Categories of companies…Applovin

Investment Analysis Clubs Saul’s Investing Discussions
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Edit:
How are the founders of Applovin able to say that they are adding incremental revenues to what Meta and Google are providing. Within the AdTech space how is Applovin opening up a new market of purchasers, from which their customers can measure purchase spend? They say that their technology is able to reach customers unrelated to those of Meta or Google, with which others compete. This sounds like its bit like a completely new market space for Advertising, no?

Saul 2019- from the side panel, under the links for Saul’s Knowledge Base.
Category Crushers-
About a year ago, in May last year, I realized that one of my criteria for investing was to pick companies that dominated their markets. I made up a list of categories, which follows below.
(Me:each appears to encapsulate all below it):

First there’s a Category Crusher, which completely dominates its space (Amazon is an example, in online retail). (Me: this includes those without credible competitors, Companies that are Creating a new Market- they’re not just trying to take or keep market share, to win eg: Applovin, Palantir?).

Second would be a Category Leader, which puts this company in first place in its space, but where there are significant competitors.

Another category would be a Disruptor, a company trying to disrupt a stagnant market with new stuff.

New Market Stocks with respect especially to Big Data New Market Stocks. (Othalan suggested this addition and it’s a great suggestion).

Then there is a Rapidly Growing Company in a Rapidly Expanding (New) Market. It’s not dominant, and not necessarily the leader, but it’s growing rapidly because its market is growing rapidly.

Then there’s a Rapidly Growing Company in a Normal Market.

Me here (again)-

I don’t know about the rest of you; but, I hadn’t read that for a couple years. I see immense value is Saul’s words above. And that’s likely why it’s so complicated to convey what category each company is in, when we write our portfolio summaries each month.

Above, in parentheses, I suggested that Applovin and Palantir might have reason, IMO, to be placed into the Category Crusher level on the VIN diagram suggested in Saul’s post. It’s my uncertainty in this that is likely why I no longer own Palantir and my position in Applovin is so small, on a relative basis.

If the CEO’s for Palantir and Applovin are to be taken at face value for their repeated statement about having no competition, does this mean that they’re essentially creating new market/s? Because no one is privy to the AI algorithms, does that mean we are forced to take their words at face value?

I hope to hear from you regarding why you agree or disagree about my attempt to include either Palantir or Applovin in the category subsuming many of the other categories.

Best

Jason

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I don’t know much about Palantir.

For Applovin, I’m of the opinion that they are a Category Leader in mobile gaming AND Disruptor in the e-commerce space.

They are a clear leader in Mobile Gaming advertising and yet there are definitely other big players in that space…I’d be curious how they compare to Google and Meta even in mobile gaming advertising. And it seems that they are prime to disrupt the e-commerce space which has been owned by Meta, Google and Amazon with other ad-techs in that space as well.

But Applovin isn’t creating a new market nor are they without credible competition. Ultimately they ARE stealing market share from other media vendors/technologies.

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Thanks Prust,

I edited my initial post, at the very top end of it, in response to yours.

Thanks

I agree now that Applovin appears to be more of a Category Disruptor … I’m still curious how and where (within mobile and now e-commerce and in what way are they going to be different/disrupt CTV) are the customers being engaged by Applovin, that is so different from anyone else?

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To answer my own question to further specify my above question:a bit of a rehash of prior posts, sorry.

  • Integration with Mobile Campaigns: Through AppDiscovery, advertisers can manage both mobile and CTV campaigns from one platform, providing a seamless experience. This integration allows for a unified strategy where CTV can complement mobile campaigns, driving additional installs or actions from viewers who are in a more relaxed, home environment.

  • Creative Optimization: AppLovin’s SparkLabs offers custom, high-performing CTV ads, optimizing existing creatives or creating new ones to fit the CTV format. This reduces the creative burden on advertisers, making CTV a more accessible channel for performance marketing.

I believe Spark Labs is the crux of my interest. How does this measure up with others, cause I see The Trade Desk doing similar things otherwise, no?

Disruption in CTV:

  • Incrementality: By focusing on performance metrics like installs and conversions, AppLovin allows marketers to assess the real impact of CTV ads, introducing the concept of incrementality where they can measure how ads contribute beyond what other channels might achieve.

  • Interactive and Measurable: Unlike traditional TV ads, AppLovin’s approach to CTV includes interactive elements and precise measurement, aligning CTV with digital advertising practices for better accountability.

  • Scale and Reach: AppLovin’s access to a broad range of CTV inventory, including through partnerships like Wurl, enables them to offer scale while maintaining performance efficiency, something not commonly seen in traditional TV or even other CTV advertising platforms.

In summary, AppLovin’s differentiation lies in its transition from a mobile-centric company to one that effectively leverages performance marketing across mobile, e-commerce, and CTV, with a strong emphasis on data-driven advertising, cost efficiency, and measurable outcomes. This approach not only disrupts the standard advertising methods in CTV but also provides a cohesive strategy for advertisers looking to engage customers across various platforms.

I believe Spark Labs is the crux of my interest. How does this measure up with others, cause I see The Trade Desk doing similar things otherwise, no?

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Ok I Grok’d this … can anyone verify the truth of it?

AppLovin’s SparkLabs has carved out a distinctive niche in the mobile advertising creative space, but how it measures up to its competition involves looking at several key metrics and strategic advantages, as well as areas where others might outperform:

Creative Production and Optimization:

  • AppLovin SparkLabs:

    • AI-Driven Creativity: SparkLabs has significantly integrated generative AI into its workflow, which led to a 170% increase in AI use for creatives in 2023, resulting in a 118% rise in win rates for ad creatives utilizing generated speech. This approach not only boosts productivity but also enhances creative output by automating mundane tasks, allowing more time for creative exploration.
    • Customization and Testing: They offer tailored creative solutions, with a focus on performance, including A/B testing creatives to optimize for metrics like CTR, IR, ROI, and ROAS. Their in-house capabilities have led to notable successes, such as with games like “Park Master” where they optimized ad creatives for better performance.

  • Competitors (e.g., MOLOCO, Vungle, ReadyUp):

    • Operational Machine Learning: Companies like MOLOCO focus on machine learning for ad optimization across multiple sectors, but might not have the same level of in-house creative production as SparkLabs. Their advantage might be in broader application areas outside of just ad creatives.
    • Specialized Tools: Vungle, before its acquisition by AppLovin, was known for its video ad technology, offering rich media formats but might not have the same level of AI-driven optimization for creatives as SparkLabs now does.

Performance Metrics:

  • AppLovin SparkLabs:

    • ROI and ROAS Focus: With a performance-driven approach, SparkLabs measures success not just by ad views or clicks but by how effectively ads contribute to installs, revenue, and other down-funnel events. Their 2024 report highlights trends where their ads captured significant campaign spend, indicating high performance and efficiency in ad spend utilization.
    • Scalability and Efficiency: They’ve reported saving over 1,600 hours in creative processes through AI, allowing them to scale production significantly while maintaining quality, a metric not often quantified by competitors in the same way.

  • Competitors:

    • Diverse Metrics: Competitors might emphasize different KPIs like user acquisition cost, lifetime value (LTV), or engagement rates, depending on their platform’s strengths. For instance, ReadyUp might focus more on community engagement metrics given its gaming event platform nature.

Market Position and Innovation:

  • AppLovin SparkLabs:

    • Innovation in AI: Their push towards AI, especially in creative production, positions them as innovators in using technology to enhance ad performance. Their reports and webinars on AI in ad creatives suggest a proactive approach to staying ahead in tech trends.
    • Cross-Platform Expansion: They’re actively expanding into CTV advertising, leveraging their mobile ad expertise, which is less common among competitors still focused primarily on mobile or gaming.

  • Competitors:

    • Niche Focus: Some competitors might excel in niche areas. For example, Zitcha focuses on retail media, potentially offering more specialized solutions for that sector.
    • Community and Event Engagement: ReadyUp or Mainstage Gaming Network might have strengths in community-driven engagement or event-based marketing, providing a different kind of value to advertisers focused on gaming communities.

Conclusion:

  • Strengths of SparkLabs: AI integration for creativity, performance-based metrics, and cross-platform (mobile to CTV) strategy give SparkLabs a competitive edge in terms of efficiency, scale, and direct impact on business outcomes.
  • Areas of Competition: While SparkLabs leads in certain areas, competitors might offer deeper specialization in different sectors or excel in community engagement, event marketing, or other specific advertising use cases.

Overall, AppLovin’s SparkLabs is highly competitive due to its focus on leveraging AI for both creative and performance optimization, but its exact standing can vary when considering the specialized offerings of other players in the market.

Best

Jason

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I would like to first go back to your question of “is Applovin engaging customers differently”.

I believe yes and it’s really important as I mentioned is my personal reason for taking a position even after the insane run-up in price. They are going client-direct, and making it really easy to side-step agencies. Which is why I think they’ll be successful quickly in eComm. From what I know, TTD is really an agency solution at this point, or a brand with a big media buying team. It requires people trained in it.

I wasn’t aware of SparkLabs really. But on the creative side, there are other media companies that offer customization for platform (TikTok, Roku, many others will offer that in a contract), I’m not sure about being AI generated though. It’s gotta be coming from Meta and Google. But it seems like a really strong tool for Applovin considering they are circumventing agencies, who may have their own AI solutions or feel that AI is not a good solution. It will only make their overall AI solution more stronger as they mix in creative variables.

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