It’s been a turbulent year for AppLovin.
The Securities and Exchange Commission launched an investigation last month into its data collection practices, which include allegedly using device fingerprinting to target ads.
Short-sellers accused the company of violating app-store policies by extracting proprietary IDs from platforms without user consent.
Meanwhile, multiple state attorneys general have reportedly begun preliminary probes into AppLovin’s consumer data privacy practices, and the company recently discontinued a controversial app distribution tool called Array after accusations that it downloaded apps onto devices without explicit consent.
Not that investors seem to give two hoots.
Q3 in a nutshell
AppLovin, which reported its Q3 earnings on Wednesday, generated just over $1.4 billion in revenue for the quarter, up 68% year over year from $835 million. Free cash flow nearly doubled to $1.05 billion, an increase of 92% from the year-ago quarter.
The company’s stock popped around 7% in after-hours trading and was still up when the market opened on Thursday morning.
CEO Adam Foroughi spent most of Wednesday’s call fielding questions from investors about balancing ecommerce growth with AppLovin’s core gaming business, the company’s plans to start testing generative AI ad creative and the advertiser onboarding process for Axon Ads Manager, AppLovin’s newly launched self-serve ad platform.
But Foroughi did reference the recent regulatory attention during his opening remarks, albeit briefly and obliquely.
“We continue to operate in an environment of heightened scrutiny around data privacy and ad tech practices,” he said. “We remain committed to strict compliance, transparency and execution excellence.”
Eyes on Axon
Speaking of execution (and heightened scrutiny aside), AppLovin launched Axon Ads Manager early last month as an invite-only service.
The tool, which uses AI to help advertisers set campaign goals and automatically optimize in real time, is part of AppLovin’s move beyond gaming and into ecommerce and connected TV advertising.
AppLovin is intentionally restricting access during the initial rollout to make sure the platform is stable and free of bugs and to prevent low-quality ad accounts from signing up, a common risk of self-serve ad platforms that can harm overall performance.
The plan is to open up the platform beyond referrals by next year, but AppLovin is taking it slow for now and focusing on the advertiser onboarding experience, improving the tooling inside the dashboard and refining its automated systems.
“These things take time to build,” Foroughi said. “One day, I’d like to make sure that the local laundromat that signs up gets a great experience promoting themselves to this gamer audience on our platform – and if we’re not ready yet today … we don’t think it’s a long time away.”
But with momentum building, it’s only natural that some investors are already thinking even bigger.
At one point, about halfway through the earnings call, one investor floated the idea of AppLovin potentially buying some combination of Google Ad Manager and AdX if there’s a forced divestiture in the ongoing Google ad tech antitrust trial.
After all, AppLovin has been actively expanding its supply beyond gaming. But Foroughi didn’t bite.
“Everywhere else is struggling to monetize, except in the walled gardens and except on games,” he said. “We’re not supply-constrained today; we’re demand-constrained. But if we do our job right and bring on a lot of advertisers, it will serve us well because it serves them well to be able to extend our offering out to more publishers.”
