The Truth About AppLovin: Should You Shift Your Budget NOW?

[00:00:00] Richard Gaffin: Hey folks. Welcome to The Ecommerce Playbook Podcast. I'm your host, Richard Gaffin, Director of Digital Product Strategy here at Common Thread Collective. And I'm joined yet again by Mr. Taylor Holiday. He's the CEO here at Common Thread. Taylor, what's going on, man?

[00:00:13] Taylor Holiday: You know, we are in the, we're in the thick of it. This is like main countdown time. My kids also have their soccer championship tonight and I'm, I'm very nervous. So I'm also a little antsy today, trying to get through it, trying to think about how I'm going to maintain my composure and not yell at the youth referees tonight.

That's what I'm trying to gather.

[00:00:31] Richard Gaffin: Have you been, you've been one of those dads in the past?

[00:00:34] Taylor Holiday: I get a little bit, a little bit, I'm trying to keep myself under control. I also don't know the rules of soccer. So it's like really dumb when I do yell, but man, I don't know.

[00:00:44] Richard Gaffin: they're vague. So, you know,

[00:00:47] Taylor Holiday: that's exactly it. It's like, it's a foul, but they're kind of waiting to see what happens. And then they're like,

[00:00:52] Richard Gaffin: Yeah.

[00:00:55] Taylor Holiday: go, here you go. And they like, hand the ball to a kid. And you're like, what is happening right now? The time is unknowable. It's very hard for someone with a objective, logical construct that I'm trying to.

to deal with

[00:01:06] Richard Gaffin: quite know where, where to yell. You know what I mean?

[00:01:08] Taylor Holiday: exactly. Exactly.

[00:01:10] Richard Gaffin: Cool. All right. Well, today we want to talk about sort of a new arrival on the scene or not necessarily new arrival cause they've actually been around for a little while, but we've been talking and there's been a lot of sort of, chatter around the industry about a platform called app law, which is a mobile in game ad network.

They've about a hundred million app users in the U S or rather or sorry, 140 million people who are, yeah, using the app or part of the network or whatever in the U. S. And What we've seen recently is shattered that it's maybe I'll frame it this way. It's almost as good as Facebook as an ad platform. Now we have been on record on this podcast many times saying that Facebook is the channel expansion beyond Facebook and Google is a step to take after you've already nailed the first one that may not change with this, but what we want to address here is. What's the deal with this new platform or the new growth of this platform and what do we do to take advantage of it?

So Taylor, why don't you give us a little more context around what this is and how we're thinking about

[00:02:08] Taylor Holiday: Yeah. So let's, let's sort of define what it would take for something to be as good as meta, what we're generally talking about is both efficiency. So the ability to acquire in particular new customers at profit or break even, or whatever your marginal goal is. Target is. So there's lots of places that can produce volume.

Volume is very rarely the challenge for a channel. TV has lots of volume and YouTube has lots of volume and

display has lots of volume. The question is volume at efficiency. Can a platform produce both? And then is there measurement solutions that you can build confidence in? So the, that's sort of what's required is, can you produce efficiency?

At that efficiency, can you scale and produce volume and then is there a way to feel confident in the decision making? And then I would even add, like, is the creative sort of a whole new thing that you have to go solve for in order to that's going to create additional, creative expense and part of the reason that app Lovin, I think is growing so fast in terms of attention and dollar spend and how fast is it growing?

Well, we've got some really great data. We're going to be publishing a full report a DTC index. So if you go to ddcindex. com and you sign up for the newsletter subscription, you will be getting access to a very detailed data driven report. We're going to be publishing in the next 10 days. So one sign up for that, for the detailed data, but some quick hitters.

Here is that there are some customers for us that are large spenders that are spending as much money on Apple 11 today as they are on meta. And so that's where the comparison is coming from. Now, that's not true across the board. That's a very small subset of customers who have been aggressive in approaching it.

But at that scale, we are also seeing some measurement presentation. Namely first click GA, last click GA, some triple whale reports, some North beam reports, where that efficiency at that scale is also comparable to meta. And in addition, the percentage of new visitors, like, so how much of it is just pure net new customers is also very, very high.

And so because of that the energy is immense around this topic. Anytime that happens, because if that were to be true, it would be a massive unlock for our industry, right? To suddenly discover a meta level acquisition engine would be transformative. I mean, probably like as transformative as COVID like that, that level of impact, if it were true to suddenly say there is a tool as good at meta as helping consumer businesses sell things online.

So it's really important. To, to understand the potential impact to orient yourself around a really hard question, which is how much attention and energy should I put towards this? You're in the middle of black Friday. You've got a thousand things to do before app 11 ever showed up. I know we did. And now all of a sudden there's this thing here that you have to decide.

How much should you orient your behavior around to finding out a solution to the problem? And that's kind of what we want to help you work through today is to try and understand how much energy should you put into this problem? Should you care? Should you go try and understand it?

[00:04:56] Richard Gaffin: So let's, maybe let's start out by framing like, so in what way is, let's say the buzz around app love and different than the buzz was around like tick tock when tick

[00:05:04] Taylor Holiday: Yeah. Well, I think it's, it's in some ways it's very similar, except I think for two things. One is, and as tends to be the case of this thing, I think with TikTok, what you saw was similar to what I see with YouTube, which is that there was a very small number of these case studies that got floated around that were intended to represent the opportunity for everyone.

And it was this idea that there is, there's the potential to win really big on those channels, but there wasn't this sense that like everybody who was doing it was having success. So that the median level outcome was also really high. I also think that tick tock always demanded. A novel creative approach in the sense that they would describe their platform as unique in some ways.

And that, that working with the creators and doing spark ads and being native to the platform was really important. And I don't think ad platforms understand what a massive lift that is when you, when you speak that way. And so I think that was the other thing, but I do think that a year ago, the energy around Tik TOK ads was similar, which is why you should have your sort of cynic or you know, your, your, View of this with a little bit of skepticism because I do think that these things tend to bubble up a lot with energy and then fade.

I think tick tock shops was like this. I think tick tock was like this ads. And now you're hearing this from app 11, but I do think that there are some important distinctions that app 11 has done really, really well. And I'll tell you what a few of them are. One, their default optimization setting is seven day click.

Okay. Now, why is this important? Well, I think that the more that a brand attempts to obfuscate or widen the attribution window to try and apply credit for their platform. It is a very bad counter signal. If, and one of the things that tick tock repeatedly does is they try to push you into wider attribution views around both view and click.

What, what app love and has stepped forward and understands is that to win this game. To win the dollars in the most conservative click based response. You have to be able to create revenue today. There's just not enough money and profitability for people to guess at a latent value capture. It just doesn't exist.

And so they've stepped through the door and said, hold us to the most. The tightest scrutiny. And we're going to optimize against the tightest scrutiny, which is a seven day click optimization. That's, that's the first thing. The second thing is they said, just bring your best meta ads. They didn't actually say, Oh, this is a novel ad platform.

You have to go and create like these really specific ads. They said, no, no, bring your best performing meta video ads. Here's what the ad looks like. When they show you that in game on a mobile app, the beauty of it is that you're sort of locked in. You have to watch the ads and get back to your game.

Which is a thing that, and it takes over full screen. Like it's a really good visual format of a video ad that are consistent with the vertical format you'd use on meta. And so they've gone right after the gold standard, which is if I could use my existing creative on a seven day click and drive a profitable result, you will get the ad dollars of this industry.

This is a mistake that Google makes. This is a mistake that tick tock makes. They all try to obfuscate measurement and widen the attribution view to try to create a scenario by which their product is valuable, but in e commerce in direct response, the gold standard is if you can drive Ross on a seven day, click, you will get the dollars of the industry.

And they are delivering against that very specific premise. And they've held themselves to a very high standard with that in a way that I think is, Really powerful. The other thing they've done, and this is similar to what Meta does too, is they've invited the measurement people in they've invited house and others to say, hold us to a geo holdout standard.

We actually want to deliver on the highest standard. Again, same problem that I see from Google and tech doc is they've resisted bringing in those standards and said, and now we have to do it our own way. We have to use Google geo to X, and it's really hard and cumbersome. You have to meet with the measurement.

No, no, no. Bring in house, set up the study. We want to see the results. We're going to improve against that baseline of expectation. And so. House, I think was the first one in there. I don't know if there's others. I apologize, but they just published their first incrementality study on Twitter. I think yesterday showing that their relative incremental Ross of the platform is about 170%.

Uh, Of the, or the, the incremental Ross is about 100%, 170 percent of the. Platform reported number. So it's actually better than what the platform is reporting, which is what we see when you run 70 click primarily is it tends to under report. So they're being conservative. They're being disciplined. There's a lot of scale.

And they're inviting measurement. Those are all the right kinds of signals for me about a platform that actually is interested in winning with the e commerce folks.

[00:09:36] Richard Gaffin: Yeah. So it sounds like there's kind of two things happening here that that makes it different. So one obviously is their openness to data transparency, which de risks it for you because you know that you're going in and they're not going to try to like basically inflate the numbers for you. And it gives you and it shows that they're confident in their tool as well because they're saying like, yeah, let's just Well, you do like the most stringent measurement you can, and we'll show you that this works. And then it sounds like seems to me that there's also something fundamental about, you know, This particular ad placement or platform. That's really interesting as well of

of like a captive audience is compelled, like basically guaranteed, but you're probably going to get people watching or experiencing your entire ad most times because they want to get to the next level of bejeweled or whatever,

[00:10:22] Taylor Holiday: exactly. That's right.

other thing is, here's a question.

Who do you think it is? Who do you think the audience is

mobile games?

[00:10:29] Richard Gaffin: of older women. Like, yeah. Okay. Mm hmm.

[00:10:35] Taylor Holiday: That's exactly right. That's exactly right. So what's really interesting is with our main customer that's spending the most there, if I look at the demographic data, it's older, and it's more female, and it's more gifting. So

get is, and I think people hear gaming, they tend to, or at least I've seen it a few times, where they conflate that with like the Twitch streaming audience.

That is playing fortnight and it's young males. That is not what we're talking about. We're talking about candy crush and bejeweled, and it is primarily older women, which is a high spending demographic. So I think there, and what I've seen is it's in meta, that audience is extremely expensive to reach.

It's the most competitive, most expensive dollar. So part of my working theory right now is that you're getting a little bit of an arbitrage on a very valuable audience in this short term that I don't know what happens as that gets competed away a little bit. I think the mark, the price is going to rise on that, on the more valuable demographic.

There's also in mobile gaming, there tends to be a whale principle where there's these really valuable users that spend a ton of money. And so, you know, My, my concern is, is like, as the continued influx of people scale in here, is everybody going to keep seeing the same results? And even my criticism of the one incrementality study that was published, it was on a very small amount of money.

I think it was like 8, 000 of spend. That's not really the thing we're trying to solve for. We're trying to figure out is, is there scale here? So, To get to the, like the cynicism lens. And I think the thing that most of you should still wait for is there's going to be more studies released about the incrementality of more scale being spent.

That I think will be really important to understand. And there's a longevity question. I wouldn't reorienting your 2025 budget to take 70 percent for meta and put it in app 11 here. We have to understand as more of the dollars show up here, how does the competition for this high value inventory Drive price up supply and demand economics of this marketplace.

And how many of these users actually have potential value? Cause I just, I can't fathom the idea that there's this latent consumer potential in the United States. That's just waiting to be tapped into by some mobile game ads, like, like that people just aren't buying t shirts and mattresses because they haven't seen a mobile game ad yet.

Like the idea that that is like this, that suddenly there's going to be. Billions of dollars pumped into the American economy because of mobile game ads for consumer products. Feels hard to imagine that there's just all this excess money on the sidelines. Just waiting to be advertised to, I guess, so I am a little bit skeptical of it for that reason is that the scale of what we're talking about would just require so much additional spending to suddenly show up out of nowhere?

That'd be amazing. And I could be wrong about that, but that feels hard to, to, to understand that being possible.

[00:13:20] Richard Gaffin: Yeah. Yeah. I think like what trips my skepticism alarm or whatever is like the fact why is this happening now? guess right? Like do you have any sense of that? Like why did people all of a sudden discover what you could sell real products instead of just other apps on an app or whatever or like why is this happening now?

[00:13:35] Taylor Holiday: Yeah. Well, I think, I think the app loving in particular decided to go into e commerce this summer. And it's funny. I, when I talk with them, it's actually Scott Kramer and Laura Geller that like ran a case study that became like the thing that they started selling everywhere. And so. The big news item that caused this was Apple love and reported Q3 earnings and their stock price jumped 100 percent in a day.

And so in the beginning of November, it became a big PR cycle that also drove a bunch of awareness in our industry about them because their earnings calls was through the roof. And so the stock jumped from 50 billion market caps, like 100 billion market cap in a day. So it became a giant PR story everywhere that also draw brought a bunch of attention to it.

And then that sort of starts the cycle of all the people like us and everybody else in the industry talking about it. And so I think that's the, that's the energy that's coming behind it. And, and, and so here's the deal of what we know right now is that it's a fully managed service. So there's no self serve ad platform yet.

They're trying to get there. So that's the limitation to onboarding people right now. They have a requirement that you spend 20, 000 a day on meta in order to spend on the platform, which. As a skeptic would make me go, why do you need me to be driving demand somewhere else for you to run ads? But the opposite argument is that's their way of qualifying advertisers with real budgets.

So tension there. I know on bamboo earth, we're spending, we got in at a lower expectation than that. We're spending a little bit on the channel. And Dave's like. optimistic. He's scaling into it's nothing like we haven't 10 X budgets overnight or anything insane like that. So there's no, there's no like wild outcome for a small business like that yet.

That said, we'll see. We'll see how it goes. We have five customers with holdout studies in progress right now. On some higher spend levels. So we'll get some good reads back. And again, this is all going to be published. The no commerce team has some awesome data around both the demographic profiles, as well as the percentages of purchases they're seeing happen from a click.

And also report a self reported user saying they're discovering him in game. That's going to be included in that. Vero's is building their integration. So we're going to have some broader data. So lots of stuff coming here. But for now, I think that you should build a relationship. It's worth getting to a point of contact with somebody at love and whether that's through your agency or whether that's through direct outreach to build a pathway to being able to test the channel, they're offering 10, 000 in free ad credits for qualifying members.

There's no reason not to spend the free money for sure. Spend the free money, find out what's there, use the best systems of measurement that you have their platform. Competent against what you see on a first click basis in GA competent against what you see on a last click basis in GA. If you use a third party tool, compare it in there, if you want to try and get confident, and then ultimately try and get to a place where you can run a geo holdout on the efficacy of that channel as you press into it.

But I do think that sitting here on November 18th, literally one, two weeks before black Friday, that if you could get this test in ahead of that moment. It would be worth trying to do because the creative lift is so little and it's a managed service that they're doing the work for you. So the actual brand requirements is so low to actually test.

They're giving you the credits. It's your existing creative. That is like the perfect storm of low barrier to entry, low risk test. That's exactly what you would want to make a new channel work.

[00:16:53] Richard Gaffin: in summary, basically, check it out. It's low risk for the time being. Don't necessarily put all your eggs into this basket because we don't know yet, but it

[00:17:02] Taylor Holiday: And if you need to help reach out, like they're, they're in our Slack with us. Like we talked to them, we're talking to their team all day, every day. So if you need someone to help you with that channel, reach out. Our customers were going to get some priority treatment. We're getting close to being able to do the self serve work on our side.

So, lots of exciting thing happens. If you need a point of contact, we're happy to help provide it.

[00:17:19] Richard Gaffin: Totally. Real quick, when's the data report coming out?

[00:17:24] Taylor Holiday: So our goal is to get it out by Tuesday of next week. So we're gathering as much as we can right now. We want to get a couple more holdout studies back. So d2cindex. com sign up there. We'll make sure we distribute it on email and everywhere else. So, uh, hopefully that that's where we're at.

[00:17:38] Richard Gaffin: cool. right. I think that's that's gonna wrap it up for us this week. Thanks y'all for listening and we'll talk to you again next week. See ya.