AppLovin just reported Q4 earnings and the numbers are, well…kind of insane. Revenue up 44% to $1.37B. Ad revenue up 73% YoY.

For those who've been around DTC long enough, this feels familiar. Every few years, a new platform emerges that changes the game. First Facebook. Then TikTok. Now... mobile gaming ads?

Today we're diving deep into what's really happening at AppLovin:

1. The Numbers: Why Wall Street is going nuts

2. The Performance: What DTC brands are actually seeing

3. The Reality Check: Why this might be too good to be true

Let's get into it.

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Customer acquisition costs (CAC) are climbing, channels are evolving, and every marketing dollar needs to work harder than ever. That’s why Tatari and Marketing Brew teamed up to survey 200+ marketing leaders and uncover what’s actually driving growth in 2025.

The result? The 2025 Advertising & Marketing Report—a deep dive into the strategies, top priorities, challenges, budget shifts, and emerging trends shaping the industry.

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• Brands are embracing AI innovations to optimize campaigns and automate decision-making.

If you’re looking to drive sustainable growth and stretch your budget further, this report is a must-read.

Get the full insights here.

1. The Numbers: From Gaming to Growth Engine?

AppLovin has been quietly building something big. Really big.

Their Q4 numbers:

• Revenue surged 44% to $1.37B

• Ad revenue jumped 73% year-over-year

• Adjusted EBITDA hit $848M, up 78%

• 78% adjusted EBITDA margin (Meta is at 54%)

• $2.1B in free cash flow for 2024

Not bad for a "gaming" company.

But here's what really matters: AppLovin is dumping their entire games business. They just signed a deal to sell their apps division for $900M.

Why? Because they're all-in on becoming an advertising powerhouse.

The platform already reaches over 1B daily active users. For context, that's:

• Roughly equal to TikTok's DAUs

• Double Snapchat's reach

• About 75% of Meta's daily users

CEO Adam Foroughi claims brands aren't just shifting spend from Meta or TikTok. They're finding entirely new customers.

"If they were spending $5,000 a day on social, they're not taking that down to zero to spend with us. They're now spending $10,000 a day total."

Since incrementality is becoming everything, that's a bold claim.

The strategic shifts are telling:

• Selling games division to focus purely on ad tech

• Building self-serve capabilities (though still manual onboarding)

• Focus on mid-market DTC ($10M-250M GMV)

• Moving beyond gaming into broader e-commerce

• Q1 2025 guidance of $1-1.05B in revenue

Perhaps most interesting? Wall Street is buying it. The stock is up over 700% in the last year, pushing AppLovin's market cap past $120B.

Something's definitely happening here.

2. The Performance: Real Data from Real Brands

Remember when everyone said TikTok ads wouldn't work?

The AppLovin story feels similar. Except this time, we have actual data.

Olivia Kory from Haus (you know, the attribution experts) ran tests across 10 DTC brands in Q4. The results?

• Weekly spends: $5,000 to $80,000

• Incrementality factors: 16% to 169%

• Most brands landing between 45-89%

Pretty good.

But here's what really matters. Ridge Wallet bet $4M on AppLovin in Q4.

"From Northbeam to Haus to post-purchase (KNO), it showed AppLovin being as incremental as Meta."

And if you know Sean, you know he doesn't mess around with channel testing.

3. The Reality Check: A Gift Card Scheme?

Lauren Balik has a different take on AppLovin's growth. And it's not pretty.

Her research uncovered what she calls a "gift card washing scheme" across AppLovin's biggest games. The details are wild:

• Cash Tornado Slots (one of APP's biggest revenue drivers) offering users $75 in gift cards for making $49.99 in-app purchases

• Multiple top games using "Get-Paid-To" schemes through platforms like Swagbucks

• Users being incentivized to watch hundreds of ads for PayPal payments

Yikes.

But here's where it gets interesting. Mobile gaming expert Daniel Wu doesn't entirely disagree - he just questions whether it matters.

"Ad fraud is prevalent on the open web and it happening on mobile isn't surprising," Wu notes. "Mobile gaming UA is a ~$30B market funded by the $100B+ gaming IAP market, not a web of related party transactions."

Still, there are 3 big concerns for DTC brands (if this is at all accurate):

1. Audience Quality These aren't shoppers. They're gamers being paid to watch ads. As one Reddit user put it: "I'm making my way through Match Jong, which involves like 5% actually playing the game and 95% watching ads. It's fairly easy money but man do those scammy ads get tedious AF."

2. Platform Dependencies AppLovin relies heavily on Meta/Google/TikTok for user acquisition. Remember Zynga? Their business collapsed when Facebook changed its algorithm. AppLovin could face the same fate - especially if they start competing for ad dollars with these platforms.

3. Scale Questions The numbers don't quite add up. For AppLovin's ad revenue to keep growing 20-30% annually without taking market share (as management claims), Wu calculates the entire $100B mobile gaming market would need to grow nearly 10% just to fund the incremental ad spend.

"Someone give me that blue pill..." Wu quips.

According to Balik, some of AppLovin's biggest revenue drivers - games like Wordscapes and Project Makeover that represent 9% of total revenue - are heavily involved in these reward schemes.

And it gets worse. The Better Business Bureau is flooded with complaints about users not getting paid after watching ads or making purchases in AppLovin games.

Not great.

Even Wu, who believes in the core business, can't fully explain the growth: "I can't quite understand how the AppLovin black box has performed so well in a challenging mobile gaming market."

For DTC brands, the question isn't whether AppLovin's gaming network is legitimate. It's whether an audience being paid to watch ads can deliver real customers at scale.

Takeaway: Should You Test AppLovin?

The thing about new ad platforms is by the time everyone knows they work, they're much more expensive to use.

Just ask anyone who got on Facebook ads in 2014. Or TikTok in 2021.

And despite the concerns (which are real), there's compelling evidence AppLovin works:

• Ridge Wallet doesn't casually drop $4M on new channels

• Haus Labs' incrementality data shows real performance

• Multiple measurement solutions confirm results

• The platform sweet spot matches mid-market DTC needs

But you need to be smart about testing.

Here's the playbook:

1. Get in the pilot now The manual onboarding that's limiting scale? That's your friend. Once self-serve launches, costs will rise.

2. Set up proper measurement Don't trust platform metrics. Use Northbeam, Haus, or Triple Whale from day one.

3. Start at $5K/week Based on Haus’ data, this is the minimum needed for statistical significance.

4. Watch incrementality like a hawk Are you really getting new customers? Or just paying gamers to watch ads?

5. If it works, scale fast The window between "it works" and "it's expensive" closes quickly in DTC.

The risk/reward here is pretty clear.

Worst case? You waste a test budget finding out Lauren Balik was right.

Best case? You find your next Meta before your competitors do.

Want to dive deeper?

• AppLovin’s Earnings call transcript

• Read the full Wall Street Journal analysis

• Check out Olivia Kory's incrementality data

• Review Lauren Balik's investigation

• Read Daniel Wu’s full take