AppLovin’s stock popped by more than 28% in after-hours trading Wednesday on the news that it plans to offload its entire apps business at a $900 million asking price by next quarter.
This isn’t a surprise. AppLovin has been talking about prioritizing its software platform for several years.
But signing a term sheet to fully divest the 10 remaining gaming studios in its portfolio makes it crystal clear that AppLovin is on its way to becoming what CEO Adam Foroughi called “a pure advertising platform.”
“Seven years ago, we began acquiring gaming studios to help train our earliest machine learning models, an invaluable step in shaping the AI that underpins our Axon platform,” Foroughi told investors on AppLovin’s Q4 earnings call Wednesday evening.
Axon is AppLovin’s homegrown AI-powered ad tech software, which uses predictive machine learning to target ads to the users most likely to convert.
But now that Axon is humming along, AppLovin is zeroing in on the non-gaming opportunity.
Talking shop
For the past decade, AppLovin’s bread and butter has been helping game publishers monetize primarily by advertising other games through cross promotion.
But last year, AppLovin launched a limited pilot program for ecommerce advertisers to promote their products and services in apps, and it’s been getting a lot of attention. Although AppLovin is still small by Meta standards, it has the potential to grow into a scaled ad platform alternative to Meta.
AppLovin claims that its platform reaches more than 1 billion people in mobile games on a daily basis.
“Their engagement times [are] comparable to social networks,” Foroughi said.
AppLovin didn’t share specifics about the performance of advertisers in the pilot. But Foroughi did say that AppLovin’s Axon models are showing “positive outcomes for a range of advertisers,” including but not limited to direct-to-consumer brands, “suggesting that any business in any vertical can harness the power of our platform.”
Self-serve as the top priority
That ambitious vision for the future can’t happen, however, without more automation.
AppLovin’s leadership is well aware that if it wants to take a page out of Meta’s playbook and attract millions of advertisers, it’s going to need easy-to-use self-serve buying options.
Currently, “our systems are still being fully developed and lack the full self-service capabilities needed to handle growth at scale,” Foroughi said.
The company’s top priority this year is to roll out more automated ad buying tools and, eventually, “to automate the entire system so that we’re not looking at a massive revenue opportunity in front of us and suggesting that we have to go hire people to go after it,” Foroughi said.
In fact, AppLovin has been downsizing. It laid off 120 people in 2024 and 89 more at the start of this year, including the CEO of Machine Zone, which AppLovin acquired in 2020. (Machine Zone will be part of AppLovin’s app studio divestment next quarter.)
“We’re one of the most financially lucrative businesses to be constantly announcing layoffs,” said Foroughi, who took on oversight of AppLovin’s HR function last quarter.
AppLovin’s Q4 revenue was up 44% year-over-year to $1.37 billion, while total 2024 was $4.7 billion, a 43% YOY increase.
“Since I took over HR, my job was to go, ‘Where are areas of the business that are not perfectly aligned with [our] organic opportunities,” he said, “and let’s start shedding those so we can really narrow in and focus on what’s in front of us.’”
