AppLovin' Skyrocketed to $106B

🧠 The Takeaways

Today we’re breaking down AppLovin’s insane 421% stock growth and how they can become a legit Meta contender.

1. AppLovin needs to fuel the DTC fire with more brand wins.

2. They need to scale user growth faster than advertisers can spend.

3. They need to acquire Snap or Pinterest for more/better inventory.

+ How I funded Coco.

Let’s Community - How I funded Acquisition 1

A lot of people have been asking, so here’s a breakdown of how I funded our first Acquisition Coco. Since I’ve signed NDAs up to my ears I can’t say the specific numbers, but can share percentages.

The funding came from 3 sources:

1) I committed 25% of the capital.

2) The owners took a 13% Seller’s Note.

3) I raised the remaining 62% from investors (LPs).

What does all of that mean?

1) My 25% came from my 401k/ some investments + cash. 

2) The seller took a loan for 13% of the acquisition price to be paid over time.

3) I raised the remaining 2/3 of the acquisition price as 50% Debt / 50% equity from investors (Also called LPs - Limited Partners).

There's a lot of reasons behind this deal structure, but the key is everyone won.

1. The sellers got the cash they wanted w/ enough skin in the game that they wouldn’t screw me.

2. My LPs got enough ownership + guaranteed repayments to hit their return goals.

3. I acquired a biz! And control enough of it to grow to its full potential.

And the most important part, I didn't bankrupt myself to get this deal done.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. I have been an investor in AppLovin since 12/’24 when I saw everyone and their mother in DTC pour money into this thing as a test, but have sold since to fund my acquisition And I was never here.

AppLovin is going vertical, but will it all come crashing down in a month? 

It’s DTC Twitter’s new favorite ad platform to love and hate.

Their core business is selling Mobile Apps/Games ad inventory. Think the forced ads you get while playing Candy Crush.

This year, they repositioned their offering to sell hard into DTC and it’s taken Shopify brands by storm. Their stock is reflecting that growth.

• Share price:  $510

• Market Cap:  $106B

• Stock performance L5: +736%

This is one of the craziest biz stories of the year no one really knows about it.

Financial Summary

TLDR Analysis: My Good Lord

• Ad Rev +75% YoY while COGS only +11% 🤤

• OPEX stayed flat. Growth went boom-boom. 💪

• Net Income more than 3x’d in a year. 🤤

Now that is how you reposition a brand.

Whether you believe in the underlying ad opportunity or believe the biz can maintain this growth and momentum.

You have to give them credit for taking the same engine they built in one market and finding a new market to tap into a whole heck of a lot of growth. 

Profitably.

Let’s Advise This Biz!

Here are 3 pieces of free advice I’d give to AppLovin to maintain this insane streak. 

1) Lean Way Heavier into DTC.

For better or worse, DTC advertisers are the toughest customers. 

• They want the world

• Expect to pay little/nothing

• And need results yesterday.

But if you can build a platform they reliably spend on, you’ll print $$$.

AppLovin has been the most provocative topic on DTC Twitter the past 6 months with:

Bulls making strong cases that it’s driving new wins for them.

To bears saying it’s non-incremental and a waste of money.

The best thing AppLovin can do is spend the next 6 months on DTC case studies and Influencer posts. 

Currently, they have 0 DTC/eCom case studies:

They’re already on fire. Now dump the Exxon Valdez on it. 

Every viral Twitter thread argument about if it’s the next Meta vs. it’s a total scam will continue to drive awareness + demand among new advertisers.

More case studies will drive those conversations and build more trust among other brands to test it out as well.

Takeaway: Make DTC/eCom the primary focus.

2) Solidify their User Growth

There are some legitimate concerns with how AppLovin is getting end users to their platform. 

Here’s a great article from Lauren Balik on their pay-to-play model.

But the real key here is whether AppLovin can scale its user growth faster than its advertisers can scale their ads. 

Many tactics Lauren breaks down as unsustainable are classic Silicon Valley “I’ll pay you $1 to spend $1 with us” incentivization plays. Look back to Paypal, Facebook, Venmo, and Robinhood for examples.

Where AppLovin has the opportunity to make a ton of money is to subsidize their growth spend with advertisers’ dollars. It’s counterintuitive, but it’s how most of Silicon Valley’s darlings were built.

Ads is 70% of overall rev. They can torch money on games and reap huge profits.

If they can get users into addictive behaviors through atypical ads, offering payouts or other forms they will. As long as they can keep people coming back to play more, advertisers will pay more.

Takeaway: AppLovin needs to quickly evolve from Shady offers to brand building advertising.

3) Acquire Snapchat and Pinterest

AppLovin could legitimately buy Snapchat ($18B) + Pinterest ($26B). Respectively, they’re 10% and 15% of Applovin’s cap.

Both would be a mega purchase the would require FTC review. But 1 isn’t that crazy.

I’d go for Snap from a valuation + brand overlap standpoint.

Focusing on allowing advertisers to dominate off-Meta mobile. They’d be able to leapfrog into “legit” ad inventory on a platform that’s mostly stable. I made and lost a lot of money day trading Snap a couple years back because users love it but it's so under-monetized.

Applovin’s narrative becomes: 

“We’re serious about Mobile ads and can provide a legit Meta competitor across mobile gaming + messaging. We’re going to open up ad inventory across our ecosystem of apps.”

It’s easy to forget that Instagram was the sonic boom that propelled Meta to a $1T advertising platform by throwing Meta’s ad engine on Instagram’s addictive engagement. 

AppLovin can do the same with 2 under monetized platforms (Snap + Pin) that users are addicted to.

Takeaway: Acquire their way into more legit traffic and ad platforms.

Final Thought

The most brilliant move AppLovin’ made in this historic run up was giving away a lot free credits to brands who were spending $20k/day on Meta.

They perfectly proxied their ideal customer and gave them a compelling offer to try their service. 

Everyone makes the mistake of thinking either:

• My product is so incredible I don’t need an offer. Or…

• Throwing bad offers at an audience who doesn’t find the offer compelling or isn’t a good fit.

The fastest growing bizs (Brands + SaaS) are always making compelling offers to get new customers in the door.