AppLovin executives discussed their strategy to expand beyond mobile gaming into e-commerce and web advertising, highlighting the recent launch of "new visitor campaigns." CEO Adam Foroughi emphasized a long-term objective to increase ad conversion rates from the current 1.3% to "over 5%," a shift he claims could quadruple revenue and generate tens of billions in additional ad spend. Management reiterated a disciplined cost structure, noting that despite massive growth opportunities, headcount (~900 employees) will not scale significantly. The company plans to release Generative AI tools for ad creative production in the first half of 2026.

Key Takeaway

• Growth Baselines: The company views its historical 20% to 30% growth target for gaming ads as a baseline, with the CEO noting "there's definitely potential upside" as technology improves.
• Web Expansion: Following "universal campaigns" and "new customer campaigns" (launched in October), AppLovin rolled out "new visitor campaigns" "a week ago" to target users who have never visited an advertiser's site.
• Monetization Upside: The platform currently operates with a "1.3% conversion rate"; increasing this to "over 5%" could allow the business to more than quadruple.
• Scale Comparison: Management stated that advertiser spend on AppLovin is now "bigger than the sum of everything that's happening on Snap, Pinterest, Twitter, Reddit combined."
• Generative AI Products: To help e-commerce merchants match the testing volume of gaming developers (who test "over 50,000 ads"), AppLovin will launch GenAI creative tools for video in the "first half of this year."
• Cost Discipline: The company has "around 900 employees," with only roughly 15 dedicated to e-commerce; future hiring will involve adding "tens of people," not hundreds.
• Data Center Efficiency: Data center costs have historically grown at approximately "10% of the overall revenue growth," a metric the company is currently beating.

Q&A

Matt Cost (Morgan Stanley): Has your thinking on the 20% to 30% growth target for gaming ads changed given that you have exceeded it, and is there potential upside?

• Adam Foroughi (CEO): The 20% to 30% target was initially set to frame the opportunity for skeptical investors, but "there's definitely potential upside" because the technology is nascent and benefits from "directed model enhancements and recursive learning."

Matt Cost (Morgan Stanley): How is the web advertising business progressing toward the general availability launch in the first half of this year?

• Adam Foroughi: The company has iteratively released products, moving from universal campaigns to "new customer campaigns" in October, and finally rolling out "new visitor campaigns" "a week ago," which drive customers to a site they have never seen before.

Matt Cost (Morgan Stanley): How should the market define success for the web business regarding customer adds and revenue?

• Adam Foroughi: Success is defined by improving the "1.3% conversion rate" on the over one billion daily users; reaching a conversion rate of "over 5%" would allow the platform to generate "tens of billions more of ad spend" than it does today.

Matt Cost (Morgan Stanley): What does the investment in technology and web initiatives mean for headcount growth?

• Matt Stumpf (CFO): The company runs extremely lean with only "around 900 employees" total and "something around 15 people for E-com"; future investment will likely only add "tens of people," so there "really isn't any impact on the overall cost structure."