Mobile gaming company AppLovin began trading at $ 70 a share on Thursday.
The nine-year-old company, which has a portfolio of mobile games and also sells marketing services to game companies, now has a market cap of approximately $ 24 billion. It started trading on the Nasdaq under the ticker “APP”.
AppLovin is just the latest in a wave of gaming IPOs, with gaming software developer Unity Software launching its own game in September, Israel’s Playtika in January and children’s game company Roblox in March. IronSource, which provides ad services for app-based game developers and makes games itself, also plans to go public through a SPAC merger.
AppLovin said it owns about 1% of the market share of the $ 189 billion global mobile apps market, which has exploded during a stay-at-home year.
“We’ve seen it since we started the business; people use their phones four or five hours a day. Mobile apps are the most accessible and affordable forms of entertainment, the best entry points for transactional trading,” Founder and CEO Adam Foroughi said CNBC.
Foroughi said when he started the company, it focused on building a technical platform for mobile app developers to grow their apps through marketing using the software.
“We’ve been building that for nine years. We’ve reached distribution and now see more than 400 million customers on our platform every day. In 2018, we started creating content ourselves and actually started building original content,” he said.
“We have more than 200 apps [and] more than 200 million people play our games every month, ”he said. And those games, our own content, build this valuable audience data that then feeds our software platform, making it even more efficient to generate value for the customers we have to get their apps discovered. ”
AppLovin’s business is now split into games and marketing tools that other game developers use to discover and promote apps. Last year, 49% of sales came from companies using the software and 51% from consumers making in-app purchases.
In 2016, AppLovin agreed to be acquired by Chinese private equity firm Orient Hontai Capital for $ 1.4 billion, but that deal fell apart the following year, turning into a debt investment. AppLovin then sold a minority stake to KKR in 2018, valuing the company at $ 2 billion. Since then, AppLovin has been buying to bolster a position in game development. AppLovin said in its prospectus that it has invested $ 1 billion in 15 acquisitions and partnerships since 2018.
“We have this technical platform for app developers to help them grow, by getting them discovered, and then what we needed to improve the software was insights into our own audience. We wanted first-party data about the audience. we saw, ”Foroughi said. “Our own content gives us much better viewer insights than we would otherwise get, because otherwise we only have data from third parties.”
Foroughi compares the strategy to that of Netflix.
“That data from the first party feeds our software and makes it much better for us to recommend future content to customers,” he said. “I think the best analogy to really compare that is how Netflix took their own data on their platform and rolled out personalized recommendations … then they layered on their own original content, exploding and giving up the amount of consumption on their platform they gain more insight into their audience – by replicating that same playbook in a new media format. “
Like other companies in the mobile space, AppLovin will have to grapple with the impact of Apple’s upcoming privacy change on the way it tracks users. Foroughi said the company’s first-party data play should help.
“We thought about it when we started content ourselves, not knowing we were thinking about it, but we knew the power of first-party data,” he said. “The core of our technology depends on the insights we glean from our own relationship with consumers. Apple’s privacy change is designed to regulate first party data sharing with third parties. So we actually think we are very good place to continue. to implement our vision in the future. “
Earlier this year, AppLovin Adjust, a German app distribution and analysis company, acquired $ 1 billion in cash and stock. Foroughi said his own company didn’t have much of a sales force, so the acquisition of Adjust brought the company several hundred seasoned sales associates and marketing talent to help try and sell it to a wider pool of mobile app developers.
While press reports have said in the past that the company was named after “McLovin,” a character from the 2007 movie “Superbad,” Foroughi said this is not the case. Could be.
“I don’t know if I’m unknowingly a ‘Superbad’ fan and that’s where it comes from, but it really was just an $ 8 domain name,” he said. “And it was crazy and cute then. And so we chose it and grew into a really big company with a crazy name. It did lead to a great stock price.”
CNBC’s Ari Levy contributed to this report.