AppLovin opts not to hike outlook amid strong growth, and shares rise

The Palo Alto, Calif.-based company offers marketing, monetization and analytics software that helps app developers grow their businesses, and also owns a portfolio of more than 200 free-to-play mobile games.

While Unity Software Inc. U, +13.25% hiked its outlook for the year late Tuesday based on strong growth and said it managed to grow out its ad business in spite of Apple’s AAPL, +0.18% recent crackdown on online ads, AppLovin opted not to raise its. AppLovin forecast fiscal 2021 revenue between $2.65 billion and $2.7 billion in its first quarterly report as a public company back in May. For the year, analysts expect revenue of $2.68 billion.

Earlier in the year, Apple opted out of using Identifier for Advertisers, or IDFA, in its privacy update, a move that worried many companies, such as Facebook Inc. FB, -0.32%, that rely upon ad revenue. IDFA is like a cookie that’s attached to a specific device like a smartphone, rather than to a browser, to collect user information to better target ads.

Adam Foroughi, AppLovin’s chief executive and co-founder, told MarketWatch in an interview that IDFA had a “muted” effect on sales, just as the company had forecast back in May. That said, Foroughi declined to change the outlook even though the company said it was experiencing “very strong momentum.”

“Whenever we’re thinking about what we’re building, it’s one to three years ahead of time, not on a quarterly basis,” Foroughi told MarketWatch. “So, I didn’t want to fall into this pattern of every quarter we beat-and-raise and we’re on this constant quarterly earnings treadmill.”

Foroughi told MarketWatch that all the recent privacy regulations are written around third parties sharing data with first parties for the purpose of advertising, and that gives AppLovin an advantage.

“In our case, the best part of our data is our own first-party data, we’ve got 200 million users a month playing our games, we’ve got millions of people paying us every single month in our games,” Foroughi said. “We’re the only platform in the ecosystem that has this first-party data at that scale on a transaction basis.”

When it comes to a comparison with Unity, Foroughi said Unity is similar to AppLovin in that people develop games on their platform, but there’s a difference in what data they collect.

“The transactional data they have is not their own,” Foroughi told MarketWatch. “Unity doesn’t own any content. People are paying and that’s first-party data, so certain data they can use, certain data they can’t use.”

“Our data, when someone pays in our game, whether built on Unity or not, it’s our data,” Foroughi said. “So, in that case there’s a difference in data, which gives us a market advantage to our peers in the ecosystem.”

Foroughi also told MarketWatch that its $1 billion acquisition of German mobile-app measurement and marketing company Adjust is key to the company’s growth. Adjust adds a salesforce that AppLovin did not have previously. Foroughi said it now has 250 sales and marketing people with access to 3,000 clients that are all spending money on mobile marketing.

“We don’t work with most of any of them,” Foroughi said, adding that if Adjust can “literally” bring in 7.5% to 10% of those 3,000 clients, it will double the company’s run rate.

AppLovin reported second-quarter net income of $13.3 million, or 4 cents a share, versus a loss of $21.4 million, or 10 cents a share, in the year-ago period.

Revenue rose to $668.8 million from $299.3 million in the year-ago quarter, while analysts surveyed by FactSet had forecast earnings of 4 cents a share on revenue of $641 million.