i found a stock that could 10x (seriously)

0:00 Welcome back. My name is Arian. I don't waste your time. So, let's get straight into it. I did it again. I spent probably close to a hundred hours researching this business and I have compiled the entirety of that research. Brought it all down to this probably 40 maybe 50-minute video. I have no idea how long this video is going to turn out to be, but it's very well worth it. This is a special company. In fact, I would go so far as to say this is a oneofone company. That is not my opinion. That is not a buzz term to just throw around.

0:26 That is a statistically factual statement in the sense that this is a one-of-a-one company. If you run a screener with the following metrics, revenue growth of over 65%, operating margins of also over 65% and a market cap of above $5 billion because, of course, we would like to look at companies that are, you know, decently sized. You get back one result. That result is, of course, AppLeven, which is the company that we're going to be talking about today. Some of you may have heard about it. We've done a video about it in the past, but I'm going to break down the entirety of this business, how they generate revenues, what the mode of the company is, why it has a structural advantage. That's something that we're going to come back to time and time and time and time again throughout the entirety of this video.

1:03 Of course, we're going to round out the video with some valuation work, fundamentals work, all that great stuff. But really, the bulk of this video, and by the way, everything's timestamped, so feel free to skip around. The bulk of this video, I would like to describe to you the mo of the company, which is nothing short of breathtaking. Again, you're going to see me use that term over and over again, but they truly do have a structural advantage over all competitors. And what arguably gets me most excited about the business. That structural advantage is going to translate into all these different agencies for their business and they have a massive, massive runway of growth ahead of them that should hopefully deliver good stock results for us.

1:35 Without further ado, ladies and gentlemen, let us get into it. So, what does the company actually do? They are of course an advertising business. Now, AppLovven might kind of clue you in to what type of advertising they do. They do mobile ads. Specifically, they do mobile ads in gaming applications. That has historically been the majority of their business. In fact, historically, they used to own gaming studios. So, they used to outright own these gaming studios that would produce and publish games inside of the App Store and the Google Play Store and so on and so forth. They've actually divested that business. That's a very important detail which we will come back to later in the analysis. But at the moment, the business is a pure play on advertising.

2:09 Simple as that. They're an exchange of advertisements for, for example, if you're playing Block Blast or if you're playing uh Candy Crush. Maybe that's a better example. When you're playing Candy Crush, of course, after you lose or, you know, the round is over with or whatever, or maybe you want extra keys or whatever the case is, some sort of in-game currency, you have the option to play an ad. And I'll have this up on screen so you can maybe better visualize this for those of us who don't play any mobile games. And so, you're able to either get, you know, in-game currencies or there's these ads that periodically play inside of the uh application as it is. And so almost always in fact I think apploven has a 70 to 80% market share particularly on iOS that advertisement there is being facilitated by app and in many cases what's actually happening is that that advertisement that is being placed inside of that mobile game is usually another mobile game. So, for example, just to kind of, you know, ground this, if I'm playing Candy Crush, I might get an ad for Block Blast while I'm playing Candy Crush and then, you know, whether or not if I like what I'm seeing with Blockb Blast, I might end up installing that game. In some cases, it has something to do with, you know, maybe like a Clash of Clans ad or a Clash Royale ad. It's just other mobile games that are being advertised inside of that little advertisement, the 30-cond advertisement that's being placed. Now, there are some question marks in terms of roundt tripping where, for example, if I'm playing Blockb Blast and then I see an ad for Candy Crush and then I buy Candy Crush, I see a Blockb Blast ad. Applavven is technically generating revenues on both sides of that transaction, if you will. And so, there's some question marks around whether or not that counts as roundtrip if they're double counting revenues.

3:32 It's a little bit sketchy. Again, we'll kind of come back to that later on and why I believe that's actually meritless, but nonetheless, that's the core of the business. They essentially facilitate advertisement placements. And you might say, well, Arya, how big is the audience for something like this? The answer is 1.6. 6 billion. Uh, that's daily active users, by the way, not total users, not every single user that's ever been in a mobile game. No, that's 1.6 billion daily active users. Yours truly is one of those users cuz whether it's chess.com or blockb blaster or whatever, I'm playing mobile games pretty frequently myself. And to give you, you know, frame of reference, by the way, that is about half the size of what Meta is. Granted, these are different types of users. The type of user that's using Meta, that's a social app, slightly different than, you know, ad gaming.

4:11 here. The business is roughly half the size of Meta's daily active users. It's three times larger than Snapchat. Shockingly, it's actually about 12 times larger than YouTube. Now, I had, you know, I posted this on Twitter. Some people kind of raised that and were like, "That number has to be wrong." Uh, no. Actually, that's the completely true number. So, YouTube does have approximately 200 million daily active users. The thing with YouTube though is that they have a lot more monthly active users. So, although they only have 200 million daily activives, they have like over two billion monthly activives. And so the, you know, thing to kind of note with YouTube in there is that most of YouTube's users don't watch YouTube every single day, which is fine. It's still a fantastic business. But nonetheless, uh, this comparison in specific kind of, uh, shines a really bad light on YouTube. That's not a knock on YouTube. We love that business. And so ultimately, what I really want you to get out of this first part of the video is kind of two things. One, it's a massive [ __ ] business. Two, the relationship of AppLin with the advertisers and what's technically called the publisher. We'll kind of refer to them as the game company just for simplicity sake, but again, we can kind of use that interchangeably throughout the video. And by the way, quick disclaimer on this. Maybe two and a half thousand out of the 4,000 words that I wrote in preparation for this video is this next section. If you need to watch it in multiple sittings, I do recommend that, but it's a highly worthwhile investment of your time in my opinion if you do stick around.

5:24 Nonetheless, let us get into it. There are essentially three parties involved with AppLin. It's obviously AppLin sitting in the middle that's kind of facilitating the relationship of the advertiser and the publisher/gaming company. There's the advertiser themselves, which has historically been other gaming companies. So again, if you think back to that Block Blast and Candy Crush example that I gave, Candy Crush could in theory be the advertiser who's placing an ad of a video of Candy Crush and how it would be to to play that game. And then they're placing that ad inside of the Blockb Blast application.

5:53 Every time that you lose on Block Blast, an ad gets played and it's a Candy Crush ad, right? So pretty simple stuff. There's three parties involved. Advertiser, publisher, App Leven in the middle that is facilitating the exchange. Now, here's where we start to put some numbers behind it and it starts to get confusing. So, I'm going to need you to focus up one very key detail about Apploven that we haven't mentioned so far. One reason that, you know, they're super differentiated and it it's groundbreaking and in fact actually Reddit has recently started to copy them. That's besides the scope of today's video. They're what's called performance-based. So, the advertising that AppLovven does in contrast to a traditional meta advertising or traditional Google advertising, whatever the case is, it it's purely performance-based. So, you don't go to apploving and tell them, "Okay, I have a $100 budget. I would like to spend $100, you know, on on my ad over here." That's how meta works, right? You set a limit in terms of uh how much you're willing to spend, maybe it's $100, whatever the case is, and it kind of just goes through that spend and then whatever result you get, congratulations. Uh you either get results or you don't, whatever the case is, there's nothing to do with how many clicks you get on your website or how many clicks you get on that advertisement that you place inside a meta. Apploven has completely flipped the script on this. They're the complete opposite way. You go to AppL and you tell them, "Hey, I want 10 app installs." I'm going to walk you through how they can actually guarantee you that they're going to get you 10 app installs. That comes in a later segment of the video, but that's what you tell them. It's performance based. So, you pay for a click or you pay for a app install or you pay for an outcome.

7:12 That's what they directly call it inside of their own marketing, not their marketing materials, that's what they call it inside of their own investor relations materials is it's an outcomebased structure to their advertising. So, big thank you to Claude for whipping up this graphic here. But this is essentially what happens when you go to spend money on apploven as a platform. You the advertiser goes to apploven and says hey I want 10 installs of my application. Apploven has axon AI which is built on a whole bunch of data.

7:38 Again I will talk about that right after this. And based off historical data they know for a fact that if we show a,000 impressions of this ad there's probably going to be a 1% conversion rate on that and and 10 people will install the Candy Crush application. So, they go to their auction and they say, "Hey, Block Blast or Candy Crush or whoever. Hey, gaming companies, what will you charge for me to place a,000 impressions of this mobile game on your application?" And so, what's important to again keep in mind here is that this is a a two-sided network effect. There's the advertiser and then there's also the publisher on the other side. So, the publisher, the way that they pro probably make the majority of the revenues of their business is that they are actually monetizing through the fact that they have this ad slot again for, you know, uh, giving in-game currency such as the keys or whatever the case is, or at the end of every single uh, round that you lose, they play an advertisement. That's how they're actually monetizing and making money on the game that they've placed on the app store. Other than that, there's like maybe in-game items that you could possibly purchase or like you can pay to go ad free. there's maybe some subscriptions like a you know gaming pass or something something of that sort but for the most part the way that most of these applications these gaming applications monetize is through the fact that they sell their ad slots and their ad inventory to a auction such as apploven and so that's how they're monetizing that's their incentive to list on there and so essentially what you have here is that after an advertiser says I want 10 installations it goes to the auction and says hey Candy Crush for example uh how much will you charge and and you know people are bidding on this uh rapidly not actual people it's programmatically being bidded on But this is getting bit on.

9:06 What is a,000 impressions on your application Candy Crush worth? And so Candy Crush will return back and say $30 for a,000 impressions is what I'm charging. Now, here's what the cool thing about Apploven that that that actually happens, right? Apploven doesn't turn around and go to the advertiser and say you will pay $30 for 10 installs. They actually just straight up put 30% on top of that. Now, it's not exactly 30%. It's a bit variable and it's actually a little bit of a black box. They don't reveal exactly how much their take rate is, but it's typically estimated to be about 20 to 30%. And so what ends up happening is to only the advertiser apploven is showing that hey you're going to pay $39 for 10 installations. And then on the other side they're telling Candy Crush, hey here, take this $30 for your,000 impressions which will based off of all of our data and based off of our proprietary LLM and Axon 2.0 engine. We know that a,000 impressions will equate to 10 downloads. And so they charge $39 from the advertisers. They give 30 of those dollars to Candy Crush and then they keep that $9 in the middle. And for the advertiser, before they even pay a single dollar, they know that my cost per lead is going to be $3.90 per installation. That is my return on ad spend. That is the exact amount of money that I will be paying in order to get this outcome. And so something super cool to to kind of note before we move on here and I explain to you the the data mode, why this works, why people are able to actually pay for outcomes as opposed to pay for impressions, which is how all of advertising is done. By the way, one really important thing to note here is, and this part of the reason why they actually got into trouble, is they don't show the take rate to anybody, right? So, they don't show the take rate to the advertisers. The advertiser doesn't know um how big of a premium they're paying for AppLin to facilitate this uh exchange here. At the same time, the publisher also doesn't know how much more of the of the revenues, how much off the top Appan is taking. And the reason for that is very very simple.

10:48 Because in theory, if both parties or even one of the parties was able to actually have uh that information available to them, they could kind of reverse engineer it and go directly to the other party and kind of circumvent apploving. What I mean by that and to help kind of ground that, it'll instantly click for you. Think of Uber for example. If in theory, as soon as I, the uh person that you know is calling an Uber and the Uber driver is able to see the exact breakdown, it's a $100 Uber and you know, we see the exact breakdown that 30 of these dollars is going over to Uber. If both of us have access to that information at the moment that the ride is happening, as soon as the Uber driver arrives, I'm just going to tell them, "Hey, dude, cancel this Uber ride. I'll just pay you 70 bucks.

11:26 It's cheaper for me. It makes no difference to you." Or, matter of fact, for your trouble, I'll pay you 75 bucks. It's still cheaper for me. For you, it's a little bit uh more money. Everybody's happy. And we circumvent Uber. For that exact reason, Uber does not show either parties. Now, of course, you could kind of do back of the napkin math compare. Hey, uh, hey, brother. How how much are you making off this Uber ride? Oh, you're only making this much? Well, I paid this much for it. Great. Do you want to circumvent Uber? This actually happens in the real world. But of course, with AppLovven, that simply can't take place because there's no direct line of communication between the publisher and the advertiser. It's not like an Uber ride where, you know, you guys are face to face, right? There's no direct line of communication. But nonetheless, that's something that could in theory happen. And that's why for competitive reasons, AppLin does not reveal that. Now that you have a solid grasp of exactly how the business generates revenues, again, they're kind of just taking this like 20 30% take rate off the top or facilitating this.

12:15 Why is it that they are actually able to charge for outcomes on one side but then pay for impressions on the other side? Super great question. I'm glad you asked it. The short of it all is that they have a [ __ ] ton of data. The longer explanation for you, I'm going to take you on this wild side tangent with an analogy that I came up with. Completely original to me, by the way. But I would like you to imagine an arcade. Okay? And stay with me here. But I'd like you to imagine an arcade called the Arya Arcade. Okay? In the Arya Arcade, I owned everything. So I own uh the land, I own the building, I own security cameras, I own everything. everything inside of there except for all the arcade games. Uh the arcade games are owned by other people. I own some of them, not all of them, but I own some of the arcade games. And then at the same time, a very important detail to note here is that I have these extremely smart security cameras. Okay, some may call it my Axon security cameras, right?

13:00 And my Axon security cameras essentially almost in a dystopian way keep track of every single one of my customers that enters the building. So, for example, I'll have Drew Cohen. Drew Cohen enters my arcade and Drew Cohen's a big fan of uh the Ninja Turtles fighting game Konami. Matter of fact, Drew Cohen comes in every single day and he spends 32 whole minutes playing the Ninja Turtles Konami game. Then he makes his way over to the bathroom cuz he likes to drink uh Diet Coke while he plays his Ninja Turtles Konami game. He goes to the bathroom, then he goes to Pac-Man, plays a couple games. After that, he spends a whole bunch of tokens at my arcade and then he leaves and he comes back the next day, does the exact same thing. Every single day, Drew Cohen is a frequent customer of my arcade. One very important thing to know here is that my very smart security cameras are able to track all of this information. They're able to track that Drew Cohen on average, for example, comes in at 4 p.m. Some days he comes in earlier, some days he comes in later, but on average he typically comes in at 4 p.m. because maybe he finishes up work over at Speedball Research and then he comes in at that time, right? He comes in, swipes his card, he maybe spends on average 112 tokens. He spends on average 32 minutes at Ninja Turtle.

14:06 Usually goes to the bathroom 70% of the time. He goes to the bathroom afterwards. After he goes to the bathroom, we know the exact path that he typically takes and walks over to Pac-Man. And then after Pac-Man, he walks over to a different game. Matter of fact, sometimes he likes to try a third game completely new, but he usually doesn't spend much time on those. His his go-tos are Pac-Man and Ninja Turtles Konami. Again, we have access to all these different variables.

14:27 We have access to his average token spend, the average time that he comes in, how much time he spends on each uh different application, sorry, not application, each different arcade game. What is the chance of him taking a bathroom break after a 30 minute gaming session? Right? Like we we have data on all this stuff because of my security cameras that are kind of looking at uh Drew Cohen's actions in here, right? And so over time, because of my very smart security cameras, I do something really really smart. I ingest all this data because I'm a genius LLM engineer. I put this all into my own proprietary LLM and my own proprietary LLM can pick up on these patterns. And what I end up having is I install software on all of my arcade games, including the ones that I own and including the ones that are not owned by me or owned by other people that, you know, I I pay. And so at the end of every round of my arcade games, I'll play an ad of another arcade game inside of there. And so here's what's interesting about that. I'll play an ad, but I'll get the arcade game owners to pay me for those ads. So, for example, let's just say there's a owner for the Street Fighter arcade game. Based off of all the data that I have inside of my arcade, I know that Drew Cohen typically likes to play fighter games. Oh, fantastic. So, I have uh Street Fighter, which is another fighting game, I have built this profile on Drew Cohen that he typically likes fighter games. And so, after he's done playing that Ninja Turtles Konami game, I put a Street Fighter ad in front of his face while he's looking at the screen for the Ninja Turtles game. And so Drew Cohen being the pragmatic gentleman that he is, he looks at that ad and he's like, "Oh, that's a really really interesting game.

15:56 You know what? I'll I'll give it a try. Sorry, where where is that in inside of the building? Oh, it's over there." He goes and he tries the other game and then he ends up spending tokens on that other game. And because of the structure that I've built inside of my arcade, I've said that, you know, I keep 30% of all token spend. So, if $100 is 100 tokens, somebody spends $100 at my establishment on on the arcade games and whatnot, I'll keep 30% of it for myself and then I'll give 70% over to my other parties inside of the ecosystem who actually own the arcade games in of themselves, right? So, the incentive of the arcade is to get people to play your arcade game. So, the owner of Street Fighter, his incentive is to run ads at my establishment to get people to play his game and then he's able to make revenues off of that. Right now, an issue starts to arise over time.

16:37 Actually, matter of fact, two issues start to arise over time. The first issue is that naturally all the different arcade game owners inside of my arcade, they start to question the fact that maybe I'm a little bit biased. Maybe when I'm placing ads, I place ads specifically for my own games, right? At the end of the day, if people go to play my game as opposed to, you know, game of uh people in the ecosystem, I'm keeping 100% of those revenues. Whereas, if somebody plays Street Fighter, for example, I'm only keeping 30% of that.

17:02 So naturally, it would invite that I'm a little bit biased simply because of my conflict of interest of being both the arcade owner and the arcade games owner, right? So you know what, I understand that. So what I end up doing with that is that I actually I end up divesting all my arcade games. I no longer own any arcade games. I'm simply the manager and the owner of the arcade in of itself, not the games. Simple problem. I get rid of that. You might see some duality with the app situation. Issue number two is some regulators come around and they say, "Hey, Drew Cohen was playing Ninja Turtles. now he's playing Street Fighter. You are charging for ad spend on both uh sides here, but the user and the consumer is just simply going from Ninja Turtles to Street Fighter and then back over to Ninja Turtles. There's roundtpping of revenues here. And at the surface, that does make a little bit of sense. There's a little bit of question marks. It maybe a little bit sketch.

17:49 Matter of fact, when I first heard of that, I was also a little bit sketched out for it. But you have to change your view from this is the same customer that's going from here to there and you're charging revenues for simply their movement. Um to you are charging for the amount of attention that you capture. For example, if you get Drew to switch from Ninja Turtle to Street Fighter for a week and he's playing 30 minutes per day on that, you paid for what is that 210 minutes of Drew's attention during that week. You paid a certain amount of advertising dollars, call it $10. And then in return, Drew spent $50 worth of tokens on your application on your game. Sorry, I keep saying application. He spent $50 worth of tokens on your game. And so very simple mathematics in terms of uh you know return on ad spend and looking at your customer lifetime value is you paid for Drew, you got 210 minutes of attention. Those 210 minutes of attention are worth $50. So you're willing to, you know, spend 10 bucks of advertising dollars to get Drew to spend $50 on your platform, right? or otherwise if he's not spending $50, he's still consuming advertisements while he's playing the other game as well. And therefore, you're able to monetize that attention as well. And so, I've taken you on this massive side tangent and story because this is exactly what app is today. It is a facilitator of essentially an arcade, which is, you know, their app exchange. And so, they're able to essentially provide monetization to these arcade owners beyond say tokens, right? If we say tokens is essentially actual spend on the application, if you're buying keys or if you're buying coins, whatever inside of the app, you can monetize through placing an ad inside of there and you're able to monetize attention, not necessarily actual monetary payments by the user to you, the application or to you, the arcade owner. And so the reason why this ultimately works as well, by the way, is because of those that super smart AI, the security cameras. In this case, it's Axon 2 is the name of the app engine inside of AppL. And Axon 2 is able to tell you basically that like, okay, if this person is interested in this type of game, we can put another game that's similar to that and they're probably going to install it. And then therefore, in the event that they do install it, they're able to charge for that installation. And by the way, most important part of it all is they have all of this data that they've collected over years and years and years. That's able to tell them that on average, if we show a,000 impressions of this type of ad, we will get 10 installations. And you can work backwards with that math.

20:03 and you're able to charge for outcomes. You're able to charge for installations or clicks or whatever the case is. You're able to charge for out. And this is ultimately where AppLin is at today. They are the arcade. They have this super smart AI algorithm that's trained based off of first-party data that they've collected for years and years and years. Mind you, by the way, the fact that they used to own their own game studios and they used to own quote unquote those arcade games. They had a whole bunch of uh first-party data that they were able to collect, behavioral data that's able to train this app engine to make it so successful and so smart that it can tell you how much it would cost exactly for your outcomes, right? And so going back to our story, the cool thing that's happening with the business as we speak and the reason why I'm ultimately incredibly bullish on the business, if this was just a business, just a quoteunquote gaming advertising business, um, that has a good runway, not that big of a runway, not reason for me to put a 100 hours of research, take you on what's been probably, I don't know, 20 minutes worth of explanation to get to this point. The reason why I'm ultimately so unbelievably excited about the business is they're expanding into other categories. They're moving beyond just gaming ads. To go back to the arcade example, imagine after a whole while you're like, "Okay, this is great.

21:06 We have a great business. Let's do more. Let's start a snack bar. Snack bar. Now, let's implement advertisers for Skittles and Reese and uh Lace Chips and Doritos and Coca-Cola and this and that and whatever." And hey, based off of all this data that we have on Drew Cohen that he's into Street Fighter games, right, for example, he's a bit more of a uh excited sort of uh actionoriented person. Okay, Drew's going to kill me for using him so much in this videos.

21:31 Based off all this data we have on doesn't even matter who, whoever person, right? Well, we know that this type of personality or this type of person who's interested in these type of games is typically also interested in Doritos chips or Skittles chips. Hey, Mr. Skittles over there, would you like to spend X amount of dollars to 100% guaranteed be able to sell 10 packages of Skittles? When I spend $10 in order to get $50 worth of revenue, yeah, that's perfectly worthwhile for me.

21:55 Great. Let's do it. And so as soon as Skittles says yes to that, they show a thousand impressions, for example, worth of Skittles ads inside of all these uh different arcade games. And then eventually you'll have 10 people across the entirety of the arcade that are like, "Oh yeah, you know what? I am craving Skittles. I'll go to the snack bar literally right over there and I will purchase a bag of Skittles." This is what is happening with AppLeven. And they've literally talked about it. This is a quote from the most recent quarter.

22:18 They've recently rolled out e-commerce as of a couple quarters ago. But what gets me super excited about the business is that this quote from Q1, this is directly from the CEO. He says, "If you think about some of the biggest advertisers on social, talking about social media, you've got e-commerce, you've got gaming, you have apps that drive to subscription." So, you could think of uh stuff like uh even, you know, Duolingo, um I would actually just say uh inapp purchases like total AP, not necessarily just subscription, but those are all revenue generating businesses. We do that. Well, the other huge category are things like auto insurance, health insurance, fintech, food delivery. These are things that are structured around a lead, and we're missing that today. What you need to note here ultimately with AppLin is that they've built this fantastic engine for certain will be delivering results, right? And they have now started to open up that engine over to other categories.

23:02 So, back to the arcade example, you can get into, you know, food and snacks and drinks, slushies, I don't know, supplements, right? Like you can get into all these different categories, toys, for example, right? All these different categories that will lend itself well to that model. The same thing is happening with AppLin. Just e-commerce alone, which is something they just started getting into. You might have noticed if you're playing mobile games recently, you might have gotten like Teu ads or Amazon ads and this and that or whatever, just that alone is a $300 billion per year advertising market. That's by the way growing like about 15% annually. So that in of itself, like ad spend in of itself on e-commerce just because e-commerce in of itself is like growing, I don't know, about 15%. Makes sense that ad spend on the e-commerce is also growing roughly the the same pace. uh never mind like uh apploven coming in and and taking a percentage of that and taking market share of of the ad spend, right? So that market in of itself is $300 billion. If they get just 1% of that market, just 1% of the market because structurally their advantage because it's a business where you're not blindly spending on advertising. You literally pay for your leads. It just makes the most amount of sense to to spend that way, right? Like it's it's really not a question of can they possibly take some market share away. It's they just opened up. They need to communicate to advertisers that hey, this is a possibility to literally just spend for outcomes, spend for installation, spend for clicks over to your website to check out the shirt that you're advertising. They need to communicate this over the next handful of quarters to maybe years. And there will be a flood of advertisers that will come in to spend for those ad placements, right? And so, if they just simply get 1% of e-commerce ad spend, that would boost their revenues by 50% overnight. goes from a business that's generating $6 billion of revenue to a business generating $9 billion of revenue. But as you just heard the CEO, and this is the reason why I get so excited talking about the business is there's way more categories than that.

24:49 Matter of fact, to advertising, there's essentially an infinite number of uh advertising categories you can get into. Earlier, I searched up on Google what is the TAM of Apploven. Do you know what I got back as a result? Apploven's total addressable market is now widely characterized by analysts on Yahoo Finance as unlimited. And I would agree with that statement. Apploving TAM just went from mobile gaming to any advertisement that you know generates revenues on on the other side of it.

25:15 Sure, there's, you know, certain categories like uh branding wise like they they would never get into like a, you know, a Coca-Cola advertisement that's essentially just like there to to drive some sort of branding. Um or certain ads that would like raise awareness and stuff like that. No, it it needs to be direct measurable outcomes. Those are the ads that they can do. they would never get into anything to do with like branding and stuff like that or some of the stuff that you see with like Super Bowl ads that like raise awareness about this new thing that we got going on. None of that. So the TAM is smaller than say a meta or something like that.

25:43 That is literally all types of advertising. But nonetheless like any advertisement that is there to drive leads and to drive revenue starting June which is you know a month two weeks from now because that's when they open the platform to all advertisers starting June will be able to advertise on app. it is a superior way of advertising and so that should ultimately lead to a massive inflection with the revenues of the business and on top of that you have this unbelievable runway for the revenues to continue to compound and so I I'm sitting here and I'm thinking seven years down the line 10 years down the line something like that why wouldn't this be a $50 billion revenue business because think about it right the core business in of itself is currently doing $6 billion of revenue by the way I haven't mentioned anything fundamental so far it's growing like 60 70% right sure that slows down over time but then you implement all these other categy you include insurance, fintech, food delivery, uh whole bunch of stuff, right? Healthcare, anything to do with e-commerce, right? Like, why wouldn't that be in the tens of billions of dollars of revenue? The truth is it will. So, and the reason why it ultimately works is because they have all this proprietary data and they've essentially assigned all these attributes to you, the user, that based off of that information can directly target uh me or your ad specifically.

26:52 Right? I I don't know exactly what attributes they've assigned to me, but I get advertisements for, for example, fintech stuff, right? Try this buy now pay later app, try this uh new credit card, try this uh brokerage app for Quest Trade, whatever the case is, right? So, they're able to obviously directly target you specifically. And on the flip side, based off all the data that they have, they're able to tell the advertiser, I'm going in circles here, they're able to tell the advertisers that for 10 checking accounts that are opened, you need to spend this amount.

27:18 And they're able to work backwards on that, whether or not that's worthwhile. You get the idea. Final note before we move on to fundamentals in terms of the moat of the business, it's only going to become stronger over time. So that targeting and the cost for advertising, cost for advertising will go down. So that's scale economy shared. I'll explain that in a second. But there's also classic network effects at play here. And I think that's perhaps best explained from yet another quote. This one's from Morning Star. In the morning star report they say as performance improves more advertisers are drawn to the platform increasing the volume of training data enhancing conversion rates and attracting even more advertisers potentially compounding Axon 2's effectiveness. So this is this is essentially a flywheel. So obviously we already have established that like the AI is really really smart and it's really good at advertising based off performance all that great stuff that will attract advertisers. Simple as that. that will attract advertisers who will want to spend on the advertising platform because of all those dynamics inside of uh the platform charging for performance, all that great stuff. Which means that those advertisers that are spending on the platform will give more data over to AppLet. It's a good advertising platform that brings advertisers, those advertisers that are new and coming onto the platform will generate more data. More data means that their AI algorithm will become even smarter, which means that that will go back all the way to the top of the flywheel, will drive even better performance, make it a more attractive AI algorithm for advertisers to spend on. It's a network effect at the end of the day. Each incremental advertiser that comes onto the platform or each incremental user that comes onto the platform is a piece of data for the AI to become smarter or Axon 2 to become smarter, which makes each incremental dollar of ad spend on the platform more efficient and and it constantly just spins this flywheel that continuously makes it a better and better AI, makes it a better and better place to spend advertising dollars and that'll just compound from there. And so there you have it. Super quickly, maybe two-minute segment, uh some risk factors to touch on. And then additionally, the short report. So this is something that has come up and I'm sure there's going to be comments about it even though I'm addressing it inside of the video, but the short report has largely been dropped actually. So the publishers have retracted their moneyaundering claims.

29:18 I'll link this in the description if you're curious to take a read, but essentially what had happened is there was a big short report. It alleged a whole host of things. Some of them have been retracted, some of them haven't. I expect almost all of them will be retracted. Number one, there was the problem with the roundtpping. I already addressed that. I think that's totally fine. You're paying for a percentage of a user's attention, not necessarily that user forever, right? You're paying for their attention, right? And that only lasts a certain amount of that. So, that's not a problem. Uh they allege a whole bunch of accounting stuff. I am not one to, you know, be an accounting wiz or anything like that and go through it. I trust the management team based off all the interviews that I've watched. I think they do the right thing. I would imagine that they don't.

29:52 In fact, a lot of those accounting uh things have been dropped now. So, there's that as well. And then at the same time, like something that was mentioned by the CEO in in an interview as well, which I largely agree with, is whenever there's a short seller report combined with like, you know, this company's fraudulent, whatever the case is, they have the massive advantage because as soon as that short report comes out, the stock drops, they obviously have a position going into the report before it drops. Um, and so they can essentially move the market or they can move the stock of a company based off of that report and make money. Like I'm not sure, you know, I don't know why that's not illegal or there's some sort of regulations around that. Um, so it it's all it's a questionable incentive structure to say the least. Nonetheless, there's been a cease and desist letter.

30:31 Apploven has counters sued the company that wrote the short seller report. Again, they've retracted most of their statements. Full Baron's article in the description down below. With all that being said, valuation at last, valuation and fundamentals. As I mentioned at the very uh beginning of the video, the company does have 77% operating margins. And mind you, by the way, about 12 quarters ago, they were quite literally unprofitable. They had -2% operating margins just 12 quarters ago and now they have 77% operating margins. If you look at the revenue growth of the business, it does look a little bit more choppy. The reason for this is that divevesture that I talked about with the gaming studios and whatnot. So instead of looking at that, what I like to do instead, and you know what, we will look at it on a last 12-month view, the software platform revenue. And if you just look at that instead, you can see that, you know, it's been growing super healthily. This is the more important segment of apploven that's been growing anywhere between 60 to call it 80% over the last 12 quarters thereabouts. That growth has largely stayed the same has slowly ticked down in in recent quarters and whatnot. But again, I would imagine that they actually end up accelerating because they have the ability to expand into all these different verticals and different categories for their ad spend.

31:36 And so you have all that, right? You have a 80% operating margin business. It's growing north of 65%. What do you think the valuation of the business is? Serious question. what what PE multiple can you buy it at? The answer to that question is you can buy it at a 44 times PE ratio, which is just ridiculous. It is so unbelievably cheap, right? So that's that's well below a one times PEG ratio, assuming that their margins uh stay stable, which I can't imagine why they wouldn't. The company only becomes more and more efficient as as it goes on. Granted, I don't expect that, you know, operating margins expand meaningfully beyond beyond 80%. That's frankly a little bit ridiculous. But yeah, you're essentially buying it at like 6 times PEG and then it's not like a capital intensive business. In fact, if we look at the capital expenditures for the total business, contrast that with, let's just do, yeah, operating, it doesn't even show up. That's how small the number is. Oh, they've just done no capex. It's a business that's done no capex. Um, that is so hilarious. Or is it so small that it's a rounding error?

32:29 I This is news to me. I'm finding this out live. It's either they've done no capex at all. Wow, that is so ridiculous. Anyways, uh that and then another cool thing about the business is they have really low stockbased compensation. So, you know, for most like softwareish businesses, this would be drastically higher. $200 million of stock stockbased comp on $4.4 billion of cash from operating activities super super low. So, fundamentally the business absolutely fantastic valuation is very attractive and moise I think we hammered it in throughout the entirety of this video of just how phenomenal the business is, right? And so, at long last, to kind of finish off the video here, a little bit of valuation work. I have put in a unbelievably conservative 30% revenue kager for the next five years. If you were to truthfully ask me, I don't see a reason why this company doesn't do 40 50 60% revenue kager for many many years to come. As I outlined, the bullcase of the business is that they just keep getting into all these different categories and they scale really fast. What I am worried about though is they're not able to to scale these different categories as fast. And uh e-commerce is kind of an example on this. They've been talking about that for years and then they launched it three months ago. uh sorry, three quarters ago and it's been a little bit slow. Um that's probably the only like bare case is that the gaming business slow down slows down to like 20 30% growth and the other categories don't scale as fast. Only sort of barecase on the business but nonetheless you still have uh you know optionality for over the next decade obviously they're going to be scaling really really fast but over the next 5 years like yeah it might be just e-commerce that scales and the other categories are slow slower.

33:55 Nonetheless, I do think 30% is like a a pretty fair revenue growth assumption here, right? And then I said 3% buyback, which I also think is really really conservative. As I just showed you a second ago, um the business has no capex. So all their free cash flow essentially just flows right over to uh buybacks and shareholder capital returns, right? So I would imagine that's that's kind of how they spend the majority of their cash. And so this is this is kind of your outcome, right?

34:18 Again, I'm saying like basically no margin expansion over the next 5 years was also bearish. trading at the exact same multiple the business is currently trading at, you'd still get a 35% annual return. This would be a $2,300 stock 5 years out. Multiple expands a little bit. You're looking at higher return. Multiple detracts a little bit. You're looking at a slightly worse return. No matter how you flip it, you're going to be outperforming. Not financial advice, but assuming these numbers, the stock will be outperforming the the broader market by, you know, a factor of two, if not more than that. And once again, these are probably conservative numbers.

34:49 I would imagine the revenue kers much higher than this. Um, and like you're not buying at an expensive multiple. You're buying it at 44 times earnings. For a business currently, uh, generating 70% revenue growth, probably continues on that pathway. Maybe slows down ever so slightly, but like even if it's, you know, 44 times earnings for 30% revenue growth, not that bad. Even if it's 20% revenue growth, which I can't possibly imagine happening, still not that bad, right? So, that's the reality of it. And so, that finally leaves me with one last thing to cover before we leave the video. Why am I not buying slash I already have a position. It's like 1.7%.

35:21 By the way, link for this uh over on Blossom. If you watch this video all the way through, the least you could do is just click the Blossom link. Sends a great message to one of our sponsors on the channel here. Just click it. Completely free. Go over there, check out the portfolio. And so, I do have a unbelievably small AppLin position. I'm not in a position where I'm willing to sell any of these other holdings. I was recommended to sell Adobe to put it into AppLin. You can't possibly be serious. I do question whether or not I'm too stubborn on that one. Anyways, besides the scope of today's video, I have some cash that I can allocate towards this, but I really don't have the heart to possibly sell out of any of my other holdings uh to put into AppLan. I did float the idea of FICO. That's perhaps the one that I'm least attached to. Um I possibly floated the idea of Zeta.

36:03 Nonetheless, that's a company that's just executing across the board. I mean, they're also growing 50%. I have no reason to sell that business. It's executing perfectly fine. And and I can't imagine having different shareholder returns between Zeta and Apploven. both advertisingish companies. I'm talking about Zeta as being advertising. So, I I can't possibly in good faith sell Zeta. Adobe's out of the question. Uber's out of the question. ASML is executing as well, out of the question. So, I'm really only left with possibly selling FICO to put into AppLin, which uh I'm not necessarily against. I do think the business is undervalued, but again, for the simply the the growth relative to the valuation, I think they're both around the same valuation, but AppLin is growing twice as fast at at some point, right? Like that needs to be factored in. So, just something I'm thinking about. I'm probably going to continue just adding with incremental cash that comes in. Bit unfortunate, but what can you do? Again, if you would like to click the Blossom link or the fiscal link, or matter of fact, if you'd like to join the Patreon and come hang out with me and form to other investors, you can maybe help me out with uh adding to my apploving position just a tad bit.

36:59 Thank you very much for watching all the way through. A little running joke that I also have here on the channel is I ask you guys to comment pineapple if you watch the video all the way through just to kind of poke fun in the comment section down below. Thank you very much for watching and have a great