AppLovin Taps Into Retail Ad Market, But Growth Hinges On Big-Brand Adoption: Analyst

Needham analyst Bernie McTernan reiterated a Hold rating on the shares of AppLovin Corp APP.

The analyst has introduced initial APP Ecommerce Tracker to assess APP’s expansion beyond mobile gaming ads into industries like ecommerce.

After reviewing over 2,200 ecommerce sites, the analyst found 297 working with APP, which represents about 50% of the 600 brands APP reported in December.

The most common industries include health & personal care, apparel, and furniture. Notable advertisers include W, Marine Layer, Bombas, and others. The tracker will be updated regularly to monitor new brands and potential self-service launches, said the analyst.

The analyst examined over 2,200 ecommerce websites for the Axon pixel, which indicates a partnership with APP for advertising. The pixel tracks user interactions from ads to websites.

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The analyst found 297 websites with the pixel, aligning with APP’s reported 600 advertisers by the end of 2024. The websites were categorized by product type and are also monitoring 60 major brands that could become significant advertisers on the platform.

APP is working with a diverse range of product categories, with over 40% of the websites in the Health & Personal Care sector, a significant category in U.S. retail ecommerce.

Apparel, footwear, and accessories make up 25% of the websites tracked. This broad category representation underscores the potential for large advertising spend and highlights the vast market opportunity for APP's new venture.

While most of the 2,200 websites in the survey are smaller DTC products, 60 major brands like Nike, Amazon, and Etsy are key to tracking, as they could significantly boost advertising revenue for APP. From this list, only Wayfair was found to have the APP pixel installed, noted the analyst.

According to the analyst, AppLovin is poised to benefit from the growing shift toward in-app advertising (IAA) and the increasing importance of first-party consumer data.

The company has developed the tools and data to help software clients drive user acquisition and monetize ads. With changing user preferences and advertiser focus on first-party data, there is significant growth potential in in-app advertising, especially within casual gaming apps.

Price Action: APP shares traded higher by 4.82% at $307.02 at last check Monday.

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