the applovin thesis goes WAY deeper than you realize

You know, it's not often that I ask you to watch a video in its entirety, but whenever I do, it is for your own good.

It's because there's a massive amount of value in this video. If you've been curious about AppLin, you've been looking at it from the sidelines, maybe you are an investor in it, maybe you just want to learn more about the company. Whatever the case is, today's

company. Whatever the case is, today's video will teach you a little bit more about AppLin, how the business works, how they monetize, and most importantly, how they have a massive asymmetric opportunity in terms of being able to

grow their revenues 10fold. Um, no,

literally 10fold. There's a lot of context that we do in the first half of the video. The final third, call it gets

the video. The final third, call it gets good. I promise you it's worth it if you

good. I promise you it's worth it if you stick around. Enjoy. Welcome back. My

stick around. Enjoy. Welcome back. My

name is Arya and I don't waste your time. So, skip to it. Ladies and

time. So, skip to it. Ladies and

gentlemen, in today's video, we are going to be talking about Apploving. The

reason why we're talking about AppLin is because I would argue it is one of the most misunderstood large cap companies that's out there. There's a huge number of investors that look at the stock and they have a base level understanding of

they're an advertiser. They primarily

monetize through mobile games and that's about it. And so in today's video, I

about it. And so in today's video, I kind of wanted to help explain two different things that I think there's a huge misconception with AppLan. First

and foremost, the first thing that we're going to really spend a lot of time getting everybody on the same page is how does AppL1 actually make money? Yes,

they primarily serve advertisers for the gaming vector and they've recently gotten into e-commerce, but how exactly does the mechanics of that work for a company like AppLan? And that's really important to understand because in the second part of the video, we're going to

be talking about essentially why they're able to have such disgusting operating margins of 80%. As an investor, you should be happy if a company has 80% gross margins, never mind operating margins after they pay their employees,

stockbased compensation, all that sort of stuff. And so without further ado,

of stuff. And so without further ado, let us get into it. So the first thing that I kind of want to highlight with Appin, this is directly from their blog.

This is when they went to general release in June of 2026. This is

directly from the CEO. He essentially

wrote a whole bunch of stuff in terms of all the different updates and so on and so forth. And he very simply just laid

so forth. And he very simply just laid out the various different ways that AppLoving charges on the platform. There

are three ways to buy on the platform today. Return on ad spend. Advertisers

today. Return on ad spend. Advertisers

who focus on revenue goals like games and online shops set a return on ad spend target and the platform maximizes the return as they scale spend. This is

very simple. It essentially says that app based off of all the data that you have, I want you to optimize for me that for every dollar that I put in, I will receive $3 back in terms of whatever their goal is. Right? If you're an

e-commerce platform, you're selling a t-shirt. For every dollar of advertising

t-shirt. For every dollar of advertising that I put in, I want $3 of revenue in return. And do not advertise for me

return. And do not advertise for me unless it meets that hurdle rate. Now,

that doesn't mean that that'll necessarily maximize the amount of ad spend that you could possibly throw at it, but what it does is that it maximizes the return on ad spend.

There's the cost per purchaser. So, an

advertiser who wants to maximize the number of purchasers like ride share, subscription brands, and prediction markets buy at a target cost per purchaser. So, essentially, you just say

purchaser. So, essentially, you just say that I'm not willing to spend more than $5 per installation of my Uber application, for example, right? And so,

App on the back end with all the data that they have, they do not advertise unless they are able to meet that hurdle rate of $5 per installation. And then

the third one that I don't understand the best but nonetheless it's still here. Uh buying leads. Leads is the

here. Uh buying leads. Leads is the newest way to buy on our platform.

Advertisers set a value per lead and app delivers leads at a cost below that value. We built this for categories like

value. We built this for categories like auto insurance, health insurance and home services. So essentially for these

home services. So essentially for these sort of like quote unquote heavyduty if you will higher ticket sort of things.

Maybe it requires a bit longer of a sales cycle. Whatever the case is maybe

sales cycle. Whatever the case is maybe with auto insurance somebody could click on the website and then a later date call in and then that's when they buy the policy. So it's it's a bit difficult

the policy. So it's it's a bit difficult to track whether or not app actually drove that sale. And so the idea here is that you essentially just buy leads. You

essentially buy clicks. If somebody

clicked over to the website and was maybe on there for a certain amount of time, app is able to charge for that.

The point that I really want to emphasize here though, if you look across the board on every single one of the methods in which that app or you can advertise on app, they're all centered

around essentially an event, essentially an outcome. You are spending at $5 per

an outcome. You are spending at $5 per installation of your application. you

are spending to achieve a return on investment of minimum three times on every dollar that you put in. You're

spending for somebody to visit your website. This is a little bit different

website. This is a little bit different than how traditional sort of like meta advertising works. Now, I understand

advertising works. Now, I understand that Meta also does this sort of advertising. Those are options on the

advertising. Those are options on the Meta platform. There's no difference on

Meta platform. There's no difference on that uh side. But the point I'm trying to make is that like traditional advertising, you essentially pay for impressions and you're just hoping that those impressions convert and they convert at a high enough rate that you

have a profitable return on investment and that you're able to have a low enough cost per installation or cost per whatever your out outcome is that you're solving for that the math works out for you. Now granted Meta and both Google

you. Now granted Meta and both Google they have like rolled out these various other types of return on ad spend and cost per purchaser but what makes apploven differentiated and why it is more powerful why you can have lower

cost per installation on apploven as opposed to a meta which by the way we have numbers for understand it is very anecdotal with what Nick put out earlier today in a tweet but even if you look across the board even if you look at different interviews and and whatnot if

you look on forums apploven historically has had significantly lower cost per installation than any other platform and mind you by the way like Meta, Google, these two companies have buttloads more

data than Apploven. So why is it that AppLoven is the one with a significantly lower cost per installation? I would

argue part of it has to do with the fact that Apploven's ads are inherently longer form. And so naturally, when a

longer form. And so naturally, when a viewer kind of comes across one of those ads, they have to have more undivided attention. It's usually when you're

attention. It's usually when you're playing a mobile game and there's a 30 to 60 second ad that comes up, in many cases it's of another game and you're playing like a trial of the other game.

And so if you end up liking that game, you'll probably download it, whatever the case is, right? So I think that is probably a significant portion of it.

And then on top of that I would argue that app 11 has higher quality behavioral data over somebody like a meta. If you recall in 2020 Apple

meta. If you recall in 2020 Apple actually did the privacy changes that resulted in advertising companies for example a meta to not be able to track users across third party websites and that absolutely hurt their customer

impression that they would be able to deliver to advertisers. In fact Mark Zuckerberg has actually came out and said that the revenues would be double if it weren't for those privacy changes by Apple. And so the reason why AppLin

by Apple. And so the reason why AppLin is uniquely positioned here is because they also own their Max ad mediation platform. And so essentially, not only

platform. And so essentially, not only is Apploven a place for advertisers to come on and and be able to advertise inside of mobile games, those same exact mobile games are in most cases using

AppLin to essentially sell that advertising slot to a potential advertiser. It's essentially a network

advertiser. It's essentially a network effect. There is the games that are

effect. There is the games that are selling ad slots and then at the same time there's advertisers that are buying those ad slots. And so App 11 is actually able to service both these parties and it's because they have the relationship with the games and they're able to sell the ad slots of those

games. They're able to pick up on a lot

games. They're able to pick up on a lot more behavioral data, deep engagement patterns, for example, how long a user plays when they purchase different items, how often do they opt in to watch a trailer to get a second life inside of

the game. All this sort of data they

the game. All this sort of data they have, and it's because of that that they're able to have much lower cost per install because they can essentially better predict when a user might turn off of an app. So, we should serve him a different ad for a different game and

then all that sort of stuff, right? I

know I just threw a lot of information at you. So, just a very super quick

at you. So, just a very super quick recap. There's essentially three

recap. There's essentially three different models of advertising on App Leven. The big point, the big takeaway

Leven. The big point, the big takeaway that you should have with this is that everything is event-based. Everything is

based around a potential lead, a potential installation, a potential return on ad spend target. And the

reason why AppLin historically is much lower cost per install than any other advertiser is because they have boatloads of behavioral data because they service both the game and the advertiser who's placing an ad inside of that game. With that being said, the

that game. With that being said, the second component of the video and why when you look on a platform like Fiscal AI and when you're looking at the margins of a company like AppLin, it's sitting at 78% which again I really want to emphasize just how ridiculous that

is. And it's not like this company is

is. And it's not like this company is you know not uh is kind of like lacking in the growth department. They are

growing their revenues a quarterly basis at 53%. Granted, it is slowing down more

at 53%. Granted, it is slowing down more recently, but it's still an absurd level of growth, especially for just how profitable the business is. But that's

an absurd amount of growth, especially for just how profitable they are, and more recently how cheap the valuation is. By the way, while I'm doing this, I

is. By the way, while I'm doing this, I think it's a great time to mention that the platform in front of you here is called Fiscal AI, and there's a link for it in the description down below if you'd like to try it out with a 7-day free trial. Speaking of that valuation,

free trial. Speaking of that valuation, by the way, it is now trading, and I I genuinely cannot believe this. is

trading at 24 times earnings and I just showed you that their revenue growth was at 55 54% and essentially all of that is flowing down to earnings. If not, there should be a little bit of operating leverage left with the business in terms

of net margins. Those margins should slowly creep up over time. They've

definitely exhausted most of their operating leverage. And so on an

operating leverage. And so on an earnings basis, you have a company that at least on a trading basis is growing at roughly 56% earnings growth and yet trades at 24 times earnings. So, I'm

giving you that backdrop before I tell you that this trend is not slowing down and there is a disgusting amount of optionality with this business and a huge amount of opportunity for them to actually accelerate uh their revenue

growth from this point on hingent on a couple different things. And so, we'll kind of get into it. Now, Nick,

unfortunately, in this thread, he uses uh revenue and profit. What he should have done is say gross revenue and net revenue. And so, essentially what I'm

revenue. And so, essentially what I'm talking about there is like obviously Apploven doesn't keep every dollar of spend that is on their platform.

Actually, it's estimated. They don't

break it out. And for competitive reasons they don't break it up but it's estimated that apploven keeps roughly about 20 to 30%. Now it's tiered differently and different advertisers whole bunch of stuff but on average

roughly 20 to 30%. And so again there's gross revenue. So for example let's just

gross revenue. So for example let's just say there's a let's just say the average installation on the app platform costs $13 to get one install. Not the case but anyways let's just say it cost $13 to

get one install of any application. That

would mean that AppLeven has roughly $10 of media costs that they have to give to the gaming company, the publisher, right? The person that is actually

right? The person that is actually owning the app where that ad gets slotted into, and they're monetizing through the fact that they're showing ads to just random people playing their game, right? They're paying that money

game, right? They're paying that money to the gaming company who is selling that ad slot. That would mean that $13 of revenue. Appven pays $10 to the and

of revenue. Appven pays $10 to the and they keep about 30% of it, which is $3 in this case, and that is what they report as revenues. Now, what's

incredible about this is that because of the way that app works, that is a fixed cost that they're paying. So, there's a fixed cost to, hey, we have to show a,000 ads to get one install of an

application. Hey, Mr. Gaming Company,

application. Hey, Mr. Gaming Company, how much will you charge us for a,000 impressions? The gaming company says

impressions? The gaming company says that they will charge $10 for that. And

so, it ultimately doesn't matter to the gaming company whether Apploven gets a,000 installs out of that or zero installs out of that. That's for them to figure out. I am selling this ad slot. I

figure out. I am selling this ad slot. I

am selling a,000 impressions. I have

absolutely no care whether or not AppLin is actually able to convert on these ads on behalf of their advertiser does not matter to me. I simply have an ad slot and I am monetizing that ad slot for $10 per thousand impressions for example.

And so the great thing and the sort of parabolic thing that ends up happening here essentially is that because they have that fixed fee for those impressions in theory if you are paying for a,000 impressions and you go from on

average getting one install to for example getting five installations per thousand all of a sudden you're now tapping into that operating leverage that I mentioned. You're paying the same amount of money for more installations.

And because you're able to charge for more installations and by extension to that you're able to charge the advertiser for more money. So again,

just to put some numbers behind this cuz I really don't want anyone to be confused. In the original example, we

confused. In the original example, we had revenues of $13, meaning the advertiser paid Apploven $13. Apploven

kept about three of those dollars because they have to pay 10 of those dollars, which is a fixed amount of money, to the gaming company for, for example, a,000 impressions. And as a result of those,000 impressions, they were able to convert on 13 of them.

Meaning that the conversion ratio was 1.3%. And so with a 1.3% conversion

1.3%. And so with a 1.3% conversion ratio, AppLeven's revenue that they generate from that entire transaction is $3. Again, keep in mind when you're

$3. Again, keep in mind when you're looking at this and reading it, uh Nick mistyped here. This is supposed to say

mistyped here. This is supposed to say net revenue. This is supposed to say

net revenue. This is supposed to say gross revenue. Gross revenue being uh

gross revenue. Gross revenue being uh just the spend on the platform, right? I

hope everybody understood that. Now,

this is the interesting part. This is

what I've been building up to this whole time, the entire point of the video. App

has the exact same $10 media cost. They

pay the exact same $10 to for those thousand impressions to own them to that gaming company. Again, the gaming

gaming company. Again, the gaming company just does not care at all whether or not all thousand of those impressions are turning into app installs or none of them are turning into app installs. All they care about is I'm getting paid x amount of dollars

to be able to monetize my little shitty gaming app and that's it. Simple as

that, right? And so in theory, if apploven's models over time and their behavioral data and uh the liquidity of their advertisers gets better over time, the conversion ratio goes from 1.3% to 5.2%. This is a direct number that

5.2%. This is a direct number that actually the CEO gave out in the conference call which I'll kind of get into in a second here but just bear with me with the numbers. If that conversion ratio quadruples 1.3 to 5.2% the revenue

doesn't just quadruple because again there's fixed costs here. The revenue

goes from $3 to $42. That is a 14x for a four times improvement in the conversion ratio. It is a 14 times improvement in

ratio. It is a 14 times improvement in the net revenue dollars that apploven generates. And so this is the asymmetric

generates. And so this is the asymmetric sort of like parabolic nature of apploven's business. if they're actually

apploven's business. if they're actually able to capitalize on a higher conversion ratio. Now, the important

conversion ratio. Now, the important super important question that we need to ask as investors and potential investors of AppLin is how do they actually go about improving that conversion ratio over time? And ladies and gentlemen, I

over time? And ladies and gentlemen, I have the answer for you very quickly.

This is another one of Fiscal's very, very cool features. It's the query feature that I actually used quite a lot. For example, I didn't actually know

lot. For example, I didn't actually know where the quote was in the conference call, but I went in here. I knew the number was 1.3% cuz that's what I remembered. I put AppLove, searched up

remembered. I put AppLove, searched up 1.3%, and I was able to find it. Again,

ladies and gentlemen, this is just scratching the surface with this platform. I use it in literally every

platform. I use it in literally every single one of the videos. There's a link for it in the description down below if you want to just give it a free trial.

You know, you have absolutely nothing to lose, and uh I'm sure you'll find it very useful. Anyways, moving on. Okay,

very useful. Anyways, moving on. Okay,

so this is the exact quote that I was talking about. Now, bear with me here.

talking about. Now, bear with me here.

It'll again get a little bit complicated, but it'll kind of relate to everything that we've talked about thus far. Here's what Adam Ferugi says. This

far. Here's what Adam Ferugi says. This

is the CEO of the company. He says,

"We've got this opportunity to really expand the business if we execute as we go forward these new categories." Let me break that down for you. We today have a 1.3% conversion rate on our ads that we serve. Said differently, we make money

serve. Said differently, we make money on 1.3% of the ads we serve. We lose

money on 98.7% of the ads that we serve.

When the model knows a user is really primed for gaming, they're likely to turn the current game. They're likely to go to another game. We have well over a 5% conversion rate. This is what I call a high value moment. Okay, so very

quickly across the entire app loving business, they have a 1.3% conversion rate. But when they know that a user is

rate. But when they know that a user is getting frustrated with a game, maybe they're playing it less and less and less. Maybe instead of hitting average

less. Maybe instead of hitting average scores of 100,000 in that game, they're starting to hit scores that are less.

Maybe they're getting worse at the game, right? Maybe they're uh playing it more

right? Maybe they're uh playing it more infrequently. Whatever the case is, when

infrequently. Whatever the case is, when AppLin is able based off all the data that they've gathered over the past handful of years, knows that this user is likely to turn from this game very soon and they serve them an ad to a very

targeted game that's similar or whatever the case is, their conversion ratio on those ads are 5%. And again, remember the math that I just gave you a second ago, how much more profitable a 5% conversion rate ad is compared to a 1.3%

conversion rate ad. This is what he calls a high-value moment. Most of these impressions that the model serves for a gaming are not highv value moments. The

reason they're not is that the user is playing a game that they like and if you serve them a 100 gaming ads in a row, at some point that becomes annoying. And

that's absolutely true. Right? If I'm

playing a game that I thoroughly enjoy, I love playing chess, right? And I'm

playing chess and I keep getting gaming ads for gaming ads that I don't care about. No matter how many gaming ads you

about. No matter how many gaming ads you give me, I'm not going to download other gaming ads. But if I was growing

gaming ads. But if I was growing frustrated with chess and then you serve me an ad for a similar strategy game, I might consider it. And that would be a high value moment. As per uh the Apple and CEO notes here, a very powerful

recommendation system is meant to personalize content in the absence of content diversity. That's a very

content diversity. That's a very important word right here, content diversity. It has to stick to what it

diversity. It has to stick to what it knows, which in our case originally was just gaming. It's gaming plus. We've got

just gaming. It's gaming plus. We've got

the e-commerce brands and we've got some of the other lead gen brands, but not a lot of them yet. not a lot of density in every single category. Fast forward five years, let's say we have hundreds of thousands of customers, which I fully believe we'll get to. What's going to

happen in our platform, this powerful technology, which is inevitably going to get much better over time, it's going to be able to serve different products in every single ad impression. What he's

basically saying is because of a lack of number of advertisers on the platform, the current state of app is regardless of if you are likely to turn, if you're part of that highv value moment or if you are thoroughly enjoying playing

chess, apploven because of a lack of advertisers has to lose a bunch of money and has to advertise all these ads that are actually maybe not the best ad to serve you in that moment. But if we fast forward 5 years and we have a variety of different advertisers, we have

e-commerce companies, auto insurance, fintech, boom, boom, boom, whole bunch of different companies. Applovin can

then identify that in this moment in time Arya is likely to for example download a ride sharing app. In this

moment in time he might download Cali.

In this moment of time we need to serve him a new game and they have the behavioral data for all this stuff. And

so that is what is ultimately the thing that I think the average app investor the average investor looking into app misses is the asymmetric opportunity ahead with this company. They're not

simply going to double triple quadruple revenues. there is an opportunity ahead

revenues. there is an opportunity ahead in the Super Bowl case if they're like there's execution risk. Let's just get that out of the way, right? There's no

guarantee that they'll be able to deliver on this, but they're confident that they're able to deliver on this as ad density goes up, which absolutely in my opinion makes sense. If you get more advertisers, you give them the advertisements at the right time when it

is most personalized that most fits their specific use case. That just makes natural sense in my opinion, right? And

so if they're able to capitalize on revenues do not double, they don't triple, they don't quadruple, they likely 10x, 15x, something in that ballpark over the next 5 years. if that

conversion ratio is able to improve.

This is a multi multi multi multibagger stock on our hands and today you can buy it 24 times earning. What's brilliant

about it is it doesn't like the thesis doesn't even rely on any of this playing out. They in the same earnings call they

out. They in the same earnings call they talk about and I I'm not going to bother pulling up the quote. H it. In the

same earnings call or conference whatever they talked about this like longerterm 20 to 30% uh growth that they think is a sustainable level for their mobile gaming ecosystem that they can achieve over the next decade. This is

the guy. This is like the long-term guidance that they think is sustainable for their business. And obviously in the past 3 four years, they've absolutely demolished those numbers. If you look at the core software business during this

period, they have done way faster than 20 to 30%. Their worst quarters were 34 24 28%. Since IPO, they've had is that

24 28%. Since IPO, they've had is that literally three they no, they've had two quarters within that range, right? So

they've completely demolished those numbers and I have full belief that they'll actually be able to deliver on those numbers over the decade literally just off the back of the gaming vertical alone. If they don't capitalize on

alone. If they don't capitalize on e-commerce, if they don't capitalize on fintech, auto insurance, if we ignore what Nick tweeted today with his experience with AppLov, the lowest cost per install, clearly it's working for

categories other than gaming. If we

ignore all of that, the stock trades at 24 times earnings. There's not much factored into the valuation at the current price. In fact, at these prices,

current price. In fact, at these prices, I would personally be happy with 12% revenue growth for the next decade. I

think the the stock would work out in that scenario. The only scenario you

that scenario. The only scenario you kind of get bit here is if the margins start to decline, which as I mentioned to you in the first half of the video, there's a ridiculous amount of operating levers built into the business that is

very, very unlikely to happen. All in

all, the stock is disgustingly undervalued, has a disgusting amount of optionality, and I hope you enjoyed my little rant uh in today's video. With

that being said, I am certainly in the next handful of months going to be buying more shares of this business. If

you want to see when I'm buying it, my portfolio is always going to be free.

It's linked in the description over on Blossom. You can see the whole thing.

Blossom. You can see the whole thing.

Unfortunately, at the moment, a little bit low on cash, but we should be coming into a solid amount of money over the next month. I'll save those details for

next month. I'll save those details for maybe a different announcement if and when it actually happens. Some stuff is in the works in the background. With

that being said, if you want to catch our original Apploven deep dive, when I explain the moat of the company a little bit more and kind of give a 12 13 minute analogy on why it's a powerful business on that front, that video is up on screen right now. Thank you very much

for watching. And be sure to check me

for watching. And be sure to check me out on Blossom, link in the description down below.