Six months ago, mobile ad tech business AppLovin overtook The Trade Desk in market cap, knocking the demand-side platform (DSP) from its perch at the top of the ad tech stock market; a position it has enjoyed since 2017.
AppLovin’s rise to the top can be traced back to the company’s Q3 2024 earnings results back in November, when its quarterly revenues smashed analyst expectations at $1.2 billion. And the watchword on Wall Street was AI, which helped drive monetisation for AppLovin’s network of mobile advertisers via its revamped ad optimisation solution, Axon 2.
“We’ve seen very few, only a handful of software implementations that are compelling at scale inside what we’re calling these AI technologies, and we’re one of those,” AppLovin CEO Adam Foroughi told investors. The company’s stock soared at the results, and by the end of the month, its share price was up almost 100 percent.
Since then the firm has jettisoned its mobile games division to focus on its ad tech business, and the company’s market cap has climbed almost 300 percent over the last year – despite hitting a bump in February when accusations of fraud wiped $20 billion from AppLovin’s market value.
Trading places
At the same time, ad tech giant The Trade Desk was running into problems of its own. In its Q4 2024 earnings, the DSP missed revenue expectations for the first time since going public in 2016 – a track record that boosted the company’s market cap to $58 billion at the end of 2024, as the business capitalised on the shift of ad dollars towards CTV and retail media.
CEO Jeff Green put the fourth-quarter miss down to “a series of small execution missteps”, as well as slower progress than the company expected for the rollout of its new media buying platform, Kokai. The ad tech stock fell by 30 percent following the results.
The Trade Desk’s shares recovered slightly following the company’s Q1 earnings earlier this month, which showed progress on Kokai adoption, but still only sits around half that of its stock price six months ago. The results did however give a bump to other ad tech stocks, adding fuel to a post-tariff-panic recovery in the wider market.
“This is a reflection of a more conciliatory or constructive approach to tariffs and non-trade barriers than were originally announced on 2nd April,” comments Mark Giarelli, Equity Analyst at Morningstar, a financial services firm.
Taking stock
But taking AppLovin’s $125 billion market cap out of the equation, the landscape looks quite different. The combined market value of the ten remaining largest ad tech stocks (excluding the likes of Google, Microsoft and Amazon) now sits around the same total as 2023, and the pack has lost a combined $20 billion since 2024.
And while stocks of all stripes were hit by the initial tariff announcement, Mark Giarelli notes that ad tech stocks are particularly susceptible to economic uncertainty due to the potential impact on advertising budgets.
“The ad tech declines are largely driven by macro uncertainty and potential retrenchment in advertising budgets,” he says. “The advertising industry is notoriously high beta, meaning that it fluctuates with overall economic activity. If you see people repricing growth expectations due to tariff uncertainty, you will see a repricing of advertising budgets to the downside which weighs on advertising firms’ valuations.”
AppLovin on the other hand has proven “pretty resilient” in the face of economic turbulence, according to Giarelli, due to the performance-based model of the mobile advertising business. The company is paid on user conversions or monetisable events post-exposure, enabling midsize brands to tie advertising activity directly to sales on the platform. The Trade Desk on the other hand charges a flat 20 percent take rate on all ad dollars spent through the DSP, which could leave the business more exposed.
There’s always a bigger fish
That exposure to ad budgets is particularly pronounced among the smaller vendors, such as DoubleVerify, Criteo, LiveRamp and Magnite, who are jostling for position in third place behind AppLovin and The Trade Desk. Recently however, the fates of the sell-side platforms (SSP) have been tied to an even bigger giant, with Google being found guilty of monopolising the ad server and SSP markets in a US antitrust ruling last month.
With the Department of Justice (DOJ) pushing for the forced divestment of Google’s AdX, rival SSPs have seen considerable gains on the stock market. Shares in Magnite and Pubmatic have both jumped since the ruling, climbing 44 and 27 percent, respectively.
But as long as the likes of Google, Meta and Amazon operate walled gardens, that tension between Big Tech and independent ad tech will persist, according to Giarelli. “I dont believe independent ad tech will ever have access to this inventory, because the walled gardens want to have complete control over their advertising supply chains and the very valuable consumer behaviour data.”
However, Giarelli maintains that the ad tech firms are well positioned to weather the economic and regulatory uncertainty, given the “integral role” they play as tech enablers in the increasingly data-driven offerings of advertising holding companies, which are themselves “at low risk of disintermediation due to their full-service offerings and geographic scale.”
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