I believe this short report and the others are capitalizing on the fact that Apple iOS and Android rules and terms of service are complex even for software developers working with the technology every day. For many investors this may be enough to scare them out of their investment.
For the last number of years I was working in software development developing mobile apps as a backend engineer. While I wasn’t doing much iOS/Android development, I was working hand in hand with frontend engineers on the mobile apps often. One company I was at was a startup brokerage that was competing with Robinhood and had exclusively an iPhone app. The other company I was at was Fanatics, building out a sport merchandise, scores, and games app for both iOS and Android.
What I can say from those experiences is that it is almost impossible to slip by Apple’s rules. They policy is basically shoot first, and ask questions later. At both companies our App Store submissions were rejected for the flimsiest of reasons, in many cases it seems like Apple simply didn’t understand something the app was doing. If Apple even suspects an app may be doing anything wrong it will instantly be taken down until it’s resolved. For example the Fanatics app was labeled as a “gambling” app a number of times when there was no gambling aspect to the app, although it did have some prizes. It was a similar story with the brokerage app where probably over half the time the app was rejected from the App Store for supposed violations when the app was only doing straightforward and standard coding practices. This is all to say that nothing slips by Apple, they are extremely strict on their rules. So the idea that AppLovin has been violating iOS rules undetected for a number of years simply isn’t passing the smell test to me.
Also it’s important to keep in mind Apple never bans you even if you do something egregiously violating their terms. They will simply tell you to resolve it and won’t let your submission hit the App Store until it is resolved. Notice below when describing Cheetah Mobile, Google only removed them after they had engaged in “years” of misconduct without addressing the issues.
The short report first compares AppLovin to Cheetah Mobile (CMCM), a Chinese company which was blatantly engaged in egregious fraud, where the executives were later found guilty of insider trading. The company at it’s biggest market cap was 2B, or never running on the scale of AppLovin. Note that the Cheetah Mobile app was only able to run this fraud on Android because Android has more lax rules. Here’s a summary of some of their practices,
The report says, “numerous competitors will start copying APP’s techniques because there is little technology involved.”
This is in contrast to the company saying they have a multi-year lead on any competitors which is one of the most advanced systems built. They’ve said they could even open source their code without harm because of their data advantage. Additionally, AppLovin built their platform with practically no marketing. They started with indie developers who saw incredible results and word spread. Eventually bigger game studios got on board reluctantly. AppLovin also put Unity’s ads program basically out of business because it wasn’t delivering similar results.
The report says the e-commerce churn was “~23% in Q1”.
First Q1 isn’t even over yet. Secondly, are we supposed to believe that Muddy Waters has a comprehensive list of AppLovin’s clients, and knows exactly which ones churned and which ones didn’t? Did they speak with most of AppLovin’s customers to confirm this, and why would these firms share information with Muddy Waters?
There’s a lot of information in this report about using aggregation from Meta, Snap, Tiktok, Reddit, Google combined with Shopify Events to “jump the last click attribution claim”. However, the very first piece of evidence they present has a glaring inconsistency,
In this tiny text, it simply shows a script which downloading a zip file, extracting it, and then deleting it over and over. The part that is inconsistent, is that file there says “date=2024-05-10” (May 10) on every file, yet at the bottom it says it’s looking a date range from the start of 2025 to mid February 2025. I believe this report is expecting people to see some linux type of script and just have their eyes glaze over. Why is the report not explaining this image and having it in such tiny text?
The next piece of evidence presented is this grainy Youtube video with no sound. Any mobile developer knows there is a screen record for iPhone which is very high quality and easy to share. The four step description simply doesn’t match what happens in the video. At minute 1:32 it looks like the user is trying to clear their cache except they don’t go through Apple settings like the standard way. I even slowed the video down to 0.25x speed to see what program this is they are opening, but it’s impossible to tell because the video is too grainy.
Additionally, they are saying the user played Words With Friends, next visited Happy Mammoth, cleared their cache, and then turned on VPN. Then then go back to Words with Friends, and the video shows they see a bunch of different ads first: Microsoft Copilot, AG1, some slot machine, and something which looks dating related. They then get the Happy Mammoth ad.
First this Youtube shows their of misunderstanding of how mobile devices are completely legally allowed to be tracked by iOS terms of service. There a plenty of techniques which are not “fingerprinting” which this can be done. Secondly, they are failing to understand this is an AI system, and the user just created a recent association between Words With Friends and Happy Mammoth, so the system could try that recommendation again to see if it gains traction or determine it’s not a strong connection.
I’m only up to page 10 of this report, but the first two “technical” claims absolutely do not check out. However, I am questioning whether a firm like Muddy Waters has a dedicated iOS engineer on staff whose job is to do work like this. Would any engineer want to sign up for a job like this? The other companies they are claiming fraud on are ELF and FTAI which aren’t in tech.
All that being said it does make me slightly uncomfortable that AppLovin’s system complexity is beyond my understanding. Even the CEO has said something similar themselves. I think right now AppLovin is an easy target for these short reports. They have a silly name, a 100B+ market cap, massive profitability, and a system beyond basically everybody’s understanding in terms of advancements in the Ad Space. This would be a huge fish to catch for any short report to bust a 100B market cap company on a fraudulent scheme. I just don’t see enough evidence to these claims that something is wrong here, although I could be wrong. It’s also one of the reasons I don’t like to go much above a 20% allocation for a company as anything is possible.
