Paul Dawalibi:

metaverse and their expansion in China and India, I don't know

Paul Dawalibi:

why those are in the same sentence. They're two very

Paul Dawalibi:

different initiatives. But they're very bullish on their

Paul Dawalibi:

Metaverse play here for Playboy. You know, we always start what

Paul Dawalibi:

was tried to start with kind of a fun, lighthearted story. What

Paul Dawalibi:

do you think of a virtual Playboy Mansion? In the

Paul Dawalibi:

metaverse? Like,

Jeff Cohen:

I think it's super interesting. Obviously, you

Jeff Cohen:

know, I'm not familiar with Playboy stock. So I'm not going

Jeff Cohen:

to try to get into the nuances of what this actually does for

Jeff Cohen:

Playboy stock. And as you're going through so this is a

Jeff Cohen:

Seeking Alpha article, which is a investor website where people

Jeff Cohen:

will post, you know, their stock ideas and their pitches, as

Jeff Cohen:

you're scrolling through it here. For people who are

Jeff Cohen:

watching on, you know, video, it's pretty impressive. They

Jeff Cohen:

actually have like a lot of detail. You know, click Beatty

Jeff Cohen:

article like this is someone put together like a very detailed

Jeff Cohen:

stock pitch. I don't think we're gonna get into that because

Jeff Cohen:

neither of us know the Playboy business model that well, but I

Jeff Cohen:

think it's interesting. I mean, you know, the, the porn

Jeff Cohen:

industry, interestingly enough, has actually been very early to

Jeff Cohen:

a lot of like technological trends, like porn was one of the

Jeff Cohen:

early kind of use cases of the internet, you know, especially

Jeff Cohen:

of high speed broadband, things like that. So I don't think it's

Jeff Cohen:

actually that crazy that, you know, virtual illicit behavior

Jeff Cohen:

could actually be a very early use case. For the metaverse, you

Jeff Cohen:

know, there's a lot of different ways you could take that in

Jeff Cohen:

terms of what that means for society and how you know that

Jeff Cohen:

how that could be negative and in many different ways, but

Jeff Cohen:

there is a big market out there for this kind of thing. And so I

Jeff Cohen:

think it's interesting that that Playboy is kind of digging in

Jeff Cohen:

and having a presence in the metaverse. We often joke that

Jeff Cohen:

every bit, you know, it seems like every business is at some

Jeff Cohen:

point going to have their their fingers in the metaverse. And

Jeff Cohen:

obviously Playboy is not, is not not one of those businesses.

Paul Dawalibi:

Obviously, I agree with everything here. But

Paul Dawalibi:

like, my take on this is a little bit different in the

Paul Dawalibi:

sense that, Aren't you surprised that Playboy was maybe the first

Paul Dawalibi:

mover here, right, because Playboy traditionally has been

Paul Dawalibi:

kind of the laggard when it comes to new tech, right. They

Paul Dawalibi:

like stuck with a magazine probably a lot longer than they

Paul Dawalibi:

should have. And there are definitely adult entertainment

Paul Dawalibi:

websites that are more forward thinking tech savvy, you know,

Paul Dawalibi:

innovate on the tech side. And at least I don't know about

Paul Dawalibi:

them. But I don't think I've heard of any efforts from those

Paul Dawalibi:

companies to do something, you know, in existing meta verses,

Paul Dawalibi:

or in their own or whatever, right? Like, I have not heard

Paul Dawalibi:

any of the adult sites doing something in decentraland or

Paul Dawalibi:

sandbox. And I don't know if that's because existing meta

Paul Dawalibi:

verses have turned them down. And maybe Playboy's a little bit

Paul Dawalibi:

of a safer not so you know, hardcore brand, you know, adult

Paul Dawalibi:

brand. But I'm surprised that it's Playboy, sort of making the

Paul Dawalibi:

first move here.

Jeff Cohen:

It's a great point, I guess, to be fair, and maybe

Jeff Cohen:

as we're like, looking through this article, I wonder if this

Jeff Cohen:

is something Playboy actually announced, or if it's this, just

Jeff Cohen:

this investor saying, hey, they should do this. Because you

Jeff Cohen:

brought up a good point about content moderation, like I do

Jeff Cohen:

wonder, you know, this isn't going in Roblox I'm sure. I

Jeff Cohen:

highly doubt Roblox would would allow, you know, something like

Jeff Cohen:

this on their platform. So it's probably going to have to go

Jeff Cohen:

into one of maybe the more upstart, mega versus like, even

Jeff Cohen:

epic, you know, I don't know just, is fortnight gonna put

Jeff Cohen:

Playboy into into fortnight? Maybe, but probably, you know,

Jeff Cohen:

you're probably looking at one of these more. It's, it's a

Jeff Cohen:

great move for an up and coming Metaverse that we're always

Jeff Cohen:

talking about, hey, they don't have, they don't have people

Jeff Cohen:

there. There's no use case like something like the sandbox or

Jeff Cohen:

decentral. And maybe this becomes a little bit of their

Jeff Cohen:

way to get a little more publicity and kind of like,

Jeff Cohen:

bring in that 18 to 35 year old male, which, frankly, you know,

Jeff Cohen:

Sex sells. So

Paul Dawalibi:

I clicked through this article from last year from

Paul Dawalibi:

late last year. And it was, you know, my just quick read of this

Paul Dawalibi:

article is, it seems a lot of this is being driven by the new

Paul Dawalibi:

spec owners right of Playboy, because they use the spec to go

Paul Dawalibi:

public and they did a sale of NF TS called rabbit tars. And every

Paul Dawalibi:

owner of these NF T's can belong to the Playboy Club. So if

Paul Dawalibi:

you're watching again, these are some of the lefties. It looks

Jeff Cohen:

really just throwing everything at the wall, I guess.

Paul Dawalibi:

But, you know, again, I'm impressed that

Paul Dawalibi:

Playboy is sort of the first mover here that that they're

Paul Dawalibi:

thinking about this before other adult brands, which have

Paul Dawalibi:

definitely shown a more tech savvy or more tech innovation.

Paul Dawalibi:

So bid on Playboy, maybe this is their chance to reinvent

Paul Dawalibi:

themselves, right? In some ways. The move to web three in the

Paul Dawalibi:

metaverse is allowing older, slower brands that may have

Paul Dawalibi:

fallen behind the web to, to to catch up or to even take

Paul Dawalibi:

leadership roles or positions. Because it's a clean slate.

Jeff Cohen:

Yeah. And we've seen web three companies try to

Jeff Cohen:

resurrect even like decidedly dead break right blockbuster

Jeff Cohen:

Limewire like a couple of you know, maybe those are a little

Jeff Cohen:

bit more of like meme brands, but yeah, I think you can

Jeff Cohen:

reinvent yourself and web three, the new audience to some extent.

Paul Dawalibi:

Let's move on. Jeff, let's talk about Roblox.

Paul Dawalibi:

We're gonna talk about Roblox in unity, call it back to back

Paul Dawalibi:

here. Both had their earnings calls this like for this

Paul Dawalibi:

quarter? And some interesting takeaways here. I think there

Paul Dawalibi:

may be some interesting discussion to go through. Let's

Paul Dawalibi:

start with Roblox. And, you know, there was a whole

Paul Dawalibi:

shareholder letter which we don't know, the half hour

Paul Dawalibi:

podcast, so we don't have the time to get that deep into that

Paul Dawalibi:

shareholder letter. But this CNBC article has a bit of a

Paul Dawalibi:

summary. So the headline here robot, Roblox shares sync on

Paul Dawalibi:

disappointing revenue and wider than expected loss. ROBLOX

Paul Dawalibi:

reported fewer users in the quarter than Analysts had

Paul Dawalibi:

expected and bookings dropped from a year earlier. Company

Paul Dawalibi:

which generates revenue from purchases of its robux virtual

Paul Dawalibi:

currency has suffered along the rest of the tech industry. So

Paul Dawalibi:

just a bit of a read cap here, they had a loss of 27 cents a

Paul Dawalibi:

share versus 21 cents, which is expected by the analysts revenue

Paul Dawalibi:

631 point 2 million versus 645 million. It's a little bit of a

Paul Dawalibi:

mess, their bookings declined by 3% in the quarter. So a little

Paul Dawalibi:

bit of a cooling from the pandemic. That is what the CNBC

Paul Dawalibi:

article is saying here. And the daily active users, though, are

Paul Dawalibi:

up, and they're up 28% From a year earlier. The only problem

Paul Dawalibi:

was the street was expecting 55 million da use, and Roblox

Paul Dawalibi:

reported 54 point 1 million users spent 11 point 8 billion

Paul Dawalibi:

hours engaged in Roblox and the average booking per daily active

Paul Dawalibi:

user slid 25% to $11.67. So more users not as many as expected,

Paul Dawalibi:

but they're spending a little bit less than they used to. And

Paul Dawalibi:

so revenue missed a little bit and earnings missed a little

Paul Dawalibi:

bit. What do you make of the overall Roblox picture here,

Paul Dawalibi:

Jeff? And do you think there's a bit of an overreaction just or

Paul Dawalibi:

general market sentiments bad? So Roblox is a victim? Or do you

Paul Dawalibi:

think there's anything in these numbers scare you?

Jeff Cohen:

I mean, number one, definitely there is a bit of a,

Jeff Cohen:

you know, the market sentiment has completely shifted. And

Jeff Cohen:

obviously, this is a business podcast, but we're not, you

Jeff Cohen:

know, going too deep into stock analysis. But the macro picture

Jeff Cohen:

right now is is pretty bleak. And the whole market is, is kind

Jeff Cohen:

of selling off particularly these these large cap like

Jeff Cohen:

growth tech stocks, so it makes sense that any hiccup you're

Jeff Cohen:

gonna get, you're gonna get punished. I do think the

Jeff Cohen:

interesting piece here is around the a the bookings declining,

Jeff Cohen:

year over year is not great. Like because even if, if growth

Jeff Cohen:

is slowing, like, it's pretty bad. And I understand it's Tough

Jeff Cohen:

comps, and you had COVID Last year, but shrinking like as a

Jeff Cohen:

business is not great when you're trading as a premium

Jeff Cohen:

brand and a premium multiple. So that's a little surprising. And

Jeff Cohen:

then this stat around like the time spent per user shrinking is

Jeff Cohen:

actually probably the most the dollar alarm. But I think there

Jeff Cohen:

was also it might not have said it in this, the the the actual

Jeff Cohen:

time spent per daily active user was down on average. So that's

Jeff Cohen:

probably the most alarming piece. And, you know, they did

Jeff Cohen:

say, hey, it was slowed down because, you know, probably was

Jeff Cohen:

because last year was a little bit more code, you know, COVID

Jeff Cohen:

locked down versus this, this kind of spring. I don't know Do

Jeff Cohen:

you buy Do you buy that like that, to me is a little bit of

Jeff Cohen:

alarming, alarming picture. Because, you know, you could

Jeff Cohen:

blame COVID. But you could also say, hey, people are moving on

Jeff Cohen:

to other metal versus people are moving on, you know, aging up

Jeff Cohen:

out of the platform. Like that's an alarming stat, that usage per

Jeff Cohen:

per person is dropping. I mean,

Paul Dawalibi:

but but the daily active users are growing now.

Paul Dawalibi:

They missed analysts expectations, but there was

Paul Dawalibi:

still growth and 28% year over year is not like anything to

Paul Dawalibi:

sneeze at that grew an average of 46% annually. Now, is growth

Paul Dawalibi:

potentially slowing? Yes. But you're also now have a user base

Paul Dawalibi:

that is, is pretty large. I mean, the simplest question I

Paul Dawalibi:

have to come back to your question, Jeff, I'll answer your

Paul Dawalibi:

question. But the question is, you know, market cap of Roblox

Paul Dawalibi:

today is 14 billion and just looked it up. Right. We know

Paul Dawalibi:

epic, just raised around at 30 plus billion, right? 31 and a

Paul Dawalibi:

half billion I think was the $2 billion dollar round they just

Paul Dawalibi:

did. Is epic worth to Roblox says,

Jeff Cohen:

Well, it's funny that you're posing it that way.

Jeff Cohen:

Because actually, like a month or two ago, we were having the

Jeff Cohen:

exact same conversation but the opposite. Where it was like,

Jeff Cohen:

well, Roblox is worth 58 billion, and like epic is worth

Jeff Cohen:

20. Like, does that make sense? And the answers, they're

Jeff Cohen:

probably pretty similar. You know, that's the benefit and the

Jeff Cohen:

negative of being on the public market where every day your your

Jeff Cohen:

sort of valuation fluctuates. Good on Epic to have closed

Jeff Cohen:

that, you know, $2 billion round, like a month ago, which

Jeff Cohen:

doesn't seem like a lot of time, but the markets have really

Jeff Cohen:

shifted so good on them to get that money. Yeah, they probably

Jeff Cohen:

should be about the same, the same valuation. It's probably

Jeff Cohen:

overshot on the downside at this point. But I think investors are

Jeff Cohen:

going to want to see those metrics kind of reach

Jeff Cohen:

accelerate, where if bookings are declining, and time spent on

Jeff Cohen:

the platform is declining, even though, you know, users are

Jeff Cohen:

still growing? Like, that's not great. And I think I saw

Jeff Cohen:

somewhere in here that like users in particularly in North

Jeff Cohen:

America, like I think daily active users may have even been

Jeff Cohen:

like flat to down. So they're growing in other regions, which

Jeff Cohen:

is great. That's a big initiative for them to grow

Jeff Cohen:

internationally. But those people are obviously not

Jeff Cohen:

monetizing, as much. So, you know, investors will look for

Jeff Cohen:

signs that they and monetize those international users. If

Jeff Cohen:

they start doing that you'll see this doc, I'm sure you start to

Jeff Cohen:

start to go higher.

Paul Dawalibi:

Yeah, I think the one thing that I find

Paul Dawalibi:

encouraging from the whole Roblox story is their story

Paul Dawalibi:

hasn't really changed. Right? Like they've they've, they've

Paul Dawalibi:

not said one thing, and then six months later said another thing,

Paul Dawalibi:

right? They seem pretty focused on what they want to achieve. I

Paul Dawalibi:

just did a quick search through their shareholder letter, right?

Paul Dawalibi:

There's five mentions of the word Metaverse in a 12 page

Paul Dawalibi:

letter. Right. And where they mentioned it, I think makes

Paul Dawalibi:

sense, right. But they talk about and I think maybe the most

Paul Dawalibi:

exciting place I'll just read the sentence. And this is where

Paul Dawalibi:

I sort of get excited for the long term opportunity for

Paul Dawalibi:

Roblox. They're they're not just thinking about user growth.

Paul Dawalibi:

They're thinking about monetization. They're thinking

Paul Dawalibi:

about, you know, every angle of building out these this

Paul Dawalibi:

metaverse. They said beyond sponsored ads were at the

Paul Dawalibi:

beginning stages of developing native and immersive advertising

Paul Dawalibi:

in the Roblox metaverse. We envisioned several new

Paul Dawalibi:

advertising units that we imagined as being complementary

Paul Dawalibi:

to our user experience that I think is, in and of itself is

Paul Dawalibi:

maybe one of the most interesting things from this

Paul Dawalibi:

whole story. Because so far, all of the advertising we've seen in

Paul Dawalibi:

any Metaverse is like, slap a logo or like a banner,

Paul Dawalibi:

essentially, in the virtual world. In the same way, you may

Paul Dawalibi:

have a, you know, a digital sign on the highway in the real

Paul Dawalibi:

world, right. Like there's, there's not much innovation that

Paul Dawalibi:

has happened there. And if Roblox sort of figures that out

Paul Dawalibi:

unlocks that, that could be really massive, right? Like that

Paul Dawalibi:

could be pretty consequential for the entire Metaverse story

Jeff Cohen:

100% agree. And it's not really something that I

Jeff Cohen:

think investors had really baked a ton into in their projections,

Jeff Cohen:

like, they were probably more thinking in terms of user

Jeff Cohen:

monetization, like in app purchasing avatars, purchasing

Jeff Cohen:

skins, if they can really unlock like an advertising side of the

Jeff Cohen:

business and make that you know, 20 or 30% of revenue. That that

Jeff Cohen:

is, that would be kind of game changing. Funnily enough, my one

Jeff Cohen:

of my impressions for whatever reason, maybe it's just having

Jeff Cohen:

heard Roblox talk a lot and listened to their investor days

Jeff Cohen:

and stuff in the past, I almost was alarmed by the focus on

Jeff Cohen:

monetization a little bit. And I'm putting my tinfoil hat on.

Jeff Cohen:

Like, it almost felt to me like what's like the Shakespeare

Jeff Cohen:

thing, like the lady doth protest too much, like, because

Jeff Cohen:

it was sterically, their line has always been like, look,

Jeff Cohen:

we're about user growth, we're about to experience the

Jeff Cohen:

platform, like, we don't care about money, you know, like,

Jeff Cohen:

people will monetize. But like, we're not trying to like, shake,

Jeff Cohen:

turn them over and shake the coins out of their pockets. And

Jeff Cohen:

the fact that they made like half the shareholder letter

Jeff Cohen:

about like, look at all these ways we can, like don't worry,

Jeff Cohen:

Wall Street, like we're gonna monetize, almost made me like

Jeff Cohen:

feel like that, like, worse about it as an investor.

Paul Dawalibi:

Interesting, that is kind of like that. tinfoil

Paul Dawalibi:

hat theory weapon. It makes sense, right? It could be the

Paul Dawalibi:

distraction like, I don't worry like that it's slowing here

Paul Dawalibi:

because we're gonna figure out how to squeeze more out of what

Paul Dawalibi:

we've got.

Jeff Cohen:

Right? Like an ending to or like any one of

Jeff Cohen:

what we think is like this, you know, you're on record saying

Jeff Cohen:

they're gonna have more users than Twitter in however many

Jeff Cohen:

years our bet is, like, you know, we're expecting them to

Jeff Cohen:

get to two 300 million, you know, daily monthly sort of

Jeff Cohen:

monthly active players I think there are 50 so if they're

Jeff Cohen:

starting to say hey, like monitor, it's all about

Jeff Cohen:

monetization now like that, as a long term investor would

Jeff Cohen:

probably worry me just maybe reading between the lines a

Jeff Cohen:

little bit and and maybe they're just putting some of this stuff

Jeff Cohen:

in there because they see the market and every stock is

Jeff Cohen:

getting killed, you know, right now and growth plans so maybe

Jeff Cohen:

they they're, they want to play up the monetization side but a

Jeff Cohen:

little something in my head kind of just like made my alarm bells

Jeff Cohen:

go off a little bit.

Paul Dawalibi:

i I wonder what is hampering the user growth at

Paul Dawalibi:

Roblox? Like why is it why is it not growing? You know, 50% a

Paul Dawalibi:

quarter and I'm exaggerating but like, what what is stopping the

Paul Dawalibi:

growth at Roblox or what is slowing the growth at Roblox? Is

Paul Dawalibi:

it an inability to break out of their age range? Is it not

Paul Dawalibi:

enough novel experiences built by developers? Is it not enough

Paul Dawalibi:

awareness because Roblox truly is not doesn't have the same

Paul Dawalibi:

presence of of mind or mind sharing that in the mainstream

Paul Dawalibi:

community as like a Minecraft or fortnight?

Jeff Cohen:

I think it is that a lot. I'd be curious to know how

Jeff Cohen:

their, their their advertising, like where, you know, clearly

Jeff Cohen:

kids are finding this. Like I'm always whenever I'm with my

Jeff Cohen:

cousins and stuff. They're always talking like I'm always

Jeff Cohen:

surprised that they are playing and talking about robots, but

Jeff Cohen:

it's not like you see ads on TV or like You know, if you watch

Jeff Cohen:

cartoons with your kid on the week, it's not like you see a

Jeff Cohen:

Roblox ad. So I'm not sure what how they're actually targeting

Jeff Cohen:

these kids. Which thing to say targeting these kids, but I'm

Jeff Cohen:

not sure how they're getting their name out there.

Paul Dawalibi:

Yeah, that may be the issue. Let's let's switch

Paul Dawalibi:

over here to unity because unity also had a bit of a problematic

Paul Dawalibi:

quarter. And the headline here, so this is from MarketWatch. The

Paul Dawalibi:

headline here says unity software stock plunges nearly

Paul Dawalibi:

30% On week revenue guidance. So this is on Tuesday of last, like

Paul Dawalibi:

if you're listening to this well, on Monday, when this comes

Paul Dawalibi:

out, this would have been Tuesday of last week. And so

Paul Dawalibi:

they reported first quarter results, largely in line with

Paul Dawalibi:

Wall Street forecasts, they reported a net loss of 177

Paul Dawalibi:

million, compared with 107 point 5 million in the year ago

Paul Dawalibi:

quarter. So they're losing more money than they did a year ago

Paul Dawalibi:

in the same quarter. But revenue increased 36%, which is not

Paul Dawalibi:

insignificant. And unity said that q2 revenue should be

Paul Dawalibi:

between 290 and 295 million, while analysts anticipated 360

Paul Dawalibi:

million. So it seems like the analysts are expecting faster

Paul Dawalibi:

growth than the company believes they can achieve. And again, are

Paul Dawalibi:

there any alarm bells for you here? Or is it just market

Paul Dawalibi:

softness,

Jeff Cohen:

I think it's a bit of a bit of market softness.

Jeff Cohen:

Again, you know, this story, I'm a little less in tune with than

Jeff Cohen:

the Roblox store, because unity is more of a software to b2b

Jeff Cohen:

software company. So it's, even though it is a gaming company,

Jeff Cohen:

it really trades like a, like a SaaS company. So as I understand

Jeff Cohen:

that, the quick, I guess, the quick take is that unity has

Jeff Cohen:

sort of two sides of the business. One side is the SAS

Jeff Cohen:

business where, you know, if you're a developer on unity, you

Jeff Cohen:

pay them, you know, on a per seat basis for a subscription.

Jeff Cohen:

And then the other side is really almost like an ad

Jeff Cohen:

network, and they have a bunch of stuff that helps monitor

Jeff Cohen:

these developers then monetize their game. And that's paid for

Jeff Cohen:

on like a per usage basis. So I think there was an issue on that

Jeff Cohen:

side of the business, like the ad piece, and it had some, you

Jeff Cohen:

know, something to do with the Apple changes that have gone

Jeff Cohen:

into effect in the last year. Basically, there was some, some

Jeff Cohen:

change that caused them to have their growth be slower. And so I

Jeff Cohen:

think that was a big piece. And then they talked a lot about in

Jeff Cohen:

the call how it's going to take them a few quarters to like ramp

Jeff Cohen:

back up to the same growth on that side of the business. So

Jeff Cohen:

yeah, I mean, it's interesting. I will just go you know, full

Jeff Cohen:

disclosure, I bought some of the some stock today in Unity. For

Jeff Cohen:

my my PA, it just seemed like the stock is at such a fall from

Jeff Cohen:

where I think it was over $200, like, a few months ago. And I

Jeff Cohen:

just see how 85% In the last six months. So I just see how

Jeff Cohen:

valuable unity is in terms of an engine. Like I know, you spoke

Jeff Cohen:

at the top about Unreal Engine, and we were talking about

Jeff Cohen:

immersive worlds and stuff like that. Unreal is the number one

Jeff Cohen:

engine the one to go with. But when you're talking about mobile

Jeff Cohen:

gaming, I mean unities market share is passing. Well, well

Jeff Cohen:

over 50%. And they're doing a lot in terms of Metaverse, web

Jeff Cohen:

three, like a lot of the gaming companies that are building web

Jeff Cohen:

three games are building them on unity. So I think it's a pretty

Jeff Cohen:

strategic asset. And, you know, at the I think it's like a $9

Jeff Cohen:

billion company now, the growth of gaming and just still the

Jeff Cohen:

popularity of mobile gaming. Throwing web three. I think it's

Jeff Cohen:

too cheap.

Paul Dawalibi:

I want to keen on something you said you're

Paul Dawalibi:

because Unity has market share very similar to Unreal, right.

Paul Dawalibi:

And in some ways on mobile, they're stronger, but very

Paul Dawalibi:

similar, like pretty apples to apples comparison between Unity

Paul Dawalibi:

and Unreal Engine when it comes to sort of market share size,

Paul Dawalibi:

scope, you know who it reaches, etc. And you're right. A lot of

Paul Dawalibi:

web three developers are building on unity. What I find

Paul Dawalibi:

interesting, and this is totally anecdotal. I rarely see any

Paul Dawalibi:

articles or any kind of press or any kind of communication from

Paul Dawalibi:

Unity, talking about Metaverse, web three, like almost nothing,

Paul Dawalibi:

but they have not tied themselves to that horse at all.

Paul Dawalibi:

Whereas epic very much has right epic talks about it quite

Paul Dawalibi:

frequently, and Unreal Engine in that context. And I wonder if

Paul Dawalibi:

part of it is just they haven't done a good job of communicating

Paul Dawalibi:

sort of what they are doing in that space in this space.

Jeff Cohen:

I think that's a fair point. It's funny you say

Jeff Cohen:

that because right before before taping, I had Mad Money. This

Jeff Cohen:

has become like the final episode, which is funny, but I

Jeff Cohen:

was watching Jim Cramer like mad money on CNBC and John reputa.

Jeff Cohen:

Oh with on being interviewed. And he actually said something

Jeff Cohen:

around Metaverse like basically like, that's become a buzzword

Jeff Cohen:

like we don't even think about Like we don't talk about that,

Jeff Cohen:

like we're, you know, we're were like building he kind of like

Jeff Cohen:

said we're doing all these things but was like the

Jeff Cohen:

metaverse has become a buzzword like here's what we're, you

Jeff Cohen:

know, we have 70% market share on mobile. He kind of like was

Jeff Cohen:

like, this is the tangible stuff we're doing, like all this

Jeff Cohen:

Metaverse stuff is just a distraction. So it's funny that

Jeff Cohen:

you said that it seemed like almost it's like, part of like a

Jeff Cohen:

conscious decision, not the hype up Metaverse speech, which if we

Jeff Cohen:

were talking three months ago would have been negative but now

Jeff Cohen:

it seems like maybe that's a positive a good strategy. Yeah,

Jeff Cohen:

it

Paul Dawalibi:

feels like a bit of a miss. Right. And when your

Paul Dawalibi:

stocks down at 5% in the last six months, maybe that's not the

Paul Dawalibi:

hill to die on. Right, like seeing worse hills to die on,

Paul Dawalibi:

but that one's not a good one. All right, let's get to our last

Paul Dawalibi:

story. Here. We have a an interesting one here. This is

Paul Dawalibi:

news from VentureBeat. The headline here is irreverent or

Paul Dawalibi:

GamesBeat irreverent labs confirms $40 million round

Paul Dawalibi:

funded by Andreessen Horowitz and others. So this is talking

Paul Dawalibi:

about a reverent labs, their web three game developer, they've

Paul Dawalibi:

confirmed that they've raised 40 million to create Mecca

Paul Dawalibi:

fightclub, a robot cockfighting game that uses NF T's This is

Paul Dawalibi:

the founder here is the was the founder of voodoo PC who I think

Paul Dawalibi:

they sold to, I want to say HP I think or Dell, Dell or HP bought

Paul Dawalibi:

and

Jeff Cohen:

then bought or all said it was also the founder of

Jeff Cohen:

unicorn which is that they didn't let's that is they just

Jeff Cohen:

sold they were the sports betting company that you know

Jeff Cohen:

was backed by Mark Cuban and had a had a lot of success and then

Jeff Cohen:

about failure but then was recently sold to obtain a

Jeff Cohen:

massive gambling company so

Paul Dawalibi:

so it's a play to earn game. You you the Mecca

Paul Dawalibi:

fight clubs. I'll read this from the article. fight clubs

Paul Dawalibi:

chickens are mega bots with NF T's which use the blockchain to

Paul Dawalibi:

verify the uniqueness of each chicken played to earn. Players

Paul Dawalibi:

can own the characters that they buy and profit from if they can

Paul Dawalibi:

resell them to someone else once they're leveled up. While

Paul Dawalibi:

cockfighting is controversial, it's popular in Asia, and the

Paul Dawalibi:

creators are aware that the people are concerned about the

Paul Dawalibi:

cruelty of the real world sport. And so the developers are

Paul Dawalibi:

emphasizing humorous combat, not gory realism. So you'll collect

Paul Dawalibi:

train and battle combat robots. Sounds a little bit like Pokemon

Paul Dawalibi:

to be honest. And each mech robot has unique styles,

Paul Dawalibi:

abilities, preferences, etc. So big round $40 million for

Paul Dawalibi:

cockfighting.

Jeff Cohen:

I mean, if you had read that story to me, a year

Jeff Cohen:

and a half ago with nothing like I wouldn't believe the single

Jeff Cohen:

you've said this before. Later earn like a virtual digital

Jeff Cohen:

cockfight where you earn money, like fighting your Cox, like

Jeff Cohen:

it's crazy. But the craziest part actually, of all, this is

Jeff Cohen:

like we really crossed the Rubicon in terms of Andreessen

Jeff Cohen:

Horowitz backing something like a content play like this, like,

Jeff Cohen:

for the longest time, I mean, gaming was really shone that

Jeff Cohen:

large VCs because it was, hey, it's too hit driven. It's, you

Jeff Cohen:

know, it's cyclical, blah, blah, blah, there's too much risk in

Jeff Cohen:

the content cycles. And if they were even going to look at or

Jeff Cohen:

touch gaming, it was, hey, we're interested in platforms, we're

Jeff Cohen:

interested in tools and technology, and a picks and

Jeff Cohen:

shovels plays, the fact that we're now seeing, you know, a

Jeff Cohen:

venerable VC firm, like Andreessen Horowitz investing in

Jeff Cohen:

this, which, I mean, good for them, I wish them a lot of

Jeff Cohen:

success. They clearly founders have a track record of exits. So

Jeff Cohen:

that's probably what, what Andreessen is betting on, but

Jeff Cohen:

this is a pure content play. If the game doesn't work, the

Jeff Cohen:

money's gone. Like there is no backup plan. So yeah, I mean,

Jeff Cohen:

this It's surprising. I don't know if you as a VC, if you have

Jeff Cohen:

any thoughts on that.

Paul Dawalibi:

I mean, this has to be all about the founder.

Paul Dawalibi:

Right? Like, I have to believe that this is essentially almost

Paul Dawalibi:

like a favor because I just feel like there's a lot of risk here.

Paul Dawalibi:

First of all, just in like, the the nature of the content,

Paul Dawalibi:

right? And I get maybe it's an Asia play, which where I firmly

Paul Dawalibi:

believe that played earn is probably only going to survive

Paul Dawalibi:

in developing countries, not in North America. So maybe the

Paul Dawalibi:

whole cockfighting like, subject matter is fine then, but I can

Paul Dawalibi:

see how this gets backlash in a place like the US where people

Paul Dawalibi:

are a lot more sensitive to these things, and are much more

Paul Dawalibi:

vocal about these things. So I'm not I'm not 100% Sure, where the

Paul Dawalibi:

innovation is coming from, like, what justifies a $40 million

Paul Dawalibi:

investment in something that is no different than just about any

Paul Dawalibi:

other fighting game. Other than the fact that it's an NFT,

Paul Dawalibi:

right? Like you've integrated NF T's. And I think that's where

Paul Dawalibi:

the blockage for me is, it's, you know, where where is the

Paul Dawalibi:

10x 100x kind of return? If we believe that if like, unless you

Paul Dawalibi:

believe the economics of adding in the NF TS changes the game so

Paul Dawalibi:

drastically. This is a hard one to get my head around. And I'm,

Paul Dawalibi:

I'm, I'm just skeptical that anyone will care to play this

Paul Dawalibi:

beyond like, a bit of a meme thing that some streamer will do

Paul Dawalibi:

for like, an hour. And then there's not much to it right?

Paul Dawalibi:

Like, you, this really has to be the next Pokemon to justify a

Paul Dawalibi:

$40 million investment. That's the way I think about it. Right?

Paul Dawalibi:

It has to be the next Pokemon. And I don't know if you know,

Paul Dawalibi:

the same way I buy Pokemon cards for my five year old nephew,

Paul Dawalibi:

will I go buy him? You know, Mecha COC whatever? Like? I

Paul Dawalibi:

don't know, I don't think so. And so, it seems disconnected

Paul Dawalibi:

from the size of the investment. If this was like 4 million, and

Paul Dawalibi:

it's a flyer, and, you know, you want to test out something fun,

Paul Dawalibi:

and you're investing in 50 of these, I guess with Andreessen,

Paul Dawalibi:

they can invest in 50 of these and they can still put this

Paul Dawalibi:

amount of money. And so the economics may be different, but

Paul Dawalibi:

I just, I just don't see it. I mean, they say the discord

Paul Dawalibi:

community has 25,000 fans. I mean, hey, our sister pie are

Paul Dawalibi:

like meta TV, our parent, that's discord community of the same

Paul Dawalibi:

size, right? Like, this is not Yeah, this is not, you know,

Paul Dawalibi:

World of Warcraft, Counter Strike level of interest,

Jeff Cohen:

right? And assume that even even, you know, I

Jeff Cohen:

think 10% of those people getting 10% of those people to

Jeff Cohen:

actually download and play the game would be probably a massive

Jeff Cohen:

success. Think about how much money they'd have to spend to

Jeff Cohen:

even come close to justifying anything near this $40 million

Jeff Cohen:

raise. That'll be in the fall.

Paul Dawalibi:

It'll be interesting to follow. And, you

Paul Dawalibi:

know, I would be curious to see long term, how many of these

Paul Dawalibi:

plays and recent puts in their fund for example, right? Is it

Paul Dawalibi:

five? Is it 10? Is it 25 bets? Like I can't wait to see sort of

Paul Dawalibi:

the overall picture come become clear in terms of their thesis.

Paul Dawalibi:

Jeff, that wraps up this week's podcast flew by. As always guys,

Paul Dawalibi:

make sure to subscribe, leave a review, go follow the juice on

Paul Dawalibi:

Twitter at Jeff Cohen 23. Instead of following Mecca,

Paul Dawalibi:

Fight Club, whatever, go follow Jeff Cohen 23 on Twitter. Also

Paul Dawalibi:

make sure to share the podcast with your friends with your

Paul Dawalibi:

colleagues, anyone you know operating in this industry, put

Paul Dawalibi:

it on your LinkedIn. Get people talking about it. We really

Paul Dawalibi:

appreciate it. Don't forget the future is fun, guys. We'll see

Paul Dawalibi:

you next week.

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About the Podcast

META Business
From the metaverse to the boardroom...
Meta Business tackles the most important Metaverse industry news. Business experts dissect and discuss all of the hottest topics and happenings, from a unique C-suite perspective.

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Paul Dawalibi