Yesterday, Applovin, the advertising platform operator and games publisher that went public this April, announced that it has acquired MoPub, the mobile SSP and ad exchange, from Twitter. Twitter acquired MoPub in 2013 for $350MM and is selling MoPub to Applovin in this transaction for $1.05BN in cash. The below Twitter thread from ad tech luminary Ari Paparo does a good job of explaining Twitter’s motivations in selling MoPub, namely: reduced revenue and margins for an exchange business resulting from the deprecation of the IDFA, and the fact that the asset was orthogonal to Twitter’s core business and simply not strategically important.
These arguments make eminent sense, but they raise a different question: why would Applovin buy MoPub? I think the answer is mostly obvious and aligned with Applovin’s general operating strategy, at least since it acquired MAX, its in-app header bidding product: to aggregate as much mobile advertising supply as possible such that it can construct a corpus of data that provides a competitive advantage to not only its advertising platform but also to its first-party content business.
Applovin’s acquisition of MoPub contributes to this strategy by giving Applovin SDK access to MoPub’s existing publisher client base, by eliminating a major supply competitor, and by delivering an advantage to its demand platform, AppDiscovery. Applovin’s blog post about the transaction implies that MoPub will be shuttered and that current MoPub customers will be transitioned onto Applovin’s platform. Supply platforms get insight into every impression filled on behalf of publisher clients: bid levels, fill rates, etc. Through an in-app bidding platform such as MAX, Applovin receives this data in real-time and can aggregate it in ways that benefit all aspects of its business, which is especially valuable in the post-ATT environment.
To understand why this is the case, it’s important to bear in mind that the App Store is the Games Store: mobile gaming dominates mobile revenue and, by logical extension, mobile advertising spend. As I explain in IDFA deprecation: winners and losers, broker ad networks like Applovin (and Unity, Vungle, ironSource, etc.) almost exclusively service in-game inventory and aren’t as impacted by the deprecation of the IDFA as is Facebook because they had access to and collected much less user-level data. Games advertising is primarily driven by contextual targeting: ads for Game A perform well when they are placed in Game B. This narrowly-scoped data is obviously more valuable in higher volume.
But it’s valuable in potentially non-obvious ways. This data is helpful to the supply side of the business because it provides transparency into which apps are bidding on what inventory, at what values, and through which networks. It’s helpful to the demand side of the business for roughly the same reason but from a different angle: it helps the demand platform to understand which publishers are most competitive, and from which advertisers, allowing the demand platform to price bids accordingly. It’s beneficial to the bidding platform, MAX, because that data can be used as leverage to incentivize its adoption. And it’s helpful to the content business because it provides helpful guidance for investment and development. These dynamics combine to form a commercial flywheel, driven by supply: more supply results in more demand and better-performing first-party content, both of which create more supply.
And MoPub may have been the last real supply provider available for acquisition, given that almost all other mobile advertising platforms have both a demand and supply component and most are building bidding (mediation) solutions. As with Applovin’s acquisition of Adjust, a number of explanations can be used to justify the purchase: enterprise salesforce, access to non-gaming inventory, SDK footprint. But as in the case of Adjust, I don’t think any of these are explanatory. With its acquisition of MoPub, Applovin is able to access an enormous amount of inventory supply, which has positive knock-on effects on the other components of its business.