AppLovin (APP), which makes and markets mobile games, started trading on the Nasdaq on Thursday after pricing at $80 per share Wednesday and was down 18.5% by the close of the market.
With mobile games like “Save the Girl,” “Yes That Dress,” “Fruit Clinic” and “Nails Done,” AppLovin has carved out a space away from traditional gaming ecosystems dominated by the likes of Activision (ATVI), Sony (SONY), and Nintendo that attract “the male-centric, usually skewing younger gamer,” AppLovin co-founder and CEO Adam Foroughi told Yahoo Finance Live on Thursday.
The 9-year-old company has 30 million users who play games for “30 to 45 minutes” per day, Foroughi said. The target demographic is casual gamers, specifically female users.
“Our audience is actually skewing toward female, and it’s a casual gamer audience. One of the biggest apps in our portfolio is a game called Wordscapes by our developer PeopleFun. It’s the largest word game in the world today. Audiences [are] adults, people are playing on the bus to work, on the bus home. And these types of games really have turned all of us into gamers,” he added.
The company’s portfolio includes 200 homegrown apps, which it develops with its 12 studio partners around the world. These apps are “not addictive apps,” the CEO told Yahoo Finance, adding, “And they give us a mental break. It’s a form of relaxation.”
Foroughi believes the idea of a “gamer” has been fundamentally redefined with AppLovin’s ecosystem of products, which are mindless ways to pass the time, not for hardcore obsessives. He says the coronavirus pandemic didn’t materially change how consumers interact with its apps.
“Our business reaches 400 million-plus daily active users playing mobile casual games. Many of these games are just played on the go. So we didn’t see an explosion in traffic going into COVID and we’re not seeing alterations in traffic coming off of it. Our growth is accelerating because the technologies that we have continue to improve,” he said.
In 2020, 51% of AppLovin’s revenue came from sales from in-app purchases and 49% came from developers using its software to monetize, grow, and market their apps, according to the prospectus it filed with the SEC. And in 2020, two games — Matchington Mansion and the aforementioned Wordscapes — collectively represented approximately 31% of AppLovin’s revenue.
The prospectus cautions: “The loss or failure to successfully monetize one of these Apps could have a significant impact on our results of operation.”
AppLovin generated $1.45 billion in 2020 revenue and is cash flow positive with $345 million in adjusted EBIDTA. Foroughi says AppLovin merely represents 1% of the $190 billion global mobile apps market, and he’s trying to carve out more of the space.
“We’ve seen when we started in the mobile app ecosystem 7 billion app installs a year happening in 2012,” he said. “Now there’s well over 200 billion app installs a year happening globally amongst consumers. This market’s huge.”