AppLovin is on a stock market tear thanks to its groundbreaking AI ad tech

AI-powered advertising drives AppLovin’s growth: AppLovin, an ad-tech company known for mobile gaming solutions, reported a significant revenue increase of 39% year over year to $1.2 billion in Q3, exceeding analyst expectations and boosting its stock value.

• The company’s software platform segment, which will be renamed “Advertising,” saw a 66% year-over-year increase to $835 million, largely due to advancements in its AI-powered Axon engine.
• AppLovin’s app business experienced modest growth of 1% in Q3, reaching $363 million.
• The company’s success has positioned it as a favorite U.S. tech stock amid a broader boom in automation software.

Axon 2.0: The AI-driven engine behind AppLovin’s success: The revamped Axon engine, launched in 2023 with enhanced AI capabilities, has been instrumental in improving targeting capabilities and agility for AppLovin’s advertising platform.

• Although specific details about the latest AI advancements were not disclosed, executives credited the company’s engineering and research science teams for the breakthroughs.
• The company acknowledges that predicting technological step changes in AI is challenging, but expects continued advancements in this emergent field.

Expanding beyond mobile gaming: AppLovin is diversifying its portfolio by venturing into new verticals, with a particular focus on e-commerce.

• CEO Adam Foroughi expects 20-30% growth from the company’s core mobile gaming advertisers.
• The e-commerce vertical, while not yet materially impacting revenue, is AppLovin’s fastest-growing area.
• Early data from e-commerce advertisers in the pilot program has exceeded expectations, with some experiencing nearly 100% incrementality from AppLovin’s traffic.

Strategic investments and partnerships: AppLovin is actively supporting its growth initiatives through strategic investments and collaborations in the e-commerce space.

• The company has reallocated staff and streamlined resources to support its promising e-commerce initiative.
• In April, AppLovin invested $50 million in social commerce platform Flip’s Series C funding round and helped relaunch its marketing platform using Axon technology.

Looking ahead: AppLovin’s growth trajectory: The company’s successful Q3 results and ongoing AI advancements position AppLovin for continued growth and expansion in the ad-tech industry.

• AppLovin plans to scale its e-commerce bets in 2025, leveraging the early success of its pilot programs.
• The renaming of the software platform segment to “Advertising” reflects the company’s increasing focus on AI-powered advertising solutions.

Broader implications for the ad-tech industry: AppLovin’s success with AI-driven advertising underscores the growing importance of advanced technologies in the digital marketing landscape.

• As AI continues to evolve, companies that can effectively harness its power for targeting and optimization are likely to gain a competitive edge in the ad-tech space.
• The expansion into e-commerce highlights the potential for AI-powered advertising solutions to disrupt traditional marketing channels across various industries, potentially reshaping the digital advertising ecosystem in the coming years.