Twitter Stock vs AppLovin: Which Is Better?

Twitter Inc (NYSE:TWTR) is one of the largest social media platforms on the internet, with nearly 400 million active users. Still, its $40+ billion market capitalization is not even double its 2013 IPO price of around $24 billion. By comparison, Meta (NASDAQ:FB) produced a 10x return for investors over roughly the same timeframe.

Twitter aims to shed unnecessary assets to maximize profitability. That led to it selling MoPub to AppLovin (NASDAQ:APP) in October 2021. So which is better between Twitter stock vs AppLovin?

AppLovin is a mobile game and technology company that makes its money from in-game purchases and ads. It grew via a series of acquisitions, but is anchored by the required 30-percent toll to mobile store operators Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL).

Twitter Grows Daily Active Users QoQ

Twitter continues to grow its monetizable daily active users (mDAU). Over the past couple of years, it has reported single-digit growth each quarter, along with double-digit year-over-year growth.

By the third quarter of this year, it reached 174 million mDAUs in the U.S. and 37 million mDAUs internationally.

Nonetheless, it reported a $743 million GAAP operating loss for the quarter due to ongoing investments and a one-time litigation charge. This loss is attributed to its $809.5 million class-action settlement related to deceiving investors about user counts.

Despite these problems, the company is focused on growth. It shuttered its fleets and Periscope services to focus on new services like Spaces and Revue. Twitter is also focused on boosting partnerships with names like IMG Fashion Events & Properties, Fox Sports, and the NFL.

This could draw more users to the platform, but there’s an aggressive push to steal eyeballs from rivals like Clubhouse, Reddit, and Facebook. The stiff competition led to the company selling MoPub to free up cash and focus on its core business.

What Does MoPub Do?

MoPub is a leading mobile app monetization platform with a real-time bidding (RTB) exchange, ad server, and ad network mediation. This complete platform connects app publishers to marketers with a high level of transparency.

Mobile advertising is one of the few avenues not fully dominated by Facebook and Google, which control much of the internet traffic-based advertising. However, Apple (AAPL) and Alphabet (GOOG) do hold an oligopoly on mobile apps, which creates high overhead for app creators listing in their respective stores.

This was the catalyst that triggered Twitter to unload the company, which is expected to generate up to $250 million in revenue next year. Will that be enough to push AppLovin’s stock up?

Is AppLovin Stock Going Up?

AppLovin (APP) hasn’t impressed investors since its 2021 IPO. It carries a heavy load, with $1.73 billion in long-term debt and $90 million in short-term debt. The company’s over $35 billion market capitalization is pricy compared to its $1.5 billion in revenue over the past year.

Still, AppLovin is in a prime market – the mobile advertising market was valued at around $223 billion in 2020 and is projected to reach over $400 billion by 2026.

The company’s revenue acceleration was eye-popping over the past two years, growing from $994 million in 2019 to $1.45 billion in 2020. In the first half of 2021, it generated $1.27 billion, much of which stemmed from its acquisitions. This growth is attracting investors who have a consensus view that the firm is priced at fair value just south of $100 per share.

Twitter Ad Revenue Is 89% Of Top Line Sales

Like other social platforms, Twitter’s core business is advertising, which accounts for 89 percent of its revenue. It also generates a portion of top line sales from data licensing.

The company’s advertising takes many forms, like promoted accounts, trends, and tweets. Businesses and influencers can pay to gain followers, reach potential customers, and measure real-time results of their ad initiatives.

Twitter also offers premium APIs to help mine for data across past and present public tweets. It started testing new revenue channels alongside its social audio Spaces and paid super follows. It even integrated an email newsletter subscription service through Revue.

Together, these efforts helped the company to increase its top line ad revenue by 41 percent year-over-year. However, it’s expected to see top line sales decline by as much as $250 million next year due to its sale of MoPub to AppLovin.

How AppLovin Makes Money

AppLovin generates approximately 51 percent of its revenue comes from in-game purchases. The company’s roster of over 200 games is distributed through a freemium business model, which means they are free to download but users can pay for in-game upgrades.

It also runs ads within these games and other B2B services which account for 49 percent of revenue.

These are lucrative businesses; the company reported a 106 percent revenue increase in 2019. The next year, it grew that top line by another 46 percent, with 127 percent year-over-year increase in the first half of 2021.

By purchasing MoPub, AppLovin stands to bolster its top and bottom lines over the long term, despite the short-term impact to investors.

A fly in the ointment so to speak is the high fees it pays to Apple and Google for its in-game purchases and difficulty in using tracking cookies – combined these threaten profitability.

Twitter Stock vs Applovin: The Bottom Line

Twitter is a microblogging social media site that failed to show the same growth as its rival Facebook. However, it’s still one of the largest social platforms on the internet and has solid partnerships to increase its user base, engagement, and monetization.

It sold MoPub to AppLovin to focus on its core businesses. This deal could be a great boon to investors of both companies, although it will create some volatility within earnings reports over the next quarter or two.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.