APPAppLovin Corporation

“Right now, we're projecting well over $70,000 a year from every new customer. So if you just want to size that, if we open up the platform and sign on 100,000 customers in the next year, first year revenue from them are ad spend -- advertising spend would be roughly $7 billion.”

“We've always said we want to help the smaller businesses scale. Last quarter, I highlighted an Israeli cookware company that went from $4 million in revenue to $16 million to now projecting $80 million with the majority of their ad spend on our platform.”

“A couple of weeks ago, we had another material model release that improves scale and return on ad spend significantly for our consumer advertisers. These are the types of compounding improvements we have talked about on prior calls. The team improves the model, advertisers see better returns and they put more budget into our system. It is a virtuous cycle, and it is working. The consumer vertical exited the quarter very strong with March growing roughly 25% more than the numbers we did in January and April reaching a record month in advertiser spend, higher than any peak Q4 month.”

“So if you recall, when we first launched AXON 2.0, we've had a lot of fast growth quarters since. I think it's been 12 straight. And almost -- most of that has been attributed to two things. One is releasing new products. So as we've gotten deeper into gaming, you know that we've come out with longer-dated periods of models. And the second and more important is improving the underlying model.”

“Sora 2 is a good product. Obviously, it is one of the ones that we use underneath the hood. It going away doesn't change a whole lot. One of the nice things about being an independent company looking at all the large language models is we don't have to be favored toward any of them. And so you mentioned SeeDance, there's other ones out of China as well. We can deploy any form of model, whether open source or closed source in any of the categories, text image or video and utilize the one that's best for the purposes that we have. And you can assume we do that. We don't stick to just one. We want to be optimized for the field. And so that's something that we constantly do. Therefore, Sora 2 being deprecated didn't impact us at all.”

“The main thing that we talked about last call, resolving, we're still in the midst of resolving. We will over the next couple of weeks before we go to general release, and that's delivering video out of the box. That's not a trivial task, but we initially rolled it out a few weeks ago with customers. There's a blog on our website, so you can see some of the AI-generated ads. Frankly, the AI-generated ads are really, really tough to tell that they're built by AI instead of a human being. And the cost is exceptionally low relative to what a human-generated video would cost.”

“The AI research space, obviously, is seeing fast improvement, too. You've seen an insane amount of product releases in the large language model space in short order because of everything that's happening there. A lot of those same trends apply to us, but I think it starts with our team is just getting much smarter about the tests that they're doing. So we have 100% seen faster improvements to the models, both across the consumer business and the gaming business. And we don't really see a reason why that's going to slow down.”

“today, the game developers already use a lot of these tools to create way more content into our system. I really doubt any customer created 50,000-plus ads by hand. So these tools are already benefiting us as a platform that's closed loop in this large scale and also really for the game developer, the first destination. If they're going to spend money on AI tools to create ads, they're going to start with, let's create ads for the Axon platform and then they're going to go beyond that.”

“It was critical for us to get a model on top of the popular image and video generation models out so that we can hand to advertisers the capacity to just create ads out of the box that work for our platform. We rolled out something called our interactive page generator earlier in the quarter. That's out to all customers. That has pretty widespread adoption at this point. But more important is the video side. That's still in testing. We're going to roll it out to all accounts shortly.”

“As our team of researchers get smarter about the things that they're testing, the success rate goes up, which is going to enable us to continue to push the technology forward, to drive better return on ad spend. That drives up same-store growth. The same customers we have today should keep growing and then pair that with opening up the platform and new advertisers and new data, it makes us really excited about where we're going.”

“we are already seeing advertisers use AI agents to manage their marketing spend, and we are building Axon to be natively accessible to those agents. Between self-serve access in June, our AI-powered ad creative tools and agent-compatible infrastructure, we are building a system where an advertiser can onboard, generate high-performing ads and scale campaigns profitably without ever needing to talk to a human.”

“by going from the -- giving this targeting that we allow the advertiser to go complete top of funnel middle of funnel and bottom of funnel, we're seeing that unlock much greater aggregate budget. Most customers that care about this or have these recurring high brand loyalty type of business models usually use a mix of all three. And it gives them just more tools in the tool set.”

“I wouldn't factor this into our economic profile at all. I would not expect margin compression. This is also not our own compute. This is utilizing third-party services. So it's really just a tax that we have to pay to third-party services to utilize their compute.”

“It's not our goal to just stop on video and interactive pages. Eventually, we'll have playables. And hopefully, over time, using these tools, we can create more types of templates as well. There's no desire or expectation that for the rest of our existence, we're only going to serve videos and playables and gaming. It's very possible there'll be other types of ad formats. And as we get into high iteration mode using the LLMs, it's possible we'll land on new techniques, too, that can create a better response from consumers.”

“First, AI technologies are now enabling these studios to do things they cannot do before. Incumbent gaming companies, the ones that already have successful titles, can now use AI tools to improve their current games faster and cheaper. More importantly, it is giving them the confidence to launch new games. The cost of experimentation has come down dramatically, and that is unleashing a wave of new content that is really healthy for our ecosystem.”

“Our CTO, Giovanni's job is to hire the best talent in the world of recommendation systems. And so the social media app is an example of something that will play that role. Not only will it allow us to attract great talent, that team is pretty excited about the things that they're building, and we're going to be able to test and iterate on our product in a very low-cost and swift way because of the popular Vibe coding tools out there.”

“What makes our business really compelling is that for this space, we've written the best models and products for the advertisers. That's super critical. That's what allows us to do so well. And we process that data and create a better output than anyone else. And that technology lead plus the data expansion, plus all the budgets being on our platform, first and foremost, drives the scale, growth and success you've seen from us.”

“: I mean the product rollouts help advertisers build campaigns, launch ads. Those are sort of like the basics of ad campaign management. A lot of that is going to be automated in the future, too, with agents. But the most important driver of our success, especially this early in the product, is the engineers improving the model to drive better return on ad spend for advertisers at a higher scale.”

“right now, a lot of the Vibe coded stuff in the world is quite a bit of slop more than substance. But as you go forward, what's going to end up happening is these tools are going to let the best developers create more content. Quality is going to go up. The content count is going to go up and the need for discovery is going to go up. So that plays right into our strong suit.”

“we also can Vibe code products. And there is once upon a time we bid on TikTok. So you know that we have an interest in better monetizing social. We believe we're very good at recommendation engine technology. We have one of the world's most sophisticated advertising technology and the possibility to work on an engagement algorithm with a social app is enticing to our team.”

“As the models get more complex, -- as we continue adding more customers, we're going to need more GPUs. We work with Google Cloud on it, and we can go to any cloud, but we have the GPUs that we need to process the business today. And it's very likely we're going to need to continue to buy GPUs.”

“Eventually, you can imagine advertisers will just be able to use their favorite LLM take all the action they need in our dashboard, automatically create the video and end cards, get live, get profits, get leads, scale. That doesn't require a lot of effort from us.”