Four years ago, Unity Software (U) was one of the market's hottest stocks... The tech company already dominated the video-game space. And its shift into advertising put it on a path to becoming the "next Google."

Poor Decisions Ran the 'Next Google' Into the Ground By Marc Chaikin, founder, Chaikin Analytics Four years ago, Unity Software (U) was one of the market's hottest stocks... The tech company already dominated the video-game space. And its shift into advertising put it on a path to becoming the "next Google." (I covered Unity's rise in yesterday's essay.) But the good times didn't last... Unity's downfall started in May 2022. That's when the company slashed its outlook for the year ahead. As part of that move, management disclosed major issues with one of its tools. Its Audience Pinpointer tool matches advertisers with users. But due to the tool "ingesting bad data from a large customer," the company took a $110 million hit on its revenue. The details are super technical. But the key takeaway was devastating... Unity's technology had big problems. And those problems were hurting its ad business. When the news broke, the company's stock plunged 37% in a single day. Then, two months later, CEO John Riccitiello created another big headache... During an interview tour, Riccitiello was promoting Unity's plan to buy another company. It should've been unremarkable – even boring. Instead, one of the interviews became a viral sensation... Recommended Links: New AI Super Chip Is 50 Times Faster Than Nvidia's Beginning days from now, this new AI super chip could launch an AI bull market bigger than anything we've seen yet and cause five little-known stocks to replace the Magnificent Seven. The man who recommended Nvidia before it rose 18,300% urges you to get positioned now. See his write-up and why this could make you 10 times your money if you position yourself by June 2. Prepare Now for May 31 He's one of the most controversial men on the planet. But Elon Musk's latest project could be his boldest yet, potentially making Tesla worth $25 trillion. It's part of what the Financial Times calls "an imminent revolution" – an event coming as soon as May 31. Get the story here before it's too late. You see, Riccitiello made an offhand comment. Specifically, he was talking about developers who weren't hyperfocused on monetizing their games. He said...   They're the most beautiful and pure, brilliant people. They're also some of the biggest f***ing idiots. Remember, this quote came from the CEO of a major corporation. And he was talking about his company's customers. The comment didn't make the front page of the "regular" news. But in the game-developer community, it triggered outrage. Publicly insulting your customers is obviously bad for business. And yet, Riccitiello was still digging a deeper hole. His next mistake would be his biggest... In September 2023, he announced a new pricing model called Runtime Fee. The new plan would charge Unity's customers a fee every time someone installed their game. That brought up a big problem for game developers... The new model made it nearly impossible to predict how much their games would cost. Once again, folks in the video-game industry went crazy. Industry website Game Developer cited the "seismic backlash" to the move and called it "an egregious act of betrayal." Unity tried to ease the pushback with more details about the new model. But ultimately, the company canceled the plan. It was too late, though... Unity's stock plunged more than 80% from its November 2021 peak through September 2023. You can see the decline in the following chart... Unity announced Riccitiello's resignation on October 9, 2023. The gaming community cheered his downfall. In a post on social platform X, an editor from Pocket Gamer sarcastically said... Sad to see Riccitiello go. Unity blunders are responsible for four out of the top five all-time most-read stories on my site. By the time Riccitiello resigned, Unity's reputation was severely damaged. And the company is still trying to rebuild its customers' trust. It's a shame... Unity could've kept paving its way to becoming the next Google. By early 2021, the company had started shifting its focus to ad-related services. And as you can imagine, advertising is a much bigger market than video games. But instead, thanks to Riccitiello's missteps, we're talking about its downfall today. It's another example of how much leadership decisions matter. A company can be full of promise – like Unity. And yet, things can still blow up if the top brass is out of sync with customers. Good investing, Marc Chaikin Market View Major Indexes and Notable Sectors     # Hld:     Bullish     Neutral     Bearish Dow 30 +1.81% 8 17 5 S&P 500 +2.08% 98 268 133 Nasdaq +2.35% 25 58 17 Small Caps +2.54% 433 1005 448 Bonds +1.4% Consumer Discretionary +2.95% 3 30 18 — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are somewhat Bearish. Major indexes are mixed. *  *  *  * Sector Tracker Sector movement over the last 5 days Consumer Discretionary +0.39% Communication +0.19% Materials +0.09% Industrials -0.31% Consumer Staples -0.31% Information Technology -0.63% Financial -0.8% Energy -1.06% Utilities -1.33% Real Estate -1.36% Health Care -1.89% *  *  *  * Industry Focus Bank Services 26 69 2 Over the past 6 months, the Bank subsector (KBE) has underperformed the S&P 500 by -11.78%. However, its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #2 of 21 subsectors and has moved up 1 slot over the past week. Top Stocks ABCB Ameris Bancorp ASB Associated Banc-Corp AX Axos Financial, Inc. *  *  *  * Top Movers Gainers HOLX +14.54% DECK +7.83% TSLA +6.94% RCL +6.42% TER +6.18% Losers FICO -11.26% VRSN -3.65% AZO -3.42% TPL -2.27% NEM -1.75% *  *  *  * Earnings Report Earnings Surprises HEI HEICO Corporation Q2 $2.31 Beat by $1.28 OKTA Okta, Inc. 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