26February, 2025
AppLovin (APP) – Formers Allege Ad Fraud; Is DTC Hype Actually ‘Stealing’ Meta’s Data; Illegal Tracking of Children & Serving Sex Ads to Kids
AppLovin (APP) is an ad-tech company in the mobile gaming space. In recent years, AppLovin has had exceptional revenue growth while growing EBITDA and cash flow even faster. The impressive financial performance has turned AppLovin into a Wall Street darling with its shares up +>3,600 % since 2023. Some investors and former employees have even praised AppLovin’s CEO, Adam Foroughi, as the next Mark Zuckerberg. But no one seems to know what AppLovin does. The company credits its success to Axon 2.0, a black-box machine-learning (ML) algorithm that serves as the “matchmaker” between advertisers and publishers.
Our research discovered that Axon 2.0 is the nexus of a House of Cards built upon tactics that formers and experts refer to as “Ad Fraud.” We believe AppLovin has pulled every trick in the book. We’ve been told they are stealing data from Meta in their e-commerce push. We also discovered AppLovin exploiting consumers and their data in ways which are clear violations of Google and Apple’s app store policies.
We are short AppLovin. We believe these so-called dark ad practices explain the truth behind how AppLovin seems to have achieved its great growth. We believe Apple, Google, and Meta all have a vested interest in putting a stop to it.
Our research into AppLovin discovered:
- The bull thesis focuses on expanding TAM from mobile games into e-commerce. But experts say the early e-commerce success came from “Copying Meta’s Homework” by “reverse engineering” Meta’s data.
- Experts said “Facebook is getting the great ROAS… and AppLovin is just stealing the credit.”
- We were told AppLovin e-commerce playbook reverse engineer’s Meta’s data in the following way:
- APP convinces e-com customers to use an AppLovin SDK for mediation.
- APP requires $600k of monthly Ad spend to join the beta, which doesn’t make sense.
- This allows AppLovin to “peek” at a large enough sample of Meta’s successful ads via their mediation platform.
- APP allegedly then knows which customers are most likely to convert.
- APP’s MAX ad auction bidding platform then gives them a real-time view into Meta’s $ bids and values for each consumer.
- APP also requires E-com companies to use the exact same Meta ads enabling AppLovin to serve up the same winning ads that Meta would have.
- AppLovin allegedly combines all these data points with 3rd party data brokers and an AppLovin tracking IDs to reverse engineer Meta’s valuable data.
- This apparently allows AppLovin to know which consumers are the likeliest to convert and then front-run Meta.
- We uncovered a confidential study which found an impossibly high correlation >12.7 std deviations between AppLovin e-commerce targeting & Meta’s.
- E-com founders told us of similar experiences “When Meta dips in performance, AppLovin is also dipping in performance.”
- Meta Senior Executives said if/when AppLovin is caught “Meta will shut it down.”
- AppLovin has impossibly high CTRs (click-thru rates) of 30-40%, 10x the industry norms. Formers and Experts told us this was obvious evidence of what they best described as “Ad Fraud.”
- We played AppLovin games and experienced the shady ads first hand and discovered:
- “Manipulative End Card Practices” in ads where close buttons “X” and skip “>>” do the exact opposite and instead open the App Store.
- Ad Experts told us “[AppLovin] is making money on fake activity.”
- Ads which are programmed to “click themselves” and open the App Store. We saw this in the code too.
- Multiple other dark ad practices, like unreadable ads and UX tricks meant to coerce an unintentional install.
- Experts say the shady ad tactics are obvious due to impossibly high CTRs (click thru rates).
- We found ~25% of AppLovin’s AI Team came from Meta.
- Our tests on Children’s Devices Uncovered AppLovin Serving Sex Ads to 7- & 12-year-old girls
- AppLovin appears to be Illegally Tracking Children.
- “Do Not Track” children accounts were assigned a unique identifying number by AppLovin that persists across multiple apps
- Studied an older version of the SDK. It revealed AppLovin collecting 50 attributes on kids that could enable the company to fingerprint children and track their locations.
- We learned user data is sent to third-party data brokers to enhance the fingerprinting.
- MoPub, MoProblem’s – MoPub previously was sued for this exact behavior.
- Undisclosed Lawsuit against AppLovin alleges tracking users without consent even when location services are turned off.
- Tracking children without consent is both illegal and will likely result in AppLovin’s SDKs getting kicked out of the Apple iOS & Google stores.
Culper Research, another short-seller, shared some of their research with us that we believe, if correct, is a major revelation. Culper believes they uncovered code that appears to enable AppLovin to directly download apps onto consumers’ phone without their knowledge or approval. The AppLovin direct download program appears to have begun right at the end of 2022, which is when AppLovin’s high margin software revenue began exploding.
- Culper Research reveals “Direct Download” program as AppLovin’s suspected major revenue driver
- Culper believes AppLovin made deals with Samsung, T-Mobile, Sprint, and Indonesia-based OPPO to enable the direct download of apps onto Android phones w/out actual engagement.
- In a direct download if there is zero cost to install — could AppLovin be booking 100% gross margins on some of its installs?
- This began at the end of 2022; right when high margin revenue growth took off
- We confirmed the direct download program with a Mobile gaming C-suite Executive.
- Culper found former employees bragging that Direct Downloads are the “Top Revenue Driver”
- Culper says they verified the spikes in downloads via individual apps download data.
- Culper also discovered AppLovin senior management’s history of deep connections to “notorious spyware” and “scammy ad” companies.
We also tested T-Mobile devices and found preinstalled bloatware on Android devices that could enable AppLovin to trigger “silent installs.” The code looks like AppLovin can do “direct downloads” without user approval.
- Renowned Ad Fraud researcher found “AppLovin’s source code contains repeated references to ‘direct download.’”
We think AppLovin’s fate is clear. Even without large fines by the FTC or for violating California privacy laws, the power to stop AppLovin’s atrocious business practices lies in the hands of three of the largest tech companies – Apple, Google and Meta. All of them say they are committed to protecting their users, and more importantly all of them directly compete with AppLovin.
We believe:
- Apple with likely kick out AppLovin SDKs and/or AppLovin gaming apps that are caught tracking children, violate children’s privacy, or that engaging in illicit fingerprinting.
- Google will likely have no choice but to ban AppLovin SDKs for numerous violations of Google Play Store policies. Plus, based on Culper’s “Direct Download” discovery, we think Google will have no choice but to stop the loophole that is reportedly AppLovin’s top revenue driver.
- Meta now knows that AppLovin could be stealing their data and some of their e-commerce revenue. We believe Meta will act quickly to “shut it down.”
AppLovin has been playing a dangerous game and is risking a permanent ban from the duopoly mobile app store platforms that controls the gateway to >99% of the market.
We are short AppLovin (APP) because we think major technology companies are going to hit AppLovin where it hurts … right in the ROAS.
Fuzzy Panda Research is Short AppLovin (APP)
Fuzzy Panda Research and Fuzzy Panda “Affiliates” are short securities of AppLovin (APP). Fuzzy Panda Research and Culper Research respectively shared some of our findings during the course of our independent research into APP and prior to the publication of this report. Please see additional disclosures at end of report and in our terms of service.
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