First is the recent short seller reports about App conducting fraud in their Ad business. I am not an expert in Ad business, but after reading their repors, here a few factors that you need to make a Bull or Bear case
- They claim APP force users to install other games on their device in order to increase its revenue --- My take is that this is a common practice in almost all mobile app games. It's not good, but App is certainly not the only one. Again, I dont know this industry well enough so you should decide
- They claim APP violates Meta and Google Andriod policy, and even steal Meta's Ad revenue -- For this, I am almost certain this is false. APP is the #1 mobile game ad provider in industry. If there were fraud, Meta and Google would have gone after them long ago.
- They claim APP inacurately counts the user click and inflates revenue --- Looking at customer spend (ie, advertiser spend) on APP, the growth has been expoenential, so, I am on the fence about this claim. I mean, Advertisers need to see ROI on their ads on APP platform in order to continue to spend. If APP engages in click fraud, the ROI for advertisers won't be that good.
But the second issue, bigger and unrelated to short seller's report, would be economy. If Economy turns negative, Ad business would be first to be impacted. I actually think seirous investors may worry more about this than those short seller reports. If you believe economy will maintain the growth in 2025, APP stock price right now is almost exact 1 PEG (PE over growth), which is reasonable. But if you think economy will turn south, best to avoid APP as their growth will be impacted significantly in a downturn.
