App Masters · How to Increase AdMob eCPM for Mature Apps (Part 3/3)
David Senra · May 3Bootstrapping a Business to $5 Billion in Free Cash Flow | AppLovin’s Adam Foroughi
Grew from a $3.8B market cap after the 2022 crash to about $140B by pairing its Axon models with a lean team of 350 to 400 people. Launched its ad SDK in March 2012, hit $1M a month in eight months, and bought back about $6B of stock worth roughly $50 to $60B later. Axon 1 was a traditional ML model needing heavy manual spend. Axon 2, a deep learning model launched in April 2023, let any advertiser plug in and profit, and the stock went from about $9 to a $750 peak.
Tips
- Adam Foroughi borrowed to buy back AppLovin stock after it fell 92 percent▶ 4:16About $6 billion of buybacks over roughly 18 months ended up worth around $50 to $60 billion.
- Foroughi bought back shares from known sellers instead of the open market▶ 2:45Private equity investors owned roughly 50% of the company, and the company deployed about $6 billion over 18 months.
- Foroughi built AppLovin's ad network for developers, not for brand advertisers▶ 16:21Launched March 2012, AppLovin reached a $1 million a month run rate and profitability within eight months.
- Foroughi turned the recommendation algorithm, not the app, into the product▶ 9:36AppLovin launched its ad network in March 2012 after the dating, fashion and discovery apps failed.
- Foroughi defined performance marketing as making the advertiser an arbitrageur▶ 17:26Axon 2, a deep learning model launched in April 2023, let any advertiser plug in and make a spread, and the stock went from about $9 to a $750 peak.
- Foroughi bought game studios for five years to get the data to train Axon▶ 49:00The studios had 1,500-plus people versus a core ads team of about 400, and AppLovin held them roughly five years.
- Foroughi turned down a $600 million offer and later saw the company worth $140 billion▶ 20:55AppLovin's market cap is about $140 billion at the time of the interview.
- Foroughi's China investment took over a year of CFIUS scrutiny to unwind▶ 30:12KKR later refinanced the note in 2018, and EBITDA passed $100 million in 2017 during the frozen period.
- Foroughi stayed loyal to the investors who bet on AppLovin, even when walking away was cheaper▶ 37:10The deal became a convertible note that gave the investors under 10% and was later cleared out with KKR's capital.
- Foroughi bootstrapped AppLovin through an LLC until the product fit was clear▶ 11:30He pitched $1 million at a $4 million valuation, a quarter of the company, and every top VC passed.
- Foroughi kept the business without a board for six years and learned the cost▶ 19:50The first board in 2018 had three members: Foroughi, Eduardo Vivas and KKR's Herald Chen.
- Foroughi cut 40 percent of the team while revenue nearly doubled▶ 1:00:40The business grew nearly 100% in 2024 while headcount was cut about 40%, leaving roughly 350 to 400 people in the ads business.
- Foroughi limited equity to about 100 critical engineers and product people after the crash▶ 1:00:00A $50,000 equity slice on a $150,000 salary falling 90% cuts pay to $105,000, which he said some staff could not absorb.
- Foroughi approves every hire personally and ended automatic backfills▶ 1:07:25Today the C-suite is the CEO, CFO, CTO and general counsel, with no CRO or COO.
- Foroughi swaps leaders when someone underneath becomes better, including cofounders▶ 39:55A cofounder in product also transitioned out about three or four years ago.
- Foroughi hires people with a chip on their shoulder▶ 24:51Raff has worked with Foroughi for about 18 years and ran business development before moving to marketing.
- Foroughi broke game developers' trust by not explaining the studio strategy in advance▶ 53:41Today more than 50% of mobile gaming marketing dollars go through AppLovin.
- Foroughi says AppLovin's IPO sold too little float, which made the stock volatile▶ 43:26The stock fell 92% in 2022, from $115 to $9.
- Foroughi keeps AppLovin lean and hires single AI-fluent experts instead of sales forces▶ 1:15:10Over 80% of AppLovin's code was LLM-written about a year and a half before the interview, and the share is now higher.
- Foroughi voices an aspiration only when he believes it, then works to earn it▶ 44:40The stock went from under $4 billion market cap in 2022 to a peak near $250 billion.
