Right. So, AppLovin. Everyone’s terribly excited. Apparently, they had 70% revenue growth last year – a truly impressive number, if you ignore the nagging feeling that impressive numbers often conceal… things. And free cash flow of $3.95 billion. Which sounds…substantial. Like enough to buy a small country, or at least a very large yacht. Q4 was apparently a triumph, 84% adjusted EBITDA margin. Honestly, it’s all a bit dazzling. And the analysts are all rushing to upgrade it. It’s like they’ve all decided to have the same birthday wish. Which, frankly, is always a bit alarming.
The numbers are spectacular, I admit. But spectacular numbers tend to make me reach for the antacids. It’s a basic principle of risk aversion, really. And I’m trying to be more disciplined. (Units of discipline achieved today: 0. Cups of coffee consumed: 3. Internal monologues about the futility of it all: countless.)
On paper, it’s all very diversified. They own this ‘Axon’ thing – an AI self-serve ad engine. Sounds…efficient. And a mobile ad exchange called ‘Max.’ And they’re venturing into e-commerce. Management talks about “omnichannel performance marketing” and “multi-vertical expansion.” It’s all very…buzzwordy. Like they’re trying to convince themselves as much as they’re trying to convince me.
But strip away the marketing fluff, and it all boils down to one thing: a performance advertising engine built around mobile attribution and user tracking. Last year, their Software Platform (read: ads) grew 88% to $4.81 billion and did pretty much all the heavy lifting. The Apps side, the gaming and content bit, actually shrank as a share of the business. Which feels… precarious. Like building a house on a foundation of sponsored content.
The catch, and it’s a rather large one, is that AppLovin doesn’t actually control the rules. Apple and Google do. And they can change those rules whenever they feel like it. AppLovin’s own warnings are rather stark: changes to mobile operating systems or privacy frameworks can wreck their ability to measure, target, and optimize ads. They have workarounds, of course. But workarounds are just that – temporary fixes for fundamental problems. Like using duct tape to repair a structural flaw.
The bullish case assumes everything will continue to work as it has. Which is…optimistic. The bearish case is that AppLovin’s entire advantage is built on rented land. One new privacy rule, one attribution change, one app store policy shift, and the whole thing could come crashing down. It’s a bit like playing Jenga with the future of the company.
AI Moat or Model Commodity?
Management is leaning hard into the AI angle. Axon is billed as a “machine-learning, real-time auction engine” that picks creatives, bids, and placements across millions of auctions per second. And it works. The revenue growth and margins speak for themselves. But here’s my question: will that advantage last? The underlying technology isn’t proprietary. Competitors could build similar models using similar data. I’m already hearing about new AI tools that do what Axon does. It’s the digital marketing equivalent of a crowded cafe – everyone’s serving the same latte.
My view is that soon, rivals will deliver comparable results at lower cost. It’s the inevitable march of commoditization. What truly matters is exclusive signal and inventory, and AppLovin doesn’t have either. Like everyone else, it’s essentially buying access. It feels… unsustainable.
Growth still leans heavily on its mobile gaming ad business, while its new e-commerce platform and AI ad tools remain unproven. Rising competition from Meta Platforms is a concern. And it’s unclear if Axon 2 can sustain an edge in a crowded gaming ad market. Honestly, it feels like a lot of hope is priced in.
At recent prices, AppLovin stock trades at high multiples for a business so dependent on external rules – around 50 times trailing earnings and a double-digit multiple of free cash flow, even after a big run. In other words, Wall Street is paying a “platform” multiple for a business whose economics can be rewritten by a few lines of policy text in an iOS or Android update. It feels… risky. (Hours spent researching alternative investment strategies: 4. Number of promising leads discovered: 0.)
I’m going to stay away. It’s just… too much worry for too little potential reward. (Current stress level: 8/10. Number of yoga classes attended this week: 0.)
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2026-03-06 14:55