• APP has recently exploded in terms of equity value and in revenue growth, fueled by a strong push into e-commerce and a potential inclusion in the S&P 500, which did not occur.
• However, incremental APP revenue and revenue growth through 2024 is heavily influenced by a number of “Get-Paid-To” third parties incentivizing mobile app users to get paid via PayPal, gift cards, or other incentives to play AppLovin and AppLovin partner games. In recent quarters 13% of APP’s revenue was derived from 3 games, and through September 30, 2024, 9% of APP’s 2024 revenue was derived from 2 games, all of which pay consumers to play APP’s games. I found rampant cases of consumers being subsidized on a 1-1 ratio or worse for making in app purchases, flattering APP revenue numbers. In the most egregious case, this included a recent offer to make a $49.99 “in-app purchase” (IAP) on APP subsidiary game Cash Tornado Slots and receive $75.00 back in PayPal/gift card points. Games so big that APP mentions them in their 10-K and 10-Q filings are subsidized with PayPal and gift card points offers.
• I believe APP is the primary benefactor of this growing trend of “Get-Paid-To” mobile game usage. APP not only gets to boost revenue on IAPs for their own house brand games, but as APP controls the majority of ad mediation in the mobile gaming space, they benefit whenever a partner company uses “Get-Paid-To” mobile gaming programs paying consumers in PayPal or gift card points to watch as many ads as possible.
• APP’s recent surge in stock price is heavily built on an e-commerce retailer narrative, with APP currently involved with initial pilots with retail brands to bring them on the mobile games ad ecosystem. However, I do not believe this is scalable through the 2025 calendar year. If consumers are increasingly playing mobile games from APP studios or partner studios with an incentive to earn money or gift card points this channel becomes worse for selling to these consumers, as users are on APP games to earn money and not to spend money.
• Additionally, APP is competing heavily for ad budgets currently allocated to Meta, Google, and TikTok while APP is simultaneously the primary benefactor of mobile game ads on these platforms. If APP is to meaningfully take share, I expect significant pushback from Meta and TikTok on allowing APP to use it as an acquisition channel, just as we saw nearly a decade ago when Zynga (ZNGA) went public while being reliant on Facebook and competing for ad spend with Facebook. All it took was Facebook turning off notifications, deprioritizing games in its algorithm, and applying enough pressure to Zynga for ZNGA to collapse.
• I am short APP, as I am confident this e-commerce narrative falls apart throughout 2025 as the market realizes that APP revenue and usage is increasingly gamed with gift card giveaways and most mobile game ads are simply ads for other mobile games and there is no changing this in the short term. There’s just nothing to be scaled here for advertisers outside of the mobile games circular revenue game.