AppLovin (NASDAQ: APP) is a Round Tripping Hellhole
Opinion: APP is a Strong Sell. AppLovin is merely a Russian/Belarusian/Cypriot hellhole of related-party transactions on low-tier mobile games in a declining industry.
Note: In the last few months I've asked thirteen investors in this name whether or not they've actually played mobile games that use AppLovin. Not one single investor, including people at funds that hold tens of millions+ in APP stock, had ever bothered to spend even 15 minutes to play any mobile game partnered with AppLovin and see the solution in action, nor could any name a game studio that uses AppLovin. Classic.
AppLovin's Story
AppLovin is a games studio and ad exchange in the mobile games space. For years, AppLovin had owned and operated mobile gaming properties and had monetized their owned properties through classic gaming monetization patterns like in-app purchases (upsells) and selling ad space in their games.
AppLovin has shifted their business in the past two years, moving beyond a mere operator and owner of mobile game properties and moving toward an advertising exchange model that allows any game partnered with AppLovin to be optimally monetized.
AppLovin has made a number of business moves in the past few years ranging from their acquisition of MoPub from Twitter to Wurl to promote a CTV (connected TV) story. Despite acquisitions outside of the mobile games space, AppLovin/APP remains a mobile games story.
In recent quarters, AppLovin has shown they've pivoted the business from one based on revenue from their own studio games to one focused on "software platform" revenue, or revenue derived from their ad exchange business.
- Despite Wall Street and APP claims, I believe the "software platform" growth story is largely due to related party transactions and circular revenue run through a series of Cyprus-based Belarusian-owned games studios passing transactions back-and-forth, using APP as the intermediary to facilitate the transactions.
- Further, I believe many of the "most popular games" partnered with AppLovin are merely games optimized for click farms to promote the most ads possible.
- Even further, upon reviewing a number of these mobile games, most ads are simply for other games in the network of AppLovin subsidiaries/key partners and very little ad traffic actually leaves this network.
A Click Bait Ad Bonanza of Related Parties
AppLovin heavily promotes MAX as their solution for gaming studios on the gaming side of the ad exchange as MAX is the core of the "software platform" revenue AppLovin reports.
On AppLovin's MAX page, they promote KAYAC, Playgendary, and Idea Solutions as gaming studios that see the benefits of AppLovin's MAX solution.
Let's dive into some of these games and see the AppLovin experience from some of AppLovin's primary partners and testimonials.
First, here is the Tomb of the Mask game from AppLovin partner Playgendary,a partner advertised above as a key partner of AppLovin. Tomb of the Mask is one of the top games per third-party SensorTower, with Tomb of the Mask even reaching #11 in free action games as recent as this past week in the US, and consistently ranking in the Top 20 free action games in the last month.
Clearly, this must be a good game?
However, as seen below on my play-through on December 19, 2024 most of the game experience is merely ads.
The interstitial/full screen ads in 12 minutes of play time on this Playgendary game Tomb of the Mask are:
1. Brawl Stars (another mobile game - studio is Supercell)
2. Wordscapes Search (mobile game - studio is AppLovin's PeopleFun studio)
3. Wordscapes Search (again)
4. Brawl Stars (again)
5. Fruit Merge: Match Game (mobile game - studio is BraveStars Technology JSC
6. Fruit Merge: Match Game (again)
7. Flappy Dunk (mobile game - studio is Voodoo)
8. Bus Escape: Traffic Jam (mobile game - studio is ABI Global LTD)
9. Colorwood Sort Puzzle Game (mobile game - studio is Burny Games)
10. My Perfect Hotel (a mobile game where one brings toilet paper to bathrooms and cleans hotel rooms - studio is SayGames LTD)
So if this game studio Playgendary using APP AppLovin is legitimate, surely their ads are legitimate, right?
As I noticed the game Flappy Dunk in the ads from Tomb of the Mask I installed this game and played through it as well. When playing Flappy Dunk from the game studio Voodoo I spent as much time clicking through or watching mobile game ads as I spent playing Flappy Dunk.
In just under 8 minutes and 30 seconds I spent more time dealing with ads than I did playing the actual Flappy Dunk game.
The interstitial ads I received in playing Flappy Dunk included:
- Paper.io 2 (mobile game - studio is Voodoo)
- Amazon Fresh
- Some audiobook ad (which got cut off)
- Aquapark.io (mobile game - studio is Voodoo)
- Twisty Arrow: Bow Game (mobile game - studio is AI Games FZ)
- Bingo Golden - Win Cash (mobile game - studio is Joybox Studio Limited)
- Tic Tac Toe: 2 Player XO (mobile game - studio is Nguyen Thi Thu Huyen)
- Grangier
- Brawl Stars (mobile game - studio is Supercell)
- Soccer Superstar (mobile game - studio is Real Free Soccer)
- Go Escape! - Casual Ball Games (mobile game - studio is AI Games FZ)
Yet, it gets even worse.
AppLovin's partner game studio KAYAC features on many testimonials and case studies extolling the benefits of AppLovin.
I played Ragdoll Break: Let's destroy! which is one of KAYAC's current most popular games, even recently reaching the #2 free action game per third-party analytics platform SensorTower.
Clearly this is one of the most recently popular games in the world, and clearly KAYAC is closely partnered with AppLovin.
Yet, when I played through this game it was more of the same, all ads for the same games network:
- Royal Kingdom (mobile game - studio is Dream Games)
- Draw Saber (mobile game - a KAYAC game advertising on a KAYAC game)
- Draw Action: Freestyle Fight (mobile game - a KAYAC game advertising on a KAYAC game)
- Rope and Demolish (mobile game - Voodoo game studio)
- Vehicle Masters (mobile game - SayGames LTD)
- Fork N Sausage (mobile game - SayGames LTD)
- Super Goal: Fun Soccer Game (mobile game - Gamegou Limited)
- Draw Saber (yet again - a KAYAC game advertising on a KAYAC game)
- Draw Action: Freestyle Fight (yet again - a KAYAC game advertising on a KAYAC game)
- Royal Kingdom (again - mobile game - studio is Dream Games)
- Robe and Demolish (again - mobile game - studio is Voodoo)
- Super Goal: Fun Soccer Game (again)
- Draw Saber (again - same KAYAC studio)
- Slow Mo’ Run (mobile game - SUPERSONIC STUDIOS LTD)
- Water Connect Flow (mobile game - IEC GLOBAL PTY LTD)
- Royal Kingdom (again)
- Everdries - an underwear for women with urinary incontinence issues
- Rope and Demolish (again)
- Pollo Campero
- Draw Saber (yet again)
Almost nothing I received in this gaming experience put me "out of the gaming ads" so to speak. Who is Voodoo? Why do I keep getting pushed to download Voodoo gaming studio games?
Well, Voodoo is a major AppLovin partner.
Predefined Path Mobile Games
Predefined path games have the end user progress through a linear sequence of levels or areas. Successful sequences of moves required to get through a level are fixed. In the video arcade days, this could mean doing "left, left, up, right, down, left, up, up, up, right" on a joystick. On predefined path mobile games, this is most often a series of finger swipes on a screen and clicks delivered on a pre-specified user experience.
Put simply: many of these AppLovin network games are click farm optimized.
This is contrasted with games that have variability, for example "shoot the monster" games where the monster may appear in variable places on the screen and thus a specific set of predefined sequence of moves cannot be achieved.
As an example, below is a screen grab from Tomb of the Mask: Maze Game which is produced by Playgendary, an AppLovin partner.
Level 1 of Tomb of the Mask: Maze Game is simply a series of 22 swipes.
After completing Level 1 of Tomb of the Mask: Maze Game an ad for another mobile game was served. In this instance, the game ad was for Colorwood Sort Puzzle Game, another simple predefined path game with each puzzle having one critical path based on screen swipes.
Then, we get to Level 2 of Tomb of the Mask: Maze Game which is a simply a series of 27 swipes.
Hypercasual Mobile Games - AppLovin's Bread and Butter - Have Been on the Decline Through 2024
The hypercasual gaming trend is on a noted decline.
-https://denebgames.com/blog/is-hyper-casual-dead-or-not-part1
-https://www.pocketgamer.biz/the-state-of-the-hypercasual-genre-in-2024/
-https://unity.com/blog/the-shift-from-hyper-to-hybrid-games-and-why-it-matters-for-everyone
Hypercasual, if you cannot tell, is merely a pyramid scheme of studios re-skinning and re-marketing previously published games and simply throwing on a new face on existing games. This is not sustainable in the medium- to long-run.
Deeper Issues with AppLovin Structure
Many AppLovin and mobile gaming space experts have recently weighed in on how AppLovin hijacks ad clicks.
Jon Norris
Additionally, APP has faced numerous issues with CFIUS,
AppLovin’s foreign investment ties have garnered serious CFIUS concerns as an attempted acquisition by Orient Hontai Capital was blocked. Instead, Orient Hontai issued debt financing, after a previous $140 million investment for ~10% stake. The founder of Orient Hontai, Yun Tao Ma, was previously on the Board of China Mobile Game Technology Co. (CMGE) based out of Shenzhen which fired nine of its executives due to bribery allegations in 2014 and was taken private by the National Council for Social Security Fund (PRC) and ICBC Credit Suisse Asset Management in 2015. CMGE was incorporated in the Cayman Islands under a Bermuda-incorporated parent company, utilizing a Variable Interest Entity to allow listing of a Chinese company abroad on NASDAQ.
Mr. Hao Tang and Ms. Ling Tang, hold ~8.4% and ~6.9%, respectively, of AppLovin’s Class A Common Stock as of the latest reporting. Hao Tang owns his stake through Midterm Success and Asian Creative Capital, both out of the British Virgin Islands. Ling Tang, a Canadian national, holds her shares through Angel Pride Holdings and Prominence Trust, also out of BVI.
Ling Tang is found on Noah Growth Capital’s website. NGC claims to be a private investment firm in Greenwich, Connecticut that represents the interests of the Tang family. However, the LLC was formed in 2024 and is merely feet from the New York state border. There is no suite listed on the address and the office complex has no mention of them online or on Google Street View.
A Reddit post also discussed how an internship job listing (in New York City, not Connecticut) for NGC entailed an interview where they asked the candidate to cover ~50% of the cost for this training opportunity.
Aside from direct ties to large Chinese PE firms with questionable leadership along with PRC-aligned families, SEC filings indicate AppLovin issued a convertible note for Class A Common Stock to Solcrest Limited, a Cyprus shell that Cypriot records indicate is a subsidiary of AppLovin Cyprus Limited with directors from Calmco, a specialist trust & corporate services group. Solcrest then transferred this security to Athena FZE. Athena FZE is just Athena Studio, a Dubai entity with developers based out of Vietnam making a variety of nonsense wood block games. A Twitter/X user noted that an old JSON payload gave away that Athena FZE → Athena Studio was still under the subsidiary AppLovin Cyprus Ltd. These partner game studios should be viewed as subsidiaries of AppLovin, and their games are just an avenue to serve AppLovin ads through this shell game.
The Cypriot - Belarusian Connection
AppLovin has many published customer stories of Cypriot game developers such as SayGames and Azur Games, who focus on hypercasual games, with significant negative reviews noting constant ads and ads directed towards other games within their portfolios.
These games such as SayGames' Sushi Roll 3D involve little user input and have constant interstitial ads via AppLovin between very short levels. These games are simply click farm optimized to serve ads.
Other Cypriot studios like AppQuantum blatantly advertise idle/clicker games where players tap a screen to gain certain in-app items (such as light bulbs to brighten a city) followed by unskippable 30-60 second ads for other mobile games. These games are utter garbage, all riddled with ads for other games from the same studios.
The worst offenders worth noting are Playgendary and SayGames. Regarding the former, each time I opened the game Crash Heads an ad populated for ~30 seconds, followed by a skip button that conveniently opened a preview of the App Store page before I could continue playing. All the while, a small banner near the bottom of the screen recycled ads served by AppLovin. Playgendary’s staff seemed to bounce from the same familiar mobile dev shops, namely Playrix, Azur, Pixonic, Belka Games, and Wargaming.
One of the studios that frequently employs Belarusian mobile developers in Cyprus is Wargaming, which makes vehicle-based multiplayer combat games. Wargaming has been linked to money laundering outfits like GlobalMoney that replenish players’ in-game accounts. The Auditor General of Cyprus also announced that dozens of Wargaming employees who received "Golden Passports" in exchange for investment never met this criteria, as the program came under scrutiny after Al Jazeera investigated applicants convicted of financial crimes attaining these passports. A commenter on Reddit claims that Wargaming used prepaid game cards to clean money for Russian mob interests, several years after Wargaming moving their corporate HQ to Cyprus.
Note: despite being over 1000 employees and headquartered in Dublin, gaming studio Playrix was founded by the Russian-born Israeli Bukhman brothers and maintained offices in Russia and Belarus until the invasion of Ukraine, and many of the Belarussian born/educated employees and founders of these smaller studios worked for Playrix at some point.
In fact upon visiting Playrix's website from the US one is directed to visit the site in its original Russian or English.
AppLovin as a Money Laundering Factory
AppLovin is clearly benefitting well from mobile games marketing other mobile games marketing other mobile games - so where is the advertising outside of these networks?
This current state is an unsustainable Ponzi scheme model that will not work in the long-term. Further, a number of these Cypriot-based game studios do not seem to have much in the way of AppLovin ads directing users outside of the ecosystem. Rather, legitimate non-click farm users are directed to other games in the same networks whether through AppLovin's PeopleFun or Lion Studios.
Why does Playgendary's top game Bowmasters seem to be only an ad feeder for other games? Where are the clicks and movement outside of the ecosystem?
I have taken positions short APP at the time of publication as I believe this stock is a large money laundering operation about to collapse.
If AppLovin can comment, why did I play Mr Bullet (a game run by AppLovin subsidiary Lion Studios) and get many ads back to the AppLovin ecosystem for re-skinned games? Why does very little seem to leave this ecosystem of mobile games marketing through other games via AppLovin? Why are the same eight or so studios connected to Cyprus involved in all of these ads passing through AppLovin?
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This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. Lauren Balik does not represent the interests of any fund or of any investor other than herself. Past performance is not indicative of future results. This content speaks only as of the date published. Any projections, estimates, forecasts, targets, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.
