The hottest advertising platform in the US is the one that’s trying to monetize mobile games of solitaire.
In 2024, the mobile-app advertising platform AppLovin brought in $4.7 billion in revenue, a YoY increase of 43%, the company disclosed to investors earlier this month. Business was so good, in fact, the company announced plans to sell its gaming apps business as part of a shift “to a pure advertising platform,” CEO Adam Foroughi said on the company’s earnings call.
AppLovin, which sells and brokers advertising placements within mobile apps, claims to reach more than 1 billion mobile gamers daily and has sold Wall Street on both its AI-powered ad tech and new tools for advertisers that might be unaccustomed to mobile gaming. The company’s stock is up more than 550% YoY, and its market cap is nearly four times that of The Trade Desk, which is generally considered to be the largest ad-tech company in the US besides Google.
While the platform has historically courted other mobile games as advertisers, the company has widened its aperture. In 2022, it acquired the CTV platform Wurl, and last year, it began a beta program geared toward e-commerce and DTC brands, the kind of advertisers that have bolstered Meta’s business for years.
In December, Business Insider reported that AppLovin was explicitly courting advertisers that were spending up to $20,000 a day on Meta, inviting them to try the platform and providing ad credits of up to $10,000.
The initial results for AppLovin have been positive, executives said. “In all my years, it’s the best product I’ve ever seen released by us, fastest-growing,” Foroughi told investors in November, and in February, Foroughi doubled down, saying that “early pilots have shown positive outcomes for a range of advertisers, suggesting that any business in any vertical can harness the power of our platform.”
For a decade, platforms like Reddit, Pinterest, and Snap have jockeyed to pull ad dollars from companies like Google and Meta. For some buyers, AppLovin has already surpassed these platforms when it comes to interest (and certainly in the case of company finances: AppLovin is more than seven times larger than Snap by market cap).
“Based on what I’m seeing, if I were a buyer, [AppLovin] is a very strong No. 3,” Olivia Kory, head of strategy at the agency Haus, told Marketing Brew—meaning that the platform falls just behind Google and Meta, the two largest ad platforms in the world.
But whether the platform can be as efficient as those platforms remains largely unknown.
“Exactly how much you should be investing here is the open question,” Kory said.
Lovin’ it?
Kory said she has more than a dozen different clients testing AppLovin, who she said are spending anywhere between $10,000 to $120,000 a week on the platform. While the early results indicate that the platform can drive outcomes like sales, the jury’s still out on the efficiency of AppLovin compared to other platforms, she said.
“The story is more mixed in terms of whether it’s efficient enough to meet the client’s goals, and whether it’s as efficient as Meta,” Kory said. “All of these tests are driving lift. They are driving sales…but at what cost? Am I paying $100 to acquire that user, or am I paying $1,000 to acquire that user?”
Some brands leaned in at the tail end of last year. The accessory brand Ridge was spending as much as 30% of its marketing budget on AppLovin in December, during the critical holiday rush, Ridge CMO Connor MacDonald said.
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“Nobody can quite explain how they do it, but the ad engine is better,” MacDonald told Marketing Brew.
That level of investment didn’t last. The brand, which had planned to reassess the investment level post-holiday, saw conversions and new visits drop off, MacDonald said; as of mid-February, AppLovin made up just 5% of the brand’s budget.
“Typically, there’s an arbitrage opportunity where we can go and pump a bunch of money in because we’re early, because it’s novel, because it’s cheap,” MacDonald said. “But that is not an indicator that it can remain a meaningful percentage of the budget over time.”
Other tests have resulted in similar findings. The beauty brand Jones Road began testing AppLovin’s ad offerings in August, spending as much as $50,000 a day before pulling back in November.
“We were not very happy at all with our internality tests, so we pulled back to relatively minor spend after that,” Cody Plofker, CEO of Jones Road, told Marketing Brew, noting that AppLovin’s efficiency paled in comparison to Meta, which can weed out returning customers.
“We want most of our media spend to be new customer acquisition,” Plofker said. “We were much less bullish on the channel after seeing these results…we were losing money on customer acquisition.”
The platform’s measurement capabilities have kept other advertisers on the sidelines. Harry Browne, VP of TV, audio, and display innovation at the agency Tinuiti, told Marketing Brew that while the agency has had meetings with AppLovin, the agency can’t be sure that the platform isn’t grading its own homework.
“We can’t really say with any confidence that their measurement is good or bad,” he said. “I’m not trying to say AppLovin has bad measurement; I’m just saying it’s not ours, and we can’t advocate for it.”
Rising tides
As marketers test out AppLovin, one crucial side effect has been bringing a spotlight onto mobile gaming ad inventory, which even a few years ago was considered to be a bit of an industry backwater. Overall, mobile app in-app spending is, according to eMarketer, expected to grow to $212 billion by 2026.
Ridge’s MacDonald said that because of the early success he saw with AppLovin, he’s met with other mobile gaming platforms, like Unity, about advertising opportunities.
Historically, Plofker said, the category wasn’t considered to provide “quality traffic,” and was more akin to Taboola-style ads than social feeds.
Mobile-ad sellers and their advertisers dabble in so-called incentivized traffic, where audiences are given digital rewards in exchange for watching ads. AppLovin sells these kinds of ads, and it has already attracted the attention of short-seller Lauren Balik, who wrote in February that AppLovin’s “revenue and usage is increasingly gamed with gift card giveaways.”
In an email to Marketing Brew, AppLovin spokesperson Joshua Grandy said Balik’s article “is baseless and without merit” and noted that the company “will not publicly respond to this individual, as they do not possess reporting credibility and their intentions appear to discredit AppLovin.”
If AppLovin is here to stay, it’s likely because its own tools will stand out, not because of any broader “come-to-Jesus moment for mobile advertising,” Tinuiti’s Brown said.
“They claim really good results,” he said. “Beyond that, we don’t really know a ton.”