AppLovin P5 - Apps Deep Dive

Hello amigos

Apologies for going ghost this week, work really picked up and there hadn't been much time to continue this on top of other commitments.

Today though, I'll be doing a deep dive into AL's portfolio of app studios and their strategic thinking to get a view of the scale of their divestments.

Per previous research, AL's portfolio contains 10 games studios that they've either acquired or partnered with.

For the purpose of the below analysis, we'll classify studios as either active or inactive. Active studios are those that have updated at least 1 app on both the app and the android stores on in the last month, and inactive studios will be detailed with the last active date.

From what I could find, AL's portfolio includes the following:


Partnered Studios, as listed on AL's website

1. Athena Studio (Woody Block Puzzle) - Active
2. Belka Games, registered as samfinaco LLC on the app store (Clockmaker) - Active
3. Clipwire Games (Bingo Story) - Active
4. Leyi - (West Game) - Active
5. Lion Studios (Mr Bullet) - Active, also acts as a publisher.
6. Machine Zone (Game of War: Fire Age, Mobile Strike) - Active, but interesting to note that none of the apps have been updated since Jan 2024, whereas the same games on the playstore were updated in March with newer versions. The exception here is FF15: War for Eos, which was updated in May for both platforms.
7. Magic Tavern, previously Firecraft Studios (Matchington Mansion) - Active
8. PeopleFun (Wordscapes) - Active
9. Zenlife Games (Zenlife Games, Word Connect) - Active
10. Zero Gravity (Cash Tornado - Slots) - Active

Since the publish date of the 2023 K-10, Lens Studio seems have to have been divested, and relabelled as Nuts Power.

The following were studios that I found that were also at some point affiliated with AL, or had been acquired at some point in the past, but not listed on the AL website. This could be due to divestments prior to 2023.

1. Redemption games (Sweet Escapes) - Active
2. Magic Ant (Fill 一筆書き パズル ゲーム) - Active, predomminately creates japanese games, published under Gamincat inc. and Lion Studios. Still states that they are a partner of Applovin on their website.
3. Geewa, published under Aliens LLC (Smashing Four) - Active

It is notoriously difficult to make an accurate prediction of app generated revenue. Although Apple has this data on file, it seems neigh impossible to obtain legally without straight up purchasing it from the devs.

The way to estimate in app purchase revenue would be to track the number of unique users and number of logins per user that log onto the app over a 30 day period, and then find the app's revenue for that period. We then use this to find the average spend peruser, and then try to get as close as possible to a live revenue estimation.

The In app ads section and the platform revenue will need user interaction data, and we
For the platform revenue, user interaction data exists, and the cut taken is usually around 30% by industry standard. From this, we can find the number of ads shown to user per minute, find data on typical CPM, and then line it up with AL's reported platform revenue from previous periods.

I will attempt to code these out in the coming technicals section, but from a brief scan it seems difficult to source these data points.


What is their core business and how has it changed over time? What is the rationale for the new strategy?

looking at revenue and guidance, we can see that the core business is continually shifting toward the platforms segment, spending less on marketing and development support for its apps since 2021. AL has gradually shifted from their apps business to focus on their software platform, which boasts a much higher EBITDA margin (73% vs 15%). AL has explicitely stated that the apps segment will no longer be a strategic focus, so we can reasonably expect revenue from this segment to remain consistent, as they still need a active userbase to provide data for AXON. They have kept a consistent 1.8m monthly active payers (MAP) between Q1 23 - Q1 24. Finding the number of monthly active users here may be important, but the stats on the subject vary significantly and are all over the place, so I'll have to do some thinking around how to get a good estimate next time.

For the next post, we'll be doing a deeper dive into the crux of AL's business- their platforms, and some of the industry trends that have been, and could affect it.

Currently, my thinking is that the crux of this thesis goes one of two ways:

1. We are able to find the datapoints that directly predict their revenue, and can therefore have a close estimate of the company's earnings before guidance / reporting is released
2. the business will be valued on it's fundamentals based on past financials, the trajectory of the market, and an appropriate multiplier.

Price at time of writing: $82.15