AppLovin Receives Timid Response on Wall Street Debut, APP Shares Close 18.5% Down

Apart from mobile gaming, AppLovin has built its position in the market by developing marketing software for app developers to help them promote their products.

It certainly wasn’t a great start on Wall Street for mobile gaming company AppLovin Corp (NASDAQ: APP).A day after APP debuted on Wall Street, its shares closed a whopping 18.5% down.With the APP shares closing price of $65.20, the company’s market cap stood at around $23 billion.

AppLovin Performance that Affects APP Shares

AppLovin seemed to be cashing upon the wave of the gaming IPOs in the market.The one-year-old company has a 1% market share of the market for global mobile apps that has an estimated global value of $189 billion.Besides, the pandemic and ‘stay-at-home’ culture have fueled the mobile gaming market over the last year. Speaking to CNBC, AppLovin founder and CEO Adam Foroughi said:

“We’ve been seeing it since we started the business; people are using their phones four or five hours a day. Mobile apps are the most accessible and affordable forms of entertainment, the best transactional commerce access points”.

For the first few years, AppLovin focused on developing a mobile app platform.The goal was to help them provide the market tools to grow their apps. Foroughi said:

“For nine years, we built that. We got to distribution of now seeing over 400 million customers on our platform every single day. Then in 2018, we got into content ourselves, and started building effectively original content. We have over 200 apps [and] over 200 million people are playing games of ours every single month,” he said. “And those games, our own content, build this valuable audience insight data that then feeds our software platform, and makes it even more efficient at driving value to the customers that we have in terms of getting their apps discovered.”

Balancing between Gaming and Marketing Tools

Over the years, AppLovin has splits its business between games and marketing tools.Their fourth-quarter revenue was generated by its developers using its software and the fifth-quarter revenue came from its in-app purchases.Explaining how AppLovin works to help developers, Fouroghi said:

“We have this tech platform for app developers to help them grow, by getting them discovered, and then what we needed to improve the software were owned audience insights. We wanted first-party data on the audience that we saw. Our own content gives us much better audience insights than we would otherwise get, because otherwise, we just have third-party data.”

He further compared his company’s strategy to that with Netflix‘s. Fouroghi added:

“That first-party data feeds our software, and then creates the ability for us to be much better at recommending future content to customers. I guess maybe the best analogy to really compare that to is how Netflix took their own data on their platform and rolled out personalized recommendations … then they layered on their own original content, which exploded the amount of consumption on their platform and gave them more insights into their audience — replicating that same playbook in a new media format.”

Chinese private equity firm Orient Hontai Capital attempted to buy AppLoving in 2016 for around 1.4 billion.However, the deal fell apart the following year turning into a debt investment. Later in 2018, the company sold a minority stake to KKR taking its valuations to $2 billion.

AppLovin has been making some aggressive acquisitions since then.About $1 billion was invested in partnership and acquisitions by the company last year.Earlier this year, AppLovin also acquired German app distribution and analytics company – Adjust – in a $1 billion cash deal.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets.Interests in economics and finance drew him to the new emerging Blockchain Technology and Cryptocurrency markets.He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.