Unity can get bought by AppLovin or merge with ironSource, but it can’t do both.

AppLovin offered to buy Unity yesterday in a deal that would value Unity at about $20 billion. It’d be a tough deal to pass up, but it comes with strings attached.

• Unity would have to give up its proposed $4.4 billion acquisition of ad tech and monetization company ironSource if it accepts a deal with AppLovin. And while Unity would control 55% of the new company’s shares and CEO John Riccitiello would remain in charge, Unity would only have 49% of the voting rights. Unity said it received the offer and would evaluate it.
• AppLovin would clearly be at a disadvantage if Unity follows through with the ironSource purchase; ironSource is an AppLovin competitor, and any merger with Unity would improve one or the other’s competitive advantage in the digital advertising and gaming markets.
• Eric Seufert, editor of the trade blog Mobile Dev Memo, called the proposed transaction “musical chairs on mobile,” saying, “This merger would marry two scaled ad networks with a formidable source of in-app games advertising supply.”

Regardless of where Unity goes, consolidation was inevitable.

• Apple made key changes to iOS’s data-tracking rules last year meant to improve privacy for users. Those changes drove some ad tech firms out of the market. Even larger companies like Unity have struggled with the changes, in part because Apple’s new opt-in privacy measures have made it more difficult to track the effectiveness of ads that drive user acquisition in mobile gaming.
• Seufert said these mobile app mergers have been predictable for some time now; Apple’s new rules just accelerated the process. AppLovin, for example, has been busy — it’s already purchased mobile ad and gaming companies including MoPub, Adjust and Machine Zone.

Unity’s either going to make AppLovin’s or ironSource’s life a lot easier soon. If it goes with AppLovin, it’ll become a major player in mobile gaming and the ad channels that support it, but it might also be giving up some control over its future in the process.

— Sarah Roach