AppLovin’s Incrementality Is INSANE

[00:00:00] Tony Chopp: the thing that keeps coming up with App Oven as we get closer and closer to it, is the scalability potential. So the, the ability to deploy dollars, a material amount of dollars is very similar to what, what we've seen from, from Meadow over the years. And, and that makes it, I think that's the thing that everybody's the most interested about with Apple specifically.

[00:00:28] Speaker 4: This episode is brought to you by Vermont. Whether you're running paid ads on meta, Google or TikTok, Vermont can help you increase your conversion rates without touching your website. They help you save time by generating high converting landing pages in minutes using AI and boost your ROI growth with built-in AB testing and real-time optimization.

[00:00:45] Offers seamless integration with your ad platforms in Shopify checkout so you can create custom post click experiences without designers or developers. Over 500 brands have scaled their e-commerce business with Vermont, improving their conversion rates by an average of 30%. Go to vermont.com/ctc today and sign up for your exclusive seven day trial.

[00:01:05] That's F-E-R-M-A t.com/ctc.

[00:01:09] Richard Gaffin: All right. Welcome folks to the D two C hotline. This is your direct connection to hot takes, to cold truths, and to really common advice. the best in the biz. I'm your host Richard. The Professor Gaffin. Now call or text eight six six DTC 2 2 6 3 to get your burning eCom questions answered. Again, that's 8 6 6 3 8 2 2 2 6 3. Leave a voicemail, shoot us a text asking whatever is on your mind. D two C wise, our operators are standing by and speaking of operators, let me introduce 'em both to you. Right here we got Tony, the Chopper shop, and Luke the weatherman, Austin, both coming in. From CTC studios in Sunny Costa Mesa, California, although my understanding is actually it's raining right now.

[00:01:47] Is that right?

[00:01:48] Tony Chopp: Not currently,

[00:01:50] Richard Gaffin: Not currently,

[00:01:51] Tony Chopp: but just for like this minute because we are in the middle of like a week long rain event.

[00:01:56] Richard Gaffin: wow. A rain event. My goodness.

[00:01:58] Luke Austin: It's an event.

[00:01:59] Richard Gaffin: yeah.

[00:01:59] Luke Austin: whenever there's the, the comparison I always draw, speaking of the weather is when we were in Chicago, you'd be going down the, the interstate 6 60, 70 blizzard. Like

[00:02:12] Richard Gaffin: Mm.

[00:02:13] Luke Austin: be coming down, no one, like maybe slow down five, 10 miles per hour. Maybe you. California one drop of rain.

[00:02:19] It is just brake lights.

[00:02:21] Richard Gaffin: Yeah. Yeah.

[00:02:21] Luke Austin: everywhere. Just an

[00:02:23] Richard Gaffin: Yeah,

[00:02:23] Luke Austin: parking lot.

[00:02:24] Richard Gaffin: 45 miles per hour on the freeway. I remember coming to California for the first time. The first time there was rain. All the kids who were from California went outside to like, dance around in it, because then they'd like, they see it once a year or whatever. It's like a, that's insane. But anyway, as you can see from my background here, it's sunny in Portland, which is a, a bizarre swap.

[00:02:41] So, let's get right into it here. So our question today, obviously we're recording this one week. we can change before Black Friday, cyber Monday weekend. And obviously you know, we're all doing running all over the place, getting prepared for that. But one question that I want to ask and this is particularly for you Tony, but Luke, you're free to jump in as well, about app Loving, which is, again, this is sort of the name that's been on everybody's lips.

[00:03:03] As we think about a platform that could potentially be something as dynamic as meta. Maybe it's not there yet. But it has the potential to do so. Tony, you and I have talked about this on our other podcast e-commerce playbook before but I don't think we've talked about it on this one. So let's let's dive in here with the question.

[00:03:20] How is APP loving shaping up for you guys for BFCM? How do you think the platform is going to affect your clients and any other observations you might have? So let's start with you, Tony.

[00:03:31] Tony Chopp: Well, so the thing, the thing that keeps coming up with App Oven as we, as we get closer and closer to it, is the scalability potential. So the, the ability to deploy dollars, a material amount of dollars is very similar to what, what we've seen from, from Meadow over the years. And, and that makes it, I think that's the thing that everybody's the most interested about with Apple specifically.

[00:04:04] You know, when it comes to the, the Snapchats or the Pinterests of the world it's like, can, can we make it work and do we find it work? Working for some advertisers, for some audiences and specific products, like, yeah, a hundred percent. But the order, the magnitude of the scale for these channels is just smaller.

[00:04:24] And so with App Oven the, the conclusion for me is the scale is there.

[00:04:32] Richard Gaffin: Hmm.

[00:04:32] Tony Chopp: So we've been spending the last six or eight weeks around the measurement piece of the puzzle. Like, okay, cool, we can, we can blast through the media dollars there. How. How much, how effective do we believe that is? And as we've gone through a series of incrementality tests for, for a handful of clients we're getting to we have two more that are in the post-treatment analysis phase and several more that are gonna be ending over the course of the next five or six days.

[00:05:03] The, there's a through line through this whole thing, which is every incrementality test that we've seen so far has come back positively incremental. AKA, the channel is creating more business value than the platform is reporting. And the only place that, the only other place that we see that happening happening regularly is meta seven day click tight attribution.

[00:05:25] So these, these two things are combining for. What, what I believe is a, is a big opportunity. And we're, we're becoming, we're taking a posture of, actually, let me, let me back that up a step. If you haven't already done an incrementality test on app 11. It's probably too late to get that read before Black Friday, cyber Monday.

[00:05:47] But we are actually going into this position with several clients of, we're gonna deploy some media dollars against what we've learned from the incrementality studies across our portfolio. So we're getting the, the easiest answer to the question, Richard, is we're becoming more and more confident about the contribution of the channel.

[00:06:06] So much so that we're, we're getting some things set up for some clients that are, that's a little bit out of order for us. Usually we just start with the incrementality test and then go deploy the media. But based on where we're at coming with Black Friday, cyber Monday coming up, we're, we're gonna get some media going for sure.

[00:06:21] Richard Gaffin: Yeah. Luke, what are you, what are you observing?

[00:06:28] Luke Austin: I think with launching any new media channel, apple included, there's like a sort of chicken and egg conversation that tends to happen around okay, what level of scale will it be worth it for us to run this channel at? And if we can't get to that level of scale, maybe we don't even try it all. And then, well, we need to understand what the measurement, measurement read looks like for this channel. Before we know what the target should be and we're confident scaling, but we need enough data to be able to know what the target, the target should be. Right. And so, for AppLovin specifically, and then we more broadly as we, in terms of how we think about channel expansion at CTC is. We are gonna get the, the focus outta the gate is getting every, getting the data and the set up tight pixel pixel tracking campaign set up, getting everything really tight, the feed, et cetera. So that we have confidence that we're giving as much signal, passing back as much signal as possible to the campaigns to optimize. And then we are gonna utilize. A benchmark assumption around incrementality to be able to scale up the channel because it is the best source of truth that we have at that point in time.

[00:07:28] So you can be more confident in it than you can be in anything else that you have in that time. No, your incrementality for that channel will not be that exact number after you run a test, but that it is going to be closer to that than any other point that you could pick on average. And so, is, that is our approach, which I think like is, novel in that it helps to instill confidence early on in the channel. Because to Tony's point, if we're spending 500 bucks a day in a channel and we run an incrementality test, once we start spending $3,000 a day or $5,000 a day, the incrementality is gonna be totally different. Right? So we need, we need something that we can all get alignment and buy, buy-in to be able to scale up against in the, in the shorter term, until we have that read, knowing it's gonna change as we scale the channel. That's for app level specifically for channels more broadly, get the setup tight, get the data integrated, and then alignment around a benchmark in terms of the measurement assumption for your target. And scale it up. It's going to be it's going to be more incremental to having that live than not having it live for the

[00:08:29] Richard Gaffin: Mm-hmm.

[00:08:29] Luke Austin: specific level, it's gonna change over time and it should continue to be measured. But if the analysis paralysis is what is inhibiting from even trying, like, that's, that's. Probably not a positive ev trade off in that decision. Like that's, it's not, it's not necessary to, because we don't know these things.

[00:08:51] We're not gonna launch it at all. Is not our, our approach.

[00:08:54] Speaker 5: Still sending people from email SMS or direct mail to the same old product pages. It's time to level up with Fermat's AI landing page and PDP builder in just minutes. You can spin up personalized landing pages and PDPs for every channel, from email campaigns to QR codes and direct mail to paid ads. No designer, no developer, no waiting around, and that's just the start.

[00:09:16] With Vermont. You can ab test every funnel, customize experiences by audience and track performance across all your channels. All in one sleek dashboard. Now, here's the kicker. Most people think Vermont is just for ads, but actually 80% of our customers use it in email, direct mail, and every place they need a landing page that works harder.

[00:09:35] Try it yourself free for seven days. Head to vermont.com/ctc or just click the first link in the description.

[00:09:42] Richard Gaffin: Right. So to, to summarize then what you're saying is like, if you can do it, you should do it. that fair? Yeah.

[00:09:48] Tony Chopp: You should do it right now for sure. I, I've seen enough at this early stage to say like, if it's me and it's my, my money that I'm spending for my brand, I'm gonna, I'm gonna put some chips on the, the app loving card here for Black Friday. The only thing I would add, so this, this trade off, right, this chicken and egg problem good measurement on one hand, on one side of the scale, on the other side of the scale, deploying the media dollars to get to the good measurement.

[00:10:11] You're gonna have performance that is atypical from a Black Friday, cyber Monday investment on app loving. So if we're gonna sort of lean towards like, all right, we're gonna go deploy the media dollars during Black Friday and Cyber Monday very, very good chance it's gonna look really good. That doesn't mean.

[00:10:27] Don't come back and get good measurement on it because it all, all the more. So, because you're gonna have an outlier result from Black Friday Cyber Monday. We've gotta come back and get the, get the good measurement on it so we know how to deploy the media dollars through the channel in a, in a more stable period.

[00:10:42] Not Black Friday, cyber Monday.

[00:10:44] Richard Gaffin: Yeah. so one thing, I mean, and obviously you're both data guys. That's how, that's how we do things at CTC. So it feels like you're being both a little circumspect about like how potentially huge this could be. And maybe I'm misinterpreting here, but our conversation actually, Tony, on the e-commerce playbook, this was probably.

[00:11:02] Three or four weeks ago, or maybe this was even on hotline, I don't remember. But one thing that we sort of determined is like one thing that at AppLovin does it, AC actually, and, and the incrementality tests kinda bear this out, is actually unlocks genuinely new. Inventory and new audience. And so are we looking at like there's a potential for Black Friday to be massive in a way that it hasn't been before, unprecedented, or is this just like a little bit of nice little extra sauce on top?

[00:11:31] Like what, what, what's the upshot?

[00:11:32] Tony Chopp: No, no, I, I think, I think the potential is huge, but if I'm being really, really honest about it, I think I think this year is, you know, 10%, maybe 15% impact. But by the time we have a year to get to know this channel by Black Friday, cyber Monday in 2026, I think we're going to be deploying a significant amount of media dollars through the app oven channel.

[00:11:56] Richard Gaffin: Yeah.

[00:11:57] Tony Chopp: so I, I think it's a little bit of a, a circumspect maybe I'm, maybe I'm hedging my bets a little bit. I have a, a pretty high level of confidence that it's going to be, it's gonna be really effective for a lot of our brands. We're, we're just still on in the, we're still early on in the measuring process and, and some of the I don't wanna say it feels too good to be true, but the ability to deploy the media dollars at this volume is like, like I mentioned in the very beginning, it's, it's, it's unlike anything that we've ever seen, so.

[00:12:31] It's crazy to think that we could have a, a second channel that, that behaves, that has the similar potential to what, what meta does for our brands.

[00:12:41] Richard Gaffin: So, so in short then deploy it this season,

[00:12:45] Tony Chopp: Yeah.

[00:12:45] Richard Gaffin: absolutely do it. Next season, what we're gonna see is something that's maybe unprecedented or bigger than we could imagine right now.

[00:12:52] Tony Chopp: Well, and Luke and I have been talking about this for a little while. It's like, with all these media channels, all these new channel activations, like, I think it's, I think it's more like I, I'm not a big fan of the, the language that sounds like we're gonna test x, y, z channel.

[00:13:07] Richard Gaffin: Hmm.

[00:13:07] Tony Chopp: It's, it's really low stakes.

[00:13:08] It's really non, non-committal, right? So my preferred language is like, we're going to become an apple of an advertiser. And between now, now over the next six months or nine months, or what, whatever that timeline is, we're gonna figure out all the different dimensions for how to make that, make that true.

[00:13:26] And if you're going to pick an identity for an advertising channel that you want to go become good at, this one feels like a pretty good bet.

[00:13:36] Richard Gaffin: Yeah, Luke.

[00:13:40] Luke Austin: Yeah, I, to double down on what Tony said, it, it, it may seem like a, just a language shift, but it's, it's critically important, which is like we, we should align on how much resource we're willing to put into launching a net new channel. And then assessing the viability at a certain point in time. So we, we do have to sort of do that analysis on the front end, but this, the, typically how we see most of these conversations start is, alright, yeah, let's, let's, let's launch on Snap or TikTok or App Loving for, or Pinterest. Let, let's run it for 30 days and see what happens. And it's not gonna work. It's not, it's, it is absolutely gonna under serve the opportunity, the potential that it could, if you approach it that way. And in many cases it's just gonna fall flat. because you need to work to make it work. Just like for meta, like we just don't, you don't have a choice as a direct consumer e-commerce business, like that.

[00:14:29] You gotta make meta work for the

[00:14:31] Richard Gaffin: Mm-hmm.

[00:14:32] Luke Austin: not, there's not other options out there. And it's not a direct comparison Apple 11 to meta or Snapchat to meta, but what it represents is that the amount of focus and intention and strategy that goes into. Making better work the same way we position, okay, over the course of the first half of the year of 2026, we are going to become an apple of an advertiser, which, which means for us that we can spend this volume of ad dollars at this level of incremental return.

[00:14:59] That is the objective. And what we are going to do is launch the media, run the in measurement test, and then scale the creative output to be able to get to that objective over that time period. And then at the end of the time period, we're gonna assess. The results, and then we will make a decision from there.

[00:15:13] But like this positioning and framing is how we're orienting these

[00:15:18] Richard Gaffin: Hmm. Mm-hmm.

[00:15:34] Luke Austin: of that are in your, in your subset. They just have a lot more reps. It's gonna take some time. But you can, you can get there. It'll, it, it will become a channel that can produce incremental contribution dollars for the business if you approach it as, as such.

[00:15:49] Richard Gaffin: of you have touched on this a little bit, but I was hoping like you could kind of distill into some kind of quick hit do's and don'ts for approaching app 11 over the next like week and a half or so as we go into Black Friday. So obviously there's like making sure measurement is on point and all that kind of thing, but like what's, what are some quick like, things to watch out for things to make sure that you put into place as, as we go into this.

[00:16:11] Luke Austin: Do approach it as if in March of 2026, it's going to comprise 15 to 20% of your total media spend is what I'd throw out as like a, you know, way to think about it, like in in Q1, Q2 of this coming year. Say this channel's gonna be gonna be 10, 15, 20% over total media mix. If you approach it that way, the behavior's gonna be very different than, let's see, let's see how much we can scale this thing.

[00:16:35] Because if you have a media channel that's driving 10% of your media mix, like you can't just be like, ah, I'm good. Because you have to get the volume from somewhere else. So approach it that way. Apple One's gonna be 10% of our total media spend in, in April, 2026. And tiktoks gonna be in summer range.

[00:16:50] Right. And like. Do it that way for the channel expansion, and then let the behavior and the resources index accordingly to build up to that point.

[00:17:00] Richard Gaffin: Tony.

[00:17:01] Tony Chopp: Yeah, I mean, just legis logistical things. If you're on a Shopify store, start with Shopify sales channel. It's gonna help you get feed and pixel stuff set up really quick and easily.

[00:17:16] We're running everything super consolidated. So one campaign ad sets broken out by, product or offer. So as, as consolidated as possible we're using primarily UGC content, creator style creative. For the most part. It's useful to consider that app love and ads don't, there's no, there's no skip and there's no scroll.

[00:17:43] So they, they have to be watched. So you have an opportunity to. Use some of your longer form content. And we see some of that stuff actually working better. So the, the longer form, the 45 second, the, the 62nd stuff. And then

[00:17:58] the, the, there's one piece, there's sort of one unique piece. To the app 11 ecosystem, which is the end card. So it's a static that sits at the end of the ad unit and we're finds finding some opportunity to explore the call to action at that stage. But yeah, so Richard, you wanted a punchline. Go into Shopify, install the Axon sales channel.

[00:18:21] Get your feed and pixel, get your pixel firing today. That's the, that's the number one thing you could be doing today. If you wanna get to Luke's endpoint of. March of next year. I want this to be 10% of my media mix today. Get the app installed, get the pixel firing.

[00:18:35] Richard Gaffin: Gotcha. Love it. Well I think that's that kind of covers our bases here. And so just to distill our two kind of words of wisdom here, it's treat this as a long-term investment because it's going to be, and it's going to work in that. And then second, make sure you get your pixel set up and do it now because this is something that you need to have ready to go for this Black Friday, which is only by the time you hear this, only a week away. Unbelievable. So I think those takes, honestly, were hot enough for hot take corners, so I think we can leave it at that. I'll only say, I sure hope that I see some more Hawaiian shirts next time, rerecord. But anyway, that's gonna do it for us for this week's episode. If you want your questions answered on this pod, you can just call and leave us a voicemail, 8 6 6 D two C 2 2 6 3.

[00:19:15] You can shoot us a text there as well, and we might read your question on a subsequent episode. So for Tony, the Chopper chop and for Luke, the weatherman. Austin, I'm Richard, the Professor Gaffin signing off. Take care everyone, and we'll see you next time. Okay.

[00:19:29]