AppLovin allows developers to ensure their mobile apps are discovered and downloaded by users. Company’s revenue is generated from the Software Platform which includes four solutions: AppDiscovery, MAX, Adjust, and Wurl.

AppDiscovery, a marketing software solution, serves as the cornerstone of the Software Platform, complemented by the rapidly expanding MAX monetization solution. AppDiscovery operates on AXON, an AI-powered advertising engine, matching advertiser demand with publisher supply through auctions that process at vast scale and microsecond-level speeds. It includes:

  • Lifetime Value (LTV) reporting to analyze campaign effectiveness by source and location.
  • Creative generation capabilities that allow for the creation and testing of a wide range of advertising materials, with support from the SparkLabs team for specialized ad development.

MAX (acquired in 2018) is a monetization solution that employs advanced in-app bidding technology to optimize the value of advertising inventory. This is achieved by conducting a real-time competitive auction that stimulates more competition and higher returns for publishers.

Adjust (acquired in 2021) is a measurement and analytics SaaS platform that provides marketers with the visibility, insights, and data necessary to scale app marketing and achieve more informed results.

Wurl (acquired in 2022) is a connected TV (CTV) platform that distributes streaming video for content companies and offers advanced advertising and publishing solutions to attract viewers and maximize revenue. Its offerings include:

  • AdPool, which links CTV providers with premium advertisers to facilitate exclusive advertising opportunities.
  • ContentDiscovery, which supports streaming platforms and apps in enhancing viewer retention and engagement.

AppLovin Apps manages a diverse portfolio of over 200 free-to-play mobile games across five genres, developed by eleven global studios. The collection includes 5 genres: casual, match-three, card/casino, midcore, and hyper-casual with a large portion of its portfolio are casual, match-three and card/casino games which have a lower risk of development and generally have more predictable revenue streams and return.

The advertising ecosystem is fragmented, consisting of divisions from large, established companies and various privately held entities. These large companies often fulfill multiple roles within the advertising and mobile app ecosystems. Advertisers generally engage multiple platforms and networks, such as Meta, Google, Amazon, and Unity Software, to purchase ads across mobile apps, devices, and CTV, aiming to optimize marketing investments. Many of these entities, including major gaming companies like Activision Blizzard (Microsoft), Tencent, and Zynga (Take-Two Interactive), serve as both partners and clients.

Partners

The ability to maintain and grow client and user bases poses significant risks, especially with potential changes to the Software Platform, Apps, or offerings. Introducing new software or mobile apps, either by the company’s studios or competitors, can impact market position. Additionally, changes in the policies or practices of key third-party platforms like the Apple App Store and Google Play Store, or regulations affecting access to these platforms and advertising identifiers like Apple's IDFA, can significantly influence operational effectiveness and the ability to accurately assess advertising efforts.

In 2023, total revenue reached $3.3 billion, marking a 17% increase YoY from $2.82 billion in 2022, and compared to a modest 1% growth from $2.79 billion in 2021. The net income for 2023 was $357 million, demonstrating a strong recovery with a net margin of 11%, following a net loss of $192.9 million in 2022 and a net income of $35.3 million in 2021. Adjusted EBITDA was $1.5 billion in 2023, increasing 41% YoY and up from $1.1 billion in 2022 and $726.8 million in 2021, reflecting an Adjusted EBITDA margin of 46%. Net cash from operating activities significantly increased to $1.1 billion in 2023, a 157% rise YoY, with free cash flow escalating to $1.0 billion, up 167% from the previous year. Cash and cash equivalents at the end of the year stood at $502 million. In February 2022, $750.0 million of common stock was repurchased. As of December 31, 2023, a total of $1,153.6 million of common stock had been repurchased.

The Software Platform business segment experienced robust growth, with quarterly double-digit revenue increases culminating in a record $1.8 billion, a 76% rise YoY. This segment also contributed an Adjusted EBITDA of $1.3 billion, up 58% YoY, achieving an Adjusted EBITDA margin of 69%. In 2023, revenue for the Apps segment declined to $1.4 billion, marking an 18% decrease YoY. This reduction was a result of strategic optimization efforts initiated in 2022, which included reducing the studio footprint and user acquisition spending.

Apps Revenue is derived from in-app purchases (IAPs) by users and in-app advertising (IAA) from advertisers who purchase inventory from a diverse portfolio of apps. IAA revenue constituted 31%, 33%, and 31% of total Apps Revenue in 2023, 2022, and 2021, respectively. Sales and marketing expenses decreased from $919 million in 2022, which accounted for 33% of revenue, to $830 million in 2023, representing 25% of revenue. Meanwhile, research and development expenses remained consistent at 18% of revenue for both years, totaling $592 million in 2023.

AppLovin experienced a decline in the number of its Monthly Active Payers, decreasing from 3 million in 2021, to 2.3 million in 2022, and further to 1.8 million in 2023. Despite this reduction in active payers, there was an increase in the Average Revenue Per Monthly Active Payer, which rose from $43 in both 2021 and 2022 to $46 in 2023.

AppLovin is strategically positioned in a rapidly expanding sector, further highlighted by the recent scrutiny on Apple's 30% in-app purchase fee. As a platform that supports app developers in promoting its applications, the company could potentially reshape the app marketplace. However, the presence of significant competitors and other risks could impact its growth trajectory. Despite these challenges, AppLovin has demonstrated strong performance this year, benefiting from positive market momentum, even with its relatively high valuation (P/E of 40.7x).