Q4 2024 AppLovin Corp Earnings Call
Welcome to <unk> earnings call for the fourth quarter and year ended December 31, 2024, I'm, David Shao head of Investor Relations.
Joining me today to discuss our results are Adam <unk>, our co founder CEO and chair person and matched up our CFO.
Please note our SEC filings to date as well as our share homeowner financial update and a press release discussing our fourth quarter annual performance are available at investors to Apple in Dachau.
During today's call, we will be making forward looking statements, including but not limited to the future development and reach of our platform our expected growth opportunities.
And timing of our strategic transactions the efficiency of our operations and expected future financial performance of the company and other future events.
These statements are based on our current assumptions beliefs, we assume no obligation to update them, except as required by law.
Our actual results may differ materially from the results predicted.
We encourage you to review the risk factors in our most recently filed Form 10-Q for the third quarter ended September 32024.
Additional information May also be found in our annual report on Form 10-K for the fiscal year ended December 31, 2024, which will be filed later this month.
We will also be discussing non-GAAP.
GAAP financial measures. These non-GAAP measures are not intended to be superior to or substitute for our GAAP results.
Please be sure to review the GAAP results and the reconciliations of our GAAP and non-GAAP financial measures in our earnings release and financial update available on our Investor Relations site.
This conference call is being recorded and a replay will be available for a period of time on our IR website.
Now I'll turn it over to Adam and match some opening remarks, and we'll have the moderator take us through Q&A.
Thank you all for joining us.
Q4 was a major milestone arguably our most foundational period since the axon upgrade in 2023 for the first time, we captured meaningful holiday shopping advertising dollars and witnessed the impact of an advertising category beyond solely gaming contributing to our growth.
Sure. Many of you are curious about how much revenue or e-commerce category contributed.
While we're not breaking out revenue by vertical because that's not how we view our business I'd like to provide some perspective, we operate a platform that reaches over 1 billion people in mobile games daily with their engagement times comparable to social networks.
Historically, most of our ads focused on advertising for other games, but now we're attracting a broader set of advertisers.
Q4 results show that our models can perform in other categories. In addition to continuing to improve performance for our gaming customers.
This breakthrough is only the beginning we've now also validated that our platform success isn't only limited to direct to consumer brands.
Early pilots have shown positive outcomes for a range of advertisers, suggesting that any business in any vertical to harness the power of our platform.
This opens up a massive opportunity as there are over 10 million businesses worldwide to advertise online. They can eventually use our platform profitably.
By delivering incremental value, we position ourselves as an engine for growth, it's a win win for brands consumers and shareholders.
These early results solidify our vision of building one of the most influential marketing platforms in the world.
Where we once focus on gaming, we're now positioning ourselves to serve the entire global advertising economy.
Importantly, the users engaging with our network aren't just shifting existing purchases.
Theyre discovering new products, while playing the games, they love generating truly incremental demand.
By enabling these discoveries were expanding the global economy for consumers and advertisers alike.
Demand from advertisers wanting to join our platform is high.
Currently our systems are still being fully developed and lack the full self service capabilities needed to handle growth at scale. Our priority. This year is to develop and rollout more automated tools to allow countless new businesses to tap into our platform.
In line with this expanding focus on advertising, we've been assessing how best to invest our resources to serve the needs of our global client base.
Seven years ago, we began acquiring gaming studios to help train our earliest machine learning models and invaluable step in shaping the AI that underpins our axon platform.
However, we've never been a game developer at heart we.
We have immense respect for the creativity it takes to build games, including from teams in our studios.
Today, we're announcing we've signed an exclusive term sheet to sell all of our apps business.
Matt will share further details, but I want to emphasize to our teams who will soon be part of a company that specializes in and champions game development, while it's bittersweet to part ways. We're excited for your future and immensely grateful for your role in getting us to where we are today.
Finally, I'd like to highlight our favorite metric going forward adjusted EBITDA per employee as we're transitioning to a pure advertising platform, our focus will be on productivity automation and building lean high impact teams.
In Q4, we had approximately $3 million in run rate adjusted EBITDA per employee in our advertising business and we expect that number to rise as we refine processes and scale our business.
This metric underscores our commitment to operational excellence.
Thank you for your continued support and partnership as we enter this next phase of growth I'm more confident than ever that we're building a platform with the potential to transform global marketing.
With that I'll turn it over to Matt for a deeper look at our financials.
Thanks, Adam and good afternoon, I'm happy to announce we had another strong quarter with total revenue increasing 44% from the same period last year to 1.3 dollars 7 billion and adjusted EBITDA, increasing 78% to $848 million, achieving a 62% adjusted EBITDA margin.
This represents an 89% flow through from revenue to adjusted EBITDA in the fourth quarter, we generated $695 million in free cash flow up 105% year over year.
Quarter over quarter, our free cash flow grew 28%, representing 82% flow through from adjusted EBITDA to free cash flow.
Free cash flow grew slightly more than our adjusted EBITDA growth over the same period due to the timing of cash tax payments.
At the end of the fourth quarter, we had $741 million in cash and cash equivalents and 340 million shares outstanding during the quarter. Our advertising business continued to drive increased performance for our mobile gaming partners combined with positive early results for e-commerce advertisers during the holiday season.
The advertising business generated $999 million in revenue and $777 million and adjusted EBITDA, achieving a 78% margin.
Quarter over quarter flow through from revenue to adjusted EBITDA was 75%, which is slightly lower than our normal levels as I previewed last quarter. This was due to a step function increase in our datacenter costs.
Flow through will normalize from here as we gain leverage on this increase in GPU costs.
Before we get into the financial performance for our AST business as Adam mentioned, we're excited to announce we signed a term sheet to divest our app business.
Total estimated consideration is $900 million, including $500 million in cash with the remainder representing a minority equity stake in the combined private company.
Subject to regulatory clearance, we hope to close this transaction in the coming quarter and look forward to seeing the success of this business under new leadership.
Our apps revenue for the quarter was $373 million, a 1% decrease from last year with $71 million and adjusted EBITDA, representing a 19% margin.
Turning briefly to our annual results revenue for the year was $4 $7 billion. That's an increase of 43% from last year. Adjusted EBITDA was $2.72 billion. That's an incredible 81% increase from last year at an adjusted EBITDA margin of 58%.
Free cash flow for the year was $2 $1 billion, representing an impressive 76% flow through from adjusted EBITDA of 2.72 billion.
This quarter, we withheld a total of one 6 million shares for a total cost of $508 million for the full year, we repurchased or withheld a total of 25.7 million shares for a total cost of $2 $1 billion out.
I want to pause here to emphasize this point during the year, we had $2 $1 billion of free cash flow and spent $2 $1 billion on our shares at a weighted average price of approximately $83 per share illustrating the commitment we've communicated to drive shareholder value through prudent capital allocation and an investment in our own shares.
Finally, turning to our financial guidance for next quarter.
In light of the transaction, we highlighted here and a continued focus on the advertising business, we will provide guidance for each of our segments separately.
In the first quarter of 2025 for the advertising business, we anticipate to deliver between $1.030 billion and $1.050 billion in revenue with adjusted EBITDA between 805, and $825 million targeting an adjusted EBITDA margin of 78% to 79%.
We expect <unk> revenue to be between 325 and $335 million on an adjusted EBITDA of between 50 and $60 million.
Now with that let's move to Q&A. Thanks, So much Matt and again as Matt mentioned, we will now begin the question answer session. Please be sure to mute and turn on your video before asking your question, we will take as many questions as time permits that since we do have many questions today. Please be patient as we move through today's list.
And our first question will come from Kurt <unk> with BT Archie.
Hey, guys. Good morning, hopefully you can hear me okay.
Adam.
A lot to dive into I think around commerce, but I want to make sure that I understood I think one point that you made.
In your prepared remarks, which is youre seeing early benefits for a range of different brands in in a variety of vertical beyond just sort of DTC marketers does that suggest that as you scale et.
So to your non gaming business over the course of the year that as we move into self serve as we're addressing more global audience says, it's not going to be just D. D fee marketers or is that an opportunity that you.
<unk> sort of identified us as one that works, but maybe we're not necessarily capitalizing on that near term.
Thanks, Clark you basically answered it for me, but when we put the platform together, we really strategically made a choice to go after DTC E Commerce.
What we knew is that if the <unk> there is going to work on everything and so sort of privately and quietly as we've gotten onboarding from clients in other categories across a wide range of categories. We've been seeing at the models are working there and what I was announcing just just a couple of minutes ago is that we're seeing success across any category that comes on it.
The platform, which gives us a lot of confidence that as we go through the year, we release more tools and really go into more of a self service an open state we're going to be in a position to go after the very very large set of advertisers that are in the 10 million plus range in the world over the next coming quarters years and decades, plus this is something that we.
We aspire to do and we're going to take our time on because I do want to caveat it with an important point that ties back to our culture, we're spending quite a lot of time trying to build tools to automate the entire system. So that we're not looking at a massive revenue opportunity in front of us and suggesting that we have to go hire people to go after we're going to continue to stay diligent lean and we're going to use tool.
<unk> is an AI and automation to deliver the same type of solution and success for advertisers as they come on board in the future to make sure they come onboard into a platform that hasn't changed anything from the cultural values that have gotten us to this point.
Okay.
<unk>.
Within that same list that you just sort of talked about with the dashboard automation at the bottom of it with CTV advertising and I don't want to do a full audit of sort of the world deal, but I'm curious if.
If you could give us an <unk>.
Synopsis of sorts of maybe what happened last time around that proved to be a little bit different relative to that initial thesis and now maybe what's changed lately that at this point in time Pez prompted you to I guess shift focus or maybe focus more on that supply opportunity. Thanks.
So I would say, we haven't really focused on it yet at all when we bought world. The idea was that they're connected to the media companies and we wanted to get supply online not too dissimilar from the Max auction.
So that we have access to supply our core business and the vast majority of revenue comes from the DSP side, so advertisers coming to us and us helping them place ads, but we need supply world's brought a ton of supply online.
Last year, what we had available to us to show into the odd slot, where gaming ads that part of the platform is live but if you think about our gaming out on a full screen TV asking user to go download a game on the phone just not that compelling a full screen TV ads, we didn't see a single gaming out on the Super Bowl right what.
What we can expect though as the consumer ads and DTC E Commerce, and then across a wide range of categories like Fintech automotive et cetera, as these come onto our platform extending that type of creative onto the big screen could be quite compelling now it's not without its challenges. There are attribution problems. There is a lack of a call.
The action. So there are difficulties to make this work, which is why we're not saying Hey. This is a lay up it's a challenge if we are able to do it and do it successfully it'll open up another massive channel of performance advertising on the big screen, probably for the first time in history, and that's why I keep mentioning it because it is a huge opportunity.
And one that we're going to be going after building into this year.
Thank you.
And our next question will come from Ralph Checkered with William Blair.
Hey, good afternoon, guys. Thanks for taking our question first question is just on model enhancements to Adam I know each quarter can be volatile and unpredictable.
You just maybe give me a sense this quarter. What you saw in terms of model enhancements in how much that may have been additive to growth and then I have a follow up.
Hey, Ralph so we've sort of broken down the growth factors across a couple of different facets, one of which is ongoing learning where the models this improving itself.
We expect to capture every single quarter, we haven't seen a slowdown there that contributed to growth in the quarter theres been another faster which is.
Iterative and incremental improvements on a preexisting model that sort of happens along the way as we go we don't break those out those are again unpredictable and not not huge but those are not those step functions that you've seen in past quarters, we add some of that in the quarter as well.
Then you've got these big incremental lifts to a new model. So analogy I've drawn is to a charge of GBP 4401 et cetera, and so as their models increment in the model gets more complex and smarter. We have the same thing this quarter. We did not have one of those so then you see this outsized growth and then the question is okay.
Where did it come from and I touched on this in my talk track, we've got seasonality in Q4, which traditionally we've never been able to take advantage of and that's built around shopping and shopping behavior and that this quarter. We were able to take some advantage of because we are starting to see that e-commerce product really takeoff. The other part of it is.
That in Q4, you also have people, having more time to spend on mobile devices, especially during the holidays and during that time people are more likely to consume and transact in mobile games. So naturally every single year Q4 is a very good healthy quarter for marketing mobile game. So it was a combination of the baseline which is just our <unk>.
Models are continuously getting smarter on their own some team effort on an incremental improvements on the models and then seasonality across both our existing games business, and our new up and coming ecommerce business.
Great just maybe a follow up I'm not sure if it's for Europe, our map, but just in terms of the ecommerce obviously a lot of excitement herons things seem to be gone really well.
Do you still I think before you've talked about it.
<unk> to be a material contribution in 2025, just curious if you still.
I think thats true a and then B can you just give us a sense of just the potential for incremental growth or how you might frame the opportunity as we're sort of thinking about our models for 25. Thank you.
So feel very confident Ralph and the ability for us to contribute an immaterial portion of revenue from the e-commerce opportunity in 2025.
Again, it's very difficult to predict when and how much that that growth is going to come in during the period in 2025. So you know.
I think we'll all see it when it comes and then we'll we'll provide more details on <unk> and then what I've given consistently is like our business predictably has got 20% year over year growth in it and that is from just the baseline of operating within the category that we've always traditionally operated and then you've got these things that can drive material upside.
That's really exciting for us they are unpredictable and when things are unpredictable a lot of times people assume they're gonna be unpredictably bad when our business. We've got two things that can be an unpredictable really got one of these model enhancements, we're really really early still and AI development and research both inside our company and then obviously externally to this.
Not a field that's mature its early in its existence is only going to get better and when our models get better we've all seen the impact to revenue and the other pieces. We've always been a closed managed platform specifically for mobile games. We now have a lot of proof of life and e-commerce, you've seen it on Twitter yet a lot of the noise from customers that are in but we have.
<unk> not let a lot of customers onto the platform yet as we've been on pilot as we go more and more open and start attracting thousands and tens of thousands hundreds of thousands of customers to come on over the coming quarters and years. The business is going to continue to show compelling growth.
We look at it as one single business and better monetizing the 1 billion plus daily Actives that we see we don't think about it as revenue from each category matters.
Thanks Al Thanks, John.
Yep.
Moving on to Jason Bazinet with Citi.
Thanks would would it be possible to share how many people are on your pilot now for E Commerce.
We've not broken it out I mean, if you do industry checks ligand Twitter there is enough noise, where you can assume is not in the tens. It's certainly not in the thousands were limited by.
Core team it would surprise you how small we maintain our teams I mean I did talk about this EBITDA by employee number we really do take that seriously. We've got around 1000 people on the entire advertising business, including all the segments of it adjust at world and the outlet businesses. The E. Commerce go to market team is roughly 20.
People so to give you a sense of how lean and automated rerun that should give you a sense for that team is all going to be able to manually onboard a lot of advertisers in a short amount of time, great and this and this goes back to yourself serve comment Dave that you made right. That's really what's going to open up the aperture to onboard more clients self serve and automated tools are going.
To be really really helpful and so if you look at just the numbers what gets US really excited is in a limited pilot of a few customers on the platform, we're driving actually interesting revenue from this category. So as we start opening up we think it's going to be really impactful to the businesses of our clients is also very very impactful for the publishers that we.
To work with all its inventory as mobile games and it adds variety to the advertising that the customer is getting on a mobile game. It also removes constantly the customer is getting an add on of gaming publisher for a competitor of the publisher. So there's really really valuable because as you think about the growth factors that we've got just embedded into the business better monetize.
The inventory that we have but also bringing on more supply a lot of gaming publishers. The biggest ones have traditionally been fearful of bringing on supply because they do not want to show their competitions ads and their games, while now that we're able to show that we have expertise marketing that any category that is going to open up a ton more supply to come online, especially into our Max Platts.
For him over the coming years as well.
Thank you.
Our next question will come from Vasu <unk> with Canada.
Thank you good afternoon congratulations.
Adam one it does get this bigger picture question as you are rolling out your E. Commerce solution offerings are you seeing already any kind of response from the incumbent competitive competitors because of it.
If I were one of them I would look at their success of gaming rights and would probably think I need to do something about it. So I was wondering how what you are seeing are you prepared for this and in general once year all without two full full scale, what they think the industry will look like how will that be different from what it is today.
Yeah. So I mean look we don't look at competition all that much what I will say is that we're not a platform that is taking the same dollars away from someone else. So let's compare to social if you've got a mattress manufacturer advertising on social today.
Driving a certain amount of business and they come onto our platform, where they're seeing our new transactions from customers that they wouldn't have otherwise gotten to respond to their ads whether those customers.
We're on social or not might be an issue, but certainly theres a lot of overlap, but it's a lot of customers just won't notice ads in one environment.
Now in our environment, we have a full screen video AD that captures the attention and they come onto our platform and they're driving incremental sales.
So what does that mean that means that if they were spending $5000 a day on social.
Going to come to us and say, we're going to spend $5000 a day on using our performance manner and take the 5000 over here down to zero. They are now going to be spending $10000. A day and this is what I keep talking about and referring to is we're expanding the economy, because it's incremental and entirely performance based the advertisers are getting measurable profits from the <unk>.
Getting that's going to expand their business begin to then have to go get more inventory theyre going to then be able to sell more product and the whole economy will expand without causing any detrimental harm to competitors in the ecosystem.
Alright, Thank you very much.
Luke Capitals, Rob Sanderson has the next question.
Thank you and good afternoon everybody.
I wanted to ask a question on your go to market for the E. <unk> E Commerce and now new verticals like the playbook seems really simple and I guess, that's part of the strategy can.
Can you kind of discuss how the strategy may have evolved a little since the pilot to now kind of going through holiday season, and any key learnings or pivots, obviously self serve is gonna be a big unlock but just how are you thinking about going to market and then you know.
Anything you can.
Sure on priority areas for demand generation in 2025, and then I have a follow up.
Yeah, we've been really exclusively focus on sort of mid market D to C. I call that somewhere in the neighborhood of $10 million to $250 million of G. M. B. These are companies that tend to move fast and they don't need a big team on the other side to bring them on board and the legal processes is much much shorter we havent gone after the very large brands. So no one in.
This pilot are companies that are incredibly large.
And then we're not focused on the very very small while we have to manually go after these folks.
In the middle because of the social noise and the feedback loop. The really positive results. The customers are getting early in the pilot we've got just customers coming to us. So theres a long long line out the door, which means we're on boarding as we can onboard nothing has changed through the holidays. The teams just bombarded with workday to work a ton during black Friday.
But other than just the the really the sheer volume that we're trying to process on helping clients get onto the platform and see that positive result, there's nothing else that's changed or will change until we get the tools out the door that will allow any customer to come in and in a self service manner be able to unlock the same type of results that the folks right now are getting with our man.
Support.
Okay. Thanks for that and then a question how much category specific optimization is required to move sorted. These non DTC adjacencies like as axon kind of figure this out on its own you start driving conversions and it's the model starts to figure it out and maybe the team can steer it with.
Vertical specific tweaks or whatever or how much product work is required to just sort of keep expanding for these 90 T. C categories, Yeah, I referenced there because it works out of the box. So we don't have the resources to be building custom models for every single vertical at least today. The goal is to continue to build a more complex model that smart enough to figure out how to market any product.
The other side.
That's where we're seeing where these companies in other categories across a wide range are just plugging in and it works.
So the challenge is really just go to market and in creating awareness of those types of advertisers and whatnot are 100% will have a challenge of get the tools out so that we can bring more and more companies on.
And then we'll always have this challenge that we're trying to sell a product where they're able to advertising do a profitably and have it be incremental and have all of that be measurable. So long as that is the result across every single advertiser relationship with our platform there'll be a lot of positive noise out there about the platform and the offering which will continue to bring those customers in an organic there.
Adam: Alright, Thank you Adam.
And we'll now hear from Jim Callaghan with Piper Sandler.
Thanks, guys. Congrats on the nice report so we've been getting some questions on how you're servicing some of the extra ecommerce demand can you talk about maybe like what kind of inventory is converting Beth and if perhaps this is different from the inventory that converts better for gaming.
Yeah. It's all the same inventory, it's full screen video AD. It sits on top of the billion plus daily active users playing games, but we don't have access to differentiated inventory, it's a unified auction, sometimes an AD for a mattress will be the one that selected sometimes an odd for any crush will be the one that selected it all depends on what the model does but the end user and the.
Adam: And supply is all the same across all categories.
Got it okay that is helpful and apologies if you talked about this in the beginning I was having some audio issues looks like Youre Rolling out 28 day models have there been any sort of early feedback here on the gaming side and could that drive kind of incremental spend.
This year.
Those have been out for I think a couple of quarters Allen and obviously I think if you talk to game developers across the border models tend to work really.
In a compelling way for all of them.
The longer models are the most highly most performance models that we deliver and so they have driven up the ability for the mobile customer to spend more profitably on our platform over the last couple of course.
Got it thank you.
Yeah.
Okay.
Sorry about that every line and we will now hear from James Keaney with Jefferies.
Great. Thanks, guys for the question.
One of the big questions that we've been getting from investors is just around that take rate dynamics between gaming and E Commerce.
Standing you don't charge, a fixed rate like other AD tech platforms, but just would be curious how to think about just the overall.
The mix of the business as you go more towards E. Com does that have any any impact on the take rate and then I had a follow up.
Yeah look like as we got better and monetizing the inventory that we buy the take rate naturally goes up on the flip side, we don't optimize the take rate. We never have so the system is willing to buy a user of 1% or 99%. It really doesn't matter, it's going out and buying users that it thinks it can out monetize from what it has to pay regardless of what the.
And result is but it is important to understand that theres a market, we're paying the highest price the publishing yet from anywhere in the better and better that we get the stronger our business is going to get because that take rate can expand.
Adam: Yeah, that's helpful and Matt now that E. Commerce is obviously, becoming a much bigger percentage of your business.
Can you just talk about the seasonality and how we should be thinking about that going forward as it relates to you know about the revenue growth and the expense profile. Thank you.
Yeah on the on the expense side it shouldn't affect us much whatsoever. Obviously, the expenses are primarily datacenter costs and payroll. So those are those costs are more driven by.
Usage rate and we've kind of communicated in the past that as we grow our revenue that we're expecting roughly 10% on an on an annual basis is that drag from incremental data center costs as we grow revenue. So there shouldn't be much fluctuation there and then you know on the E. Commerce side of the business you know as we grow and e-commerce becomes a larger portion of the overall pie.
And as we start to move towards that being a material portion of the overall revenue, obviously will be subject to enter e-commerce seasonality and everything we've talked about in the past, obviously black Friday and the holiday periods will who will see slightly larger periods of revenue.
Great. Thank you.
Okay.
This <unk> with UBS. Please go ahead with your question.
Great. Thanks for taking the question can you just talk a little bit more about the <unk> sequential growth drivers of the ecommerce business is this should we be thinking about this more as same advertiser spend or more driven so bye.
New incremental advertisers.
Well, we haven't broken out ecommerce right, but <unk> in our traditional advertising business typically <unk> steps down to less days and you've got seasonality effect in the fourth quarter. So we would have that for sure in the E Commerce category across the current Advertiser base. If we didn't add a single new Advertiser then by definition that category.
Expand in Q1 versus Q4, but as a whole we're guiding to expansion in the business even in Q1 against Q4 and frankly, that's just because our business is growing really quickly right now and we're guiding that way implying that I think it was a 4% quarter over quarter guide up with two less days you have 2% less days.
Because we're confident that just as a baseline level, regardless of seasonality or any bump that we had in Q4 youre going to have continued growth end of July.
Got it and just one quick follow up as you think about the cohort of E. Commerce advertisers that have been all been engaging with you for a longer period of time versus some of your newer ones. What are you seeing from the willingness to spend into higher daily spend thresholds.
I mean, it's volatile only because we got into the category right into Q4. So a lot of these E. Commerce companies go bonkers going into Black Friday and going into the holidays, and then just where we're even learning the business model right now as you go into Christmas time that they are sort of out of inventory and then they got to replenish inventory and so those.
Spike they'll draw they'll come back, but ultimately were performance marketing business and so as they get inventory replenished when they get into Q1, they ramp back up and so we see volatility just due to the nature of the business, but they see great result on the platform. So that means over time as you normalize for that seasonality they'll just be consistent lines of revenue for us.
Should be growing not only should be growing because of their success on our platform, helping their business has become larger in which case they'll reinvest more in the marketing, but also because we're really early on this is the only benefit matter of few months. So far we're still in one of the earliest versions of our model that model. In this category is a couple of years behind on the.
<unk> of our model to the gaming model. So we've got a long runway of of a long roadmap of things to do to improve the gaming side and the gaming models are years ahead of now the E Commerce model and so we're playing catch up to the efficacy of that gaming model. So our platforms only going to get better and better as we go on and go forward from here.
Thank you.
The next question comes from Omar <unk> with DNA.
DNA.
Amanpour, you hardly needed.
Great. Thank you.
So I am intrigued by this notion that.
Your technology works.
For many different types of advertisers.
It seems that you know.
Everyone is calling the non gaming e-commerce, Okay and within ecommerce there are you know <unk>.
Different types of I guess, some categories some products some subscriptions things like that.
Adam: You know you put out the axon pixel. So e-commerce merchants you now have that in on their on their website now.
If you attribute.
Is that enough to.
You know access all of these different types of E Commerce advertisers. That's the first question. So so really the question is.
Is your technology.
As all of your technology deployed.
At least on the attribution side, you know to access that 10 million advertisers in the world. Okay. That's that's the first question and then.
You know given that your AI has shown such efficacy.
Is it now going to start working for in App install for non gaming categories. This would be like non gaming apps.
That now a growth segment and twenty-five because I think to date.
That's been a very very small part of your business and I'm wondering if that's about to inflect swell.
Yeah. So it's a great question. So the first one I think you said is that have we deployed all of our technology for attribution and being able to bring on customers on the platform certainly havent pixel integration, that's going to be consistent for any website to be able to advertise on our platform, but I wouldn't say that any aspect of this business there were at maturity.
All the technology that we can release you can always do more to get to more attribution, that's accurate with advertisers and so we're working on continuously adding tools to that so I will say, though it obviously works. It works in a category of websites and E. Commerce, we're seeing it work in broader than that other categories of non gaming on the web.
And so any type of customer and once were self service will be able to come into the platform in advertising as long as they have a website then you've got other types of advertising you've got game advertisers and you've got non gaming App advertisers and then you've got websites you will also have an app.
Those last two we have to do work to bring online, but its work that we'll be doing throughout this year. So it's not something where I think you said will inflect and twenty-five is not something that is a twenty-five thing. It's just something that's in our roadmap that we're actively working on and we do expect that then opens up even new categories. As we go into later.
Adam: Through this year, and then next year and beyond.
Thank you.
Moving on to Martin Yang with Opco.
Thank you for taking my question first question for Adam since it took oversight of the HR function last quarter.
Are there changes you could talk about on recruiting streamlining the operation anything worth highlighting to us.
Well look I mean, my focus has been on streamlining the team and processes and getting really focused and we did announce that app sale that were worth one as well and our talk script and really this is all about just we see a lot of opportunity in front of US we have a long road map a lot of things to do and when you have that.
Organic opportunity you've got to get everyone focused on it and so it's really been around streamlining I mean, we're one of the.
Most financially lucrative businesses to be constantly announcing layoffs no. We don't want to constantly be doing that bid since I took over HR. My job was to go where are areas of the business that are not perfectly aligned with these organic opportunities and let's start shutting those so that we can really narrow N and focus on what's in front of us.
And so we're really getting to that place.
And once we get there I think it's going to be even more exciting times here.
Thank you my another question is about you talked about non gaming, helping with the supply.
So do you expect market share gains a mediation and how will the additional supply over time help the gaming business.
But look our Oh are our market share is really high okay. So lets setting aside market Sheila just to talk about share inventory.
We're getting new game publishers, all the time, they run game ads, where.
We're the best monetizing it at this point and so that aspect of the business growth in gaming supply is there now that's just sort of organic and natural but its not some step function opportunity.
What I was referring to is if you look at the in our purchasing apps most of them where a lot of consumer time spent in gaming don't actually run ads. They don't run ads because of Vega monetize a user.
Adam: At really effective rates within our purchasing why would they run ads to their competition and King was a perfect example of this than they used to report underneath Activision when they were public pre acquisition. They launched ads with non gaming advertisers and created a lot of incremental revenue doing so traditionally in the mobile gaming mediation market.
Vast vast majority of the ads were for games that we're competitive to the publisher game as we execute on bringing on more and more advertisers are non gaming categories. We think that is going to be pretty reasonable to sell the Max product and our DSP platform to these gaming publishers, who are monetizing predominantly or exclusively within our purchasing.
Bring on that supply and that will create another expansion vector.
Thank you.
Alex <unk> with Wells Fargo has the next question.
Hey, guys. Thanks, so much for the question I think youre, describing a situation where the business is rapidly transitioning from demand constraint and supply constrained as you kind of expand the aperture of categories that can serve as I guess acknowledging that some games could increase Terry Aberdeen that could increase available supply. How do you think about kind of the amount of spend growth that currency.
Apply base that kind of the mobile game environment or ecosystem high today could absorb like coda inventory be choices valuable three towns as valuable do you think that's kind of the constraint on growth going forward. Yeah. I don't think we're saying that's a constraint I mean in the last year supply has been pretty constant and I think we grew 80, 90% we're pretty early on both sides on the <unk>.
Demand side, we're just getting into areas that are going to help us much better monetize our inventory and we've given out examples in terms of just arb Dow that.
Some of the largest social properties are able to monetize that being significantly higher than the art Dow that we monetize this audience in today and yet our AD unit is a full screen video it requires some amount of engagement and viewing with the video and it's really high impact. The only reason, we're not better monetizing today, where we would say maybe we're supply constrained as we can.
We don't have every type of advertising across the world on our platform yet over the coming quarters years decade, plus as we onboard more and more advertisers and we're talking in the millions plus.
That's going to allow us to have a lot more demand density our algorithms are only going to get stronger our data footprint is only going to get stronger and forget supply increase same exact supply a billion plus daily actives are just going to be better monetized.
There's a long runway of growth there the supply side is just gravy on top it's really just an extra area that we think is going to be given to us for free that is going to come. We certainly don't think it's going to be anywhere near as impactful as the demand expansion, that's going to drive our growth.
Thank you so much.
Moving onto our <unk> with Wolf.
Hey, Thanks for taking the question.
What is the thought process you guys have on bringing audience plus out of pilots and into self serve I guess, what have you learned with the pilot. They will help you improve or make changes to the solution before making it self serve and I guess, what's a good point to look at in 2025 on when we should expect it to go self service and then just one brief follow up.
Well, we'll launch self service I think we'll we're ready for it the most important keys there are.
One we're going to have tools that automate every step of the process, including AI agents that are helping the advertiser get onboard and get going they're really helped them through the process. So that they feel like they are engaging with human beings, but they're engaging with bots and they're getting going the.
The other key pieces, you did a lot of tools and content moderation controls when you open up a platform as big as ours and at this point I mean in the advertising realm, where you've got Facebook, you've got Google where now the next really big platform out there we opened that up and we would get a lot of fraud that came on board. If we didn't have a lot of tools written.
To prevent that so we're going to take it really seriously will be conservative I don't know that we have any need to accelerate growth right. Now we're growing really really quickly as it is in controlling the pace, but we're developing all these tools in a background and once we're ready we'll bring it out we'll let you all know and we think it'll be very impactful not just for a moment in time, but.
That will compound over quarters years, and decade, plus got it and thanks for providing the segmented guidance I just wanted to understand with the App sales is it going to be tranched out where you're going to roll off a few studios over time throughout the year or is it a once it closes all 10 studios are off no more etch revenue and that's kind of the way the mechanism it'll be in that.
What happened when would that be at the end of the quarter or trying to understand the timing dynamic cooler apps revenue modeling, yes here that we're gonna be we're gonna be selling the entirety of the apps business ours, an inch so that would all come off of the P&L and the balance sheet all at once.
And then timing as I mentioned I think in my my talk track that we're targeting for that to close within Q2, obviously, we may be subject to regulatory approval.
Approval, so that timing may change slightly, but that's kind of where we're targeting is within Q2 got it. Thank you.
Okay.
Next question will come from Eric Sheridan with Goldman Sachs.
Thanks, So much for taking the question doesn't wanted to go back to one of the five initiatives you talked about for 2025, personalizing and experiences how much of that initiative can be done with what's already been built today versus incremental investments you need to make against the goals of personalization over the medium to long term and from the outside.
Looking in what we should we be watching in terms of how you might implement that and how it might be rolled out in the business more broadly in the years ahead. Thanks, so much yet.
Thanks, Hey, this is Luke this is all research and development right now and just a breakdown when it means today, if you've got a game, let's use candy crush again as an example, a human beings uploading 'twenty at the end user that sees ads for the Candy crush campaign run through US. She is one of those 20 ads the in the middle They I will dig.
Turbine, which one of those 20 are in place now that's a very personalized is very static in the either seeing the exact same sort of format of add in the exact same type of video as all the other users who were seeing that campaign now a degenerative AI and these large language models you can imagine you can run those top creative through our model and create many variations.
Adam: Facebook and Google are talking about this to generative AI enabled ads is something that we're working on we think it'll be very impactful in driving consumer response to the AD unit, it's trickier than a tech side, because we've got a full screen video experience plus a lot of times, we've got HTML and and the gaming realm, where we've got even a mini game inside the HTML. So.
There's a lot of work to do to personalize that experience and then Theres a lot of work to do to build a model that can can do it do it automatically and then be able to process. It within the constraint of the Gpus that we have but it's something that we're working on we and we think will be impactful in a rolls out and it's something that's in focus for us this year.
Thank you.
Adam and Matt we have time for one more question will come from Bernie Mcternan with Needham <unk> company.
Great. Thanks.
Thanks for taking the question, maybe just a follow up on Erik's question on personalization.
From some of the checks that we've done it seems that E. Commerce brands are largely using social ads within mobile gaming is an opportunity for you guys that you can help actually making our ads that look more like mobile gaming adds for e-commerce and other verticals, yes, possibly I mean look we hope not to be the ones deciding that we hope the AI and the machines are the ones.
Deciding that and the beauty is once you're in a machine created realm youre going to be able to create way more variations in the human being can so whether it's an e-commerce product somehow gamify it in the advertising or something that we can imagine right now in theory. The machine is gonna be able to do that in the the advertiser and the considerable gain the benefit of all of those new I variation.
That'll be I'll put it out of out of our system.
Speaker Change: Got it and then just one last one for me any feedback that you're hearing from the gaming companies as you're moving into ecommerce and other verticals.
I mean like the gaming companies are seeing better performance on our platform every single quarter. So they're obviously happy we're a catalyst for their growth and really a requirement for their growth at this point the publishers themselves Theres been some social commentary on this when they start seeing more and more of their impressions shifting to e-commerce. They absolutely love it if you're a game publisher your worst nightmare.
Would've been I'm going to monetize my game with all my competitions ads that just sucks as an end product, but that's all they had and so we allow all of our Max publisher see the advertising. This run some of those publishers have commented about the number of impressions that are shifting to non gaming categories. When you see that commentary there absolutely excited about it.
Thank you.
Yes.
And again this concludes the question and answer session and the webinar for this quarter. We thank you all for joining us and look forward to seeing you again next quarter take care until then thanks.
Thanks IRA thank you.
Goodbye.