Here is some positive commentary on APP from e-commerce analytics company Northbeam. ROAS looks strong for clients.
Also, CNBC story on APP today shows that Wall Street still likes APP, despite the short seller noise, including a new bullish note by PiperSandler. Currently 22 Buy & only 2 Sells by Wall Street Analysts:
AppLovin shares fall as short sellers target the stock - YouTube
That CNBC story covered it pretty well. First the Fuzzy Panda bear case is hard for anybody to define easily except to say, “Short sellers are questioning the integrity of their platform”.
One of the CNBC hosts said “Sell side community, Jefferies among others are saying if this AI platform didn’t work well they wouldn’t be buying”
The other analyst replied, “That is always the backup, advertisers know what return on investment is and presumably they wouldn’t use if they didn’t have it.”
It’s clear to the CNBC analysts these short reports look bogus from the start. Return on Ad Spend (ROAS) is a simple calculation for advertisers. They look at how much they spent on ads and how much revenue those ads generated. AppLovin’s product stands out with the superior ROAS it provides, and it seems like some just cannot accept this fact.
The AppLovin Twitter account has been reposting some of the more positive feedback on Twitter from their e-commerce pilot. To be fair, this is the company sharing this, but it seems to come from a variety of industry insiders in the AdTech space,
There’s also some other bizarre claims that cropped up on Twitter these past few weeks, that again don’t even really make sense. Not sure these are even worth investigating, but I’ll post them here just to surface it.
Someone replied with this humor,
“using Applovin + strategically decreasing Meta spend.”
…that’s actually potentially concerning imo:
$APP’s narrative is that spending with $APP doesn’t decrease spending with $META. I think $APP wants, and maybe even needs, that to be true.
As far as I can tell, $APP basically needs $META. $APP is using $META to filter for only low-risk customers (…you can’t get onto the $APP platform unless you spend a minimum amount of $$ with $META).
Also, $APP is leveraging Creative content originally built for $META. Essentially they don’t have to spend money consulting with Customers over Creative content, because $META is spending that money and $APP gets the benefits for free.
Maybe $META thinks this is all ok as long as $APP isn’t siphoning income away. However “using Applovin + strategically decreasing Meta spend.” sounds a lot to me like Applovin siphoning ad spend away from $META. If there’s too much of that $META may start scrutinizing their relationship with $APP more closely.
Laurin Balik was the author of the APP short report I posted in January. She had a highly dubious claim at that time. She’s moved on to a different highly dubious claim. I read somewhere (maybe it was one of the replies to my January post?) that she’s also the author of several conspiracy theories. It appears that she has an active imagination. Probably best to not take investment advice from this woman, but that’s just my opinion.
@intjudo I can’t speak on the requirements to spend with Meta, but I can tell you that repurposing creative built for another platform is not new or an Applovin exclusive offer. Other programmatic platforms offer the same thing. And there are other services that adapt traditional videos for social, etc.
Meta is the biggest copycat in the modern media landscape, so it would be certainly strange if they put up a fight about this stuff.
@intjudo You might know more than I do, it is true that Adam (APP CEO) has asserted that they have a parallel market with META with little overlap in end customers. In other words advertising on APP should have little impact with respect to advertising on META, it should be additive rather than zero sum.
I don’t know how an investor who does not advertise on either platform might test that assertion. But I would suggest that every business has limited resources. Most businesses would establish an advertising budget and that would pretty much dictate how much their total spend will be irrespective of the way in which they spend it.
And again, you might have more information than I do, but you alluded to a relationship between APP and META. And further suggested that META’s spend with APP was discretionary. The only relationship that I’m aware of is that META uses APP’s MAX auction platform for ads placed on mobile devices. The only discretionary part would be if META pulled back on their advertising on mobile. META does not have the option of placing their ads with a competitive auction platform because there isn’t one.
As for the demand for a minimum spend with META in order to get on the APP e-commerce pilot - I’m simply ignorant of this requirement. Your post is the first time I’ve heard of it.
However, APP does have requirement for a minimum advertising spend on their platform in order to participate in the pilot. Adam said they intend to eliminate this requirement once they get the self serve function operational. The requirement for the minimum spend is there in order to defray the cost to APP of the onboarding labor. Once onboarding is automated this cost goes away and so too will the related spend requirement (I think I read this in the transcript of the most recent cc).
As for hijacking META’s creative - I just don’t know about that. I’m not sure that it even is META’s creative. I know a lot has changed in the advertising industry, but traditionally the creative is the property of the client. This is part of what they paid an advertising agency for and it was at the client’s discretion as to how they used their property. However, again traditionally, the contracts between an ad agency and a client included a certain amount of spend to go to ad placement. The agency would make the decisions regarding where and when to run the ads. The agency would decide on allocations. so much for print, so much for radio, so much for TV, etc. and they would buy those placements on behalf of the client. The cost of ad placement would constitute the majority of the contracted dollar value. The amount that was devoted to creative was relatively small. How much of that model has persisted in the digital age is something I just don’t know.
That requirement was discussed by the CEO in his response to the short report. He said they are currently by hand onboarding new clients and they have requirements to make it worth their time because they have a backlog of people who want in. Its the step before people say they will do the requirement for minimum advertising spend for the pilot program. So you can treat it as the same and they plan on removing it after it goes fully automatic.
Drew,
@drew1618t Yes, exactly. This is what I wrote in my reply to @intjudo. The requirement has nothing to do with META whatsoever. In fact, if I remember correctly, the onboarding fee is collected in cash up front. It’s not based on how much the vendor will spend on advertising via AppLovin services. The requirement is based on the manual onboarding labor incurred by AppLovin and if we can take the CEO at his word it will go away entirely once they declare GA for AppLovin e-commerce functionality because the manual labor will be eliminated via automation.
…correct, and correct.
However if $META determines that $APP is siphoning money away from them, their perception of the relationship might change from “service provider” to “parasite” given that Meta’s data is used to drive Applovin’s platform. Not sure what they could do about it, but it’d be something to monitor.
Well, I don’t think META’s data drives AppLovin’s platform, or at least to much of an extent. AppLovin has accumulated data from gaming apps for years. Most of the people who see AppLovin ads are gamers.
Adam was challenged about this during a cc (I forget which quarter, but within the last year). He replied that people are people. Human response is the same. Further, there’s a common misconception about who the average gamer is. In fact, that person would be female in their 40s with some college education (you can check me on this, I’m shooting from memory, could be off, but not by a lot). The e-commerce pilot appears to have proved him right.
META just isn’t all that significant with respect to AppLovin’s AI. Additionally, if META decides that AppLovin is exploiting their ads by feeding it to AXON (just like they do with everybody’s data), what action are they going to take? I’m 100% confident that AppLovin has protected themselves from any legal exposure - so what action will META take?
I suppose they could decide they’d rather be a competitor than a customer. They could stop using MAX as the auction platform for mobile advertising and go where with their business? There’s no place to go. They could invest millions of $$$ and build their own platform, but you need two sides for an ad to make it into the general public. They would place that ad with what publisher - all of them are using MAX. Is META really going to try and lure them away from MAX? How would they be enticed to use META?
I just don’t see it happening even if META decides AppLovin is a “parasite.” According to Adam, all the big social media companies, META, Microsoft, Alphabet, Tencent, Twitter, etc. were reluctant to go with AppLovin at first. But they all came to the same conclusion. There was no alternative. If they wished to advertise on mobile, MAX was the only game available (pun intended). That’s still true. AppLovin wouldn’t lose all that much if the very big internet businesses left their platform.
@WillO2028 There’s competition and then there’s competition. Huh? Here’s what I’m getting at, AppLovin basically has three applications that are heavily used and generate income for them.
There’s the advertising function that has AXON, their AI engine driving the placement of ads. This app represents the vast majority of their income. There’s MAX, this is the instantaneous auction system that matches advertisers with content providers. They get a small commission (or percentage or fee or something that generates income). While the amount per transaction is very small, there are literally billions of transactions a day (or something like that). It adds up due to volume. And finally, there’s Adjust which provides analytics and reports.
When Bert says Unity might finally be getting their act together in order to compete with AppLovin, he’s referring to the advertising function. They don’t have a competitive product for MAX, in fact, no company has a competitive product for MAX.
I don’t know if FB uses AXON driven ad campaigns. I doubt it, but I really don’t know. I do know that FB uses MAX in order to place ads on mobile devices because there’s no alternative.
I say that MAX has no competition with a lot of confidence, but my knowledge is not first hand. I don’t advertise on mobile devices or anywhere else for that matter. I’m relying on what I’ve read. So if anyone can contradict my assertion, I’d love to hear about it and learn more.
My understanding of the AppLovin’s products is that they do not depend on Meta. While they may overlap using tracking that Meta offers, there’s dozens of ways that users can be tracked that are within iOS and Android guidelines. This means that losing ability to track a user in one fashion is not a big deal. AppLovin was able to adapt the enormous iOS privacy changes in 2022 fine, and Apple has said since then they will never do that big a change again as it disrupted so many different companies.
I believe the reason AppLovin made the requirement of having 600k monthly spend on Meta was for a couple of reasons. First they believe their platform has a better ROAS than Meta so a heads up comparison is going to convince these advertisers easily. Additionally, the assets such as images/sounds for the ads is cross compatible with Meta, so the advertiser does not need to do extra work.
AppLovin was also giving away a free 10k to spend for those early onboarding pilot customers. This article below says that the first 5-10k spent takes some time to learn the audience for the ads, then results improve dramatically after that. The author said they are able to onboard clients in less than 48 hours.
With regards to Unity getting back in the game for gaming ads, their platform previously lost nearly their whole client base overnight because AppLovin outperformed them while Unity was trying to rebuild their platform. Unity had a bunch of broken promises about delivery dates and performance but it was not able to compete. Last I listened their call and analysts were asking if customers would wait around out of loyalty. I doubt they will be able to get back into the space effectively over a year later now, but it’s worth keeping an eye on them.
My overall thesis is that revenue and profitability will shoot up massively once AppLovin’s e-commerce platform goes to general availability. There is already a lot of hype and buzz around the platform from industry insiders. It doesn’t get much better than the CEO saying there is a “long, long line out the door” to onboard. I suspect there will be a lot of skeptics of the results as well.
Just to be clear, did Bert give you the ok to post this?
Bert’s article is now generally available
