Long|Why is Applovin so awesome, but others haven't learned from it?

Truths behind Applovin's Quarterly Report

First, let's introduce what Mediation is:

In simple terms, DSPs are various ad bidding companies, and mediation is a bidding platform that centralizes all bids and ultimately matches advertisers with traffic owners.

Applovin has significant advantages in doing both mediation (ad aggregation) and DSP (demand-side platform):

1. Picking up bargains in pricing: This is equivalent to being both an athlete and a referee. The platform can manipulate and optimize bidding costs in the dark. For example, after knowing the bids of the first and second places, it can obtain the opportunity to display ads with an extremely low premium. To illustrate, if Applovin, as a mediation, learns that Unity bids $1, and if Applovin's original algorithm is to bid $2, now it only needs to change it to $1.1 or even $1.00001.

2. Collecting more data: The Mediation platform is embedded in the publisher's game in the form of an SDK, which can collect user data, including session information, number of ad slots, the integrity of anonymous user data exchanged between Mediation and DSP, and various intermediate data in various bids (not just the single-word bidding data obtained by DSP).

3. These advantages are sufficient for Applovin to attempt exclusive tactics: Applovin's crazy subsidies for mediation in the early stage have led to a near-monopoly in the mediation field. If a customer chooses Unity's mediation, Applovin will not access the customer as a DSP. This makes it even more difficult for competitors.

Applovin has data collection advantages different from Unity:

1. Obtaining player data through the acquisition of game studios: This is mainly helpful for mid-to-hardcore games. It can bypass IDFA to match user consumption and Applovin is also very aggressive in FingerPrint.

2. Most importantly, Applovin has its own attribution product, Adjust: MMP helps developers collect in-game deep behavior data. The trickiest part here is that the switch of MMP is in the hands of developers. They decide what data to callback or not. If the developer chooses not to callback, MMP cannot provide data to DSPs like Unity. But for developers using Adjust, whether the developer chooses to callback or not, Applovin can see all the data because Adjust is its own product. Appsflyer accounts for 60% of the market share, while Adjust has grabbed 30%.

With the above-mentioned closed-loop data, Applovin can better train its own ad engine, Axon2:

1. We won't say much about ROI and conditional optimization, as everyone understands it.

2. The main awesomeness lies in the few shot period: Axon1 needs to run in CPI mode for 1-2 weeks before switching to ROAS, and ROI is not guaranteed during the CPI period. With Axon2, ROAS delivery can be achieved almost on the first day, or at the latest a few days later.

3. Here comes the trickiest part: In our research, Applovin requires game publishers to run campaigns on Facebook for 3 to 5 days before importing them to Applovin. Facebook's few shot is faster than all DSPs, which may also be the main reason for Axon2's shortened training cycle. In our communication with other DSPs, they weren't even aware of this point.

Axon2's awesomeness goes beyond the above points. It can also eat the spread more opaquely:

1. In all of Applovin's bids, advertisers don't know the price obtained by traffic owners, and traffic owners don't know the true bid of advertisers. The profit of DSP is the difference between the two.

2. Axon2 greatly shortens the training cycle and improves advertisers' ROI. Based on the opaque advantage, Axon2 can further convert part of the ROI into the spread, and its commission ratio may be higher than 20% in this generation of Axon2.

All these have created an increasingly exclusive barrier for Applovin on the data side.

So after reading all the above content, you may already have an idea that it is difficult for DSPs like Unity to complete Applovin's layout. This is not just a matter of algorithms.

Applovin is penetrating into the e-commerce field beyond games: Advertisers have seen considerable returns, often surpassing other traditional media channels (Google, Meta, etc.), and have achieved nearly 100% incremental traffic in the e-commerce field.

In this quarter's research, we observed that top Chinese cross-border manufacturers have opened independent advertising accounts with Applovin, while second- and third-tier advertising platforms like Snap have not yet opened independent accounts...