When you’re in a hyper competitive space like mobile advertising, it’s easy to think boosting sales and marketing is the best way to gain an edge.
But AppLovin, a mobile ad network founded in 2012, has taken a totally different approach, and has grown at an exponential rate — it’s on track to book $US200 million in revenue this year, which is more than double the revenue run-rate it had last July.
Instead of marketing, it’s staying laser-focused on product development.
“The typical ad tech company is very heavy on sales but limited on tech,” AppLovin CEO Adam Foroughi told Business Insider. “We take a very technologically advanced approach.”
From the beginning, Foroughi let engineers and data scientists rule at AppLovin. It wasn’t until its 10th engineer that AppLovin hired its first non-engineer. Even to this day, Foroughi has only hired five sales people in his 70-plus employee organisation.
“Our heaviest investment is in engineering, data science, and DevOps,” he adds. (DevOps is the relatively recent practice of letting developers — the people who build applications — run the technology necessary to support those applications, rather than turning that function over to an IT department.)
Its product-first approach resulted in creating an algorithm that works more efficiently and effectively than its competitors, Foroughi says. AppLovin runs a pretty standard mobile ad network business where it targets and acquires new users by placing ads on different apps for its clients. But its algorithm, which automatically analyses things like types of device used to retention rates for better targeting, is what makes the difference, he says.
“We process 100 TB of data and receive 30 billion ad requests per day,” Foroughi says. “We deliver the most relevant content to the consumer so that ads become a lot more like content and recommendation than an annoying ad that has nothing to do with the consumer audience.”
In order to focus on product development early on, AppLovin had stayed in “stealth mode” for its first two years. But that didn’t stop it from signing up customers. Foroughi says AppLovin already had 300 major brands as users by the time it exited “stealth mode” in 2014, all through word of mouth. Two months after its official launch, in July 2014, it had a $US100 million revenue run rate and high-profile users like Uber, Spotify, and Opentable.
Roughly six months later, AppLovin says its run rate has surpassed $US200 million.
Revenue run rate, a 12 month extrapolation of your current month sales, could be deceiving in a seasonal business where sales fluctuate. In ad tech, December is usually the biggest month, with sales dropping in January and February. Yet, AppLovin claims its February sales was 18% higher than in December, with the last week of February being the highest revenue week ever.
And today, AppLovin is further expanding its offering by extending native ads to mobile web. Until now, the only type of native ads AppLovin offered were in-app. Native ads are the types of ads that look like regular content, such as the ones you see on your Facebook feed. AppLovin also offers regular banner and interstitial ads, as well as video ads which now comprise 35% of its business.
There’s no doubt AppLovin still faces huge competition. Besides the two major players, Google and Facebook, there are upstarts like Millennial Media, InMobi (which Google was rumoured to be interested in, although it looks like the deal won’t happen now), and MoPub.
But it’s worth noting AppLovin has done all this with a significantly smaller team in a short period of time — while only taking in $US4 million in seed investment and not doing much sales and marketing.
Foroughi claims AppLovin is one of the fastest growing startups in this space, with only more room to grow internationally. Currently, 70% of its sales comes from the US.
“So far we’ve invested entirely in product,” Foroughi tells us. “We see a very quick path to a billion a year in revenue by just increasing our investment in sales & marketing internationally.”
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