How AppLovin (NASDAQ: APP) Gooses Revenue

How AppLovin (NASDAQ: APP) Gooses Revenue

Opinion: APP is a Strong Sell. This stock had been managed to an "S&P 500 inclusion" story that did not pan out, on the back of an e-commerce story that makes no sense. Even strong beats this upcoming earnings would not account for how APP revenue growth is actually occurring.

Last week, on January 8, I wrote up a piece regarding the circular nature of revenue among AppLovin studios and partner studios. I categorically do not believe the "this is simply mobile games advertising on other mobile games" story here, as that high-level hand wave excuse ignores the granularity of specific entities passing revenue back-and-forth.

Today, we're going deeper into the actual state of AppLovin.

Even if AppLovin beats revenue and earnings on their next print, which they should, this is a business that has leaned into goosing their revenues through gimmicks, gift card schemes, and misdirection.

Naturally, Wall Street is asleep at the wheel as most people on the buyside and sellside do not play mobile games and see mobile games as beneath them, even though this is now a company with over $100B+ in market capitalization, most of which has only been realized in the last 6 months.

https://finance.yahoo.com/quote/APP/ Jan 20, 2025

Unreadable, Poorly Formatted, Unclickable Ads

Below is a play-through of AppLovin house studio Lion Studios' The Superhero League 2, a game currently featured atop the Lion Studios website.

https://lionstudios.cc/games/ Jan 20, 2025

This AppLovin game is clearly primarily made to clear ads and act as click farm or bot traffic bait. The "levels" are just simple 1-3 or so predetermined swipes. In ~16 minutes of a play session I experienced multiple cases of:

-Unclickable ads

-Ads not readable on a mobile phone screen

-Poorly formatted ads embedded in the game experience that were cut off with major parts of the offer or call-to-action hidden

-At 1:56-2:18 in the video I attempt several times to click the ad within the gameplay but I was unsuccessful (which you can see in the video). The ad is impossible to click, not that I could even read what it was for. Then, a new poorly formatted ad that does not even fit into the space appears.

-At about 3:20 on I again attempt to several times to click the ad within the gameplay but again I was unsuccessful. At 3:54 on a new ad in the same placement I again tried. None of these are even readable ads on a mobile phone!

-At 4:13 a new ad for a dress appears in the space but it appears unreadable and is also cut off.

And so on...

The entire experience of this AppLovin house brand game is an incessant flood of ads and some of them not in the interstitials aren't even clickable or readable.

Pay-for-Play Gift Cards to Artificially Boost Downloads, Engagement, and to Maximize In-App Purchases and Ads Viewed are Rampant

1) Belka Games Gift Card Laundering for AppLovin Revenue

Belka Games F.K.A. Samfinaco is a heavily Russian/Belarusian subsidiary of AppLovin with operations currently based in Limassol, Cyprus, with AppLovin acquiring the firm in 2019.

Currently, as of January 20, 2025, Belka has 4 different games on the market.

-Clockmaker

-Roger That!

-Bermuda Adventures

-Solitaire Cruise

Archive capture: https://archive.ph/Pviic Jan 20, 2025

Each of these 4 Belka/AppLovin owned games are currently subsidizing downloads, engagement, and any resulting in-app purchases and ad views through a variety of third-party offers. By playing the game and boosting KPIs and revenues for AppLovin, players are awarded gift card points back.

Clockmaker

Clockmaker is a simple Match-3 style game not unlike Candy Crush or the hundreds of other similar games on the market.

Currently site InboxDollars.com offers the ability to earn "$29.70 Cash Back" by playing through and achieving various milestones on AppLovin's Clockmaker.

https://www.inboxdollars.com/web-to-mobile-offer?id=25949&trkId=p16644658&placementName=SearchResult&deo=16644658,13,0,0,0,0,0 Archived here: https://archive.ph/uhN3M January 20, 2025

Similarly, AppLovin's Clockmaker is available on Swagbucks, though on this site payouts for playing games are not displayed in terms of dollars but as SwagBucks where 100 SBs = $0.01

https://www.swagbucks.com/web-to-mobile-offer?oid=25949&trkId=p16644658&placementName=SearchResult&deo=16644658,13,0,0,0,0,0 Archive: https://archive.ph/BkcmU Jan 20, 2025

From this August 26, 2023 Reddit post we see that at that time the offer was for 4625 Swagbucks, or $46.25.

https://www.reddit.com/r/SwagBucks/comments/1625zq9/has_anyone_tried_clock_master/

Among the comments:

"Just finished it last night. Playing every night for seven days. Tons of ads to get boosters to beat later levels. A grind for sure but doable."

"I was able to do it, but it does take a little investment. I paid about $3 and used a lot of the free gifts you get from ads on the main area. One level was impossible to beat unless you used 3 hammers, and one required chain.lightning to beat. Other than those two it's possible, just time consuming. It took me 4 days of nonstop playing to beat. It does not pend early at the townhall anymore either."

"Took me 2 days. Spend $10 on 3 different booster packages for a 36 dollar profit. Some levels were impossible without boosters. And felt like it was never ending. Could have taken a day but I was only playing at night."

It's clear this AppLovin/Belka game is being subsidized, and that this shows up directly as revenue to in-app ads and in-app purchases on AppLovin's reporting.

Yet all of the AppLovin/Belka games use this "pay-to-play" rewards system.

Roger That!

https://www.reddit.com/r/SwagBucks/comments/1bl2v7k/has_any_one_tried_roger_that_merge_adventure/

Bermuda Adventures

https://www.reddit.com/r/SwagBucks/comments/18b1nl5/bermuda_adventures/
https://www.reddit.com/r/SwagBucks/comments/uiq90y/bermuda_adventures_now_at_6500_sb_10_days/

Solitaire Cruise

https://www.reddit.com/r/SwagBucks/comments/th6m6e/my_tips_for_solitaire_cruise_pending_in_one_day/
https://www.reddit.com/r/SwagBucks/comments/wk6lnd/solitaire_cruise_current_strategy/

2) Additional AppLovin House Brands 'Paying-for-Play' to Boost AppLovin Revenue

Belka is not the only AppLovin studio utilizing gift card points schemes to boost revenue.

Hexa Sort

Hexa Sort is an AppLovin Lion Studio game that engages in "pay-to-play" gift card subsidy through Fetch Play. Fetch Play was launched in early 2024 as a spinoff of Fetch's coupon scanning app where they sell CPI proxies to retailers, CPG brands, and hedge funds, and Fetch Play has many AppLovin house brand partners.

Yet again, we have more paying gift cards for ad views and in-app purchases with an updated post advertising Hexa Sort on Fetch Play as recent as last week, on January 17, 2025.

https://archive.ph/FUlid

Matchington Mansion

Matchington Mansion is a Match-3 game run by AppLovin house studio Magic Tavern. Like with many other AppLovin titles, Matchington Mansion has "pay-for-play"/gift card subsidies pumping AppLovin revenues.

https://archive.ph/eYsEi

Wordscapes/Wordscapes Solitaire

Yet again, another AppLovin studio, this time AppLovin house brand studio PeopleFun, is using a third-party for "pay-for-play"/rewards gift cards to promote usage, currently on Fetch Play and with a history on Swagbucks.

https://archive.ph/XA7Vc
https://www.reddit.com/r/SwagBucks/comments/14byc6w/wordscapes_super_quick_800/
https://www.reddit.com/r/SwagBucks/comments/1g1qtfy/i_now_hate_swagbucks_was_playing_wordscape/

AppLovin Partner Playrix Also Heavily Utilizes 'Pay-for-Play' and Rewards Gift Cards for User Acquisition and Engagement

Instead of sitting for a co-branded interview with AppLovin, why don't you just admit that "user acquisition" and "business development" for Playrix is heavily dependent on gift card laundering for engagement?

Playrix is so hilarious that their default is to display text in Russian Cyrillic. Go try it if you don't believe me! Playrix.com. Above are Playrix's partners, as of January 10, 2025. https://playrix.com/privacy/list_of_our_partners_en.html

Among the worst offenders in AppLovin's network is Playrix, which the British government has come down on for showing misleading ads about its games Homescapes and Gardenscapes. Naturally, Russian/Belarusian Playrix has moved on into the world of rewards for playing its games in exchange for gift card points.

Fishdom

https://archive.ph/3jx4w

Gardenscapes

https://archive.ph/HEQX7

Homescapes

https://archive.ph/9qGNc

Conclusion

APP is a strong sell. Even though APP is likely to "beat and raise" this upcoming print, the quality of revenue is poor as AppLovin or related parties are boosting the stock performance by paying out gift cards for revenue. This will not hold over a medium-term duration and any "beat" is largely already priced in.

AppLovin's e-commerce growth story is not sustainable nor scaleable over this population. AppLovin's e-commerce growth story is dependent on major brands like SHEIN or Temu signing up for the service, not on long-tail DTC brands or American retailers. While initial e-commerce results may appear clean or positive, it's not possible to scale this over the user base when AppLovin and its partners engage in a circular revenue round trip between game studios advertising for other game studios, and then when you download those games you get ads for the original game studio's other games.

How are e-commerce brands going to market to people on games who are there for the purpose of making money for pennies for gift cards? AppLovin can segregate these users out of initial pilots, but at any scale this story falls apart. Meta and Google and Apple have much greater profiles and Meta and Google are large feeders upstream of AppLovin.

Game companies live and die by how much they are willing to goose revenue with gimmicks. AppLovin is merely Zynga and Farmville on Facebook, only instead of hosting the games on the Facebook platform, today there is a separate app to download. With AppLovin it is clear they have chosen to goose revenue to play into their "S&P 500 inclusion" story, which did not pan out. With AppLovin it's clearly become all about gimmicks. There is no chance in hell this business is able to deliver solid e-commerce returns long-term, as the entire space is dependent on subsidizing revenue through gimmicks like "pay-for-play" rewards gift cards and mobile games advertising on other mobile games and AppLovin is the major exchange/clearinghouse for this dirty space.

Do you really think it's a good idea to invest in growth for something getting kicked around on Reddit's r/povertyfinance? Is this where good e-commerce growth will come? No way.

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This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. Lauren Balik does not represent the interests of any fund or of any investor other than herself. Past performance is not indicative of future results. This content speaks only as of the date published. Any projections, estimates, forecasts, targets, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

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