AppLovin to Sell Its Gaming Division for $900M to Strengthen Its Ad Tech Focus
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US-based mobile gaming and ad tech company AppLovin (NASDAQ: APP) has signed a term sheet to sell its entire mobile gaming division for $900m to an undisclosed private company, according to an SEC filing.
The consideration will be $900m, paid in $500m in cash and $400m in common shares of the acquirer. To finance the cash portion, the acquirer will borrow up to $250m, and if it fails to secure such funding, AppLovin will provide financing through promissory notes.
The mobile gaming division comprises 10 studios, including Machine Zone, PeopleFun, Magic Tavern, Lion Studios, Belka, Athena, Clipwire, Leyi, ZenLife, and Zero Gravity.
Deal multiples (based on 2024 Apps Segment Financials) are shown in the table below, calculated using adjusted EBITDA, which excludes stock-based compensation and restructuring costs and may exclude some central group costs.
FINANCIALS
For the past five years, AppLovin has shifted from a mobile gaming-driven business to an ad tech-first company, significantly changing its revenue structure:
In 2020, apps contributed 86% of revenue ($1.2B) and 65% of EBITDA ($224m).
In 2024, advertising accounted for 68% of revenue ($3.2B) and nearly 90% of EBITDA ($2.4B), with a 76% EBITDA margin.
As part of its ad tech expansion strategy, AppLovin pursued organic growth and acquisitions to strengthen its position in mobile advertising. The company acquired Max in Sep’18 and MoPub Jan’22 to increase its control over mobile ad mediation. In 2022, AppLovin made a $17.5B bid to acquire Unity, aiming to establish itself as a dominant force in ad tech. However, the bid was ultimately rejected, with Unity opting to merge with ironSource instead.
Meanwhile, AppLovin’s gaming segment remained essentially unchanged. Unlike its major gaming competitors, which continued investing in content development and acquisitions, AppLovin did not pursue further gaming M&A, with Machine Zone (May’20) being its last major gaming acquisition.
The gaming division also faced mounting challenges, including rising competition, post-IDFA user acquisition difficulties, and a volatile revenue performance. Its EBITDA margin also struggled to be optimized and exceeded 20%, peaking at 19% in 2024, primarily due to cost-cutting in user acquisition. Additionally, there is evidence of potential studio closures, as AppLovin had 20 gaming studios in its Q1’22 report but currently lists only 10 studios on its website.
STRATEGIC RATIONALE
The decision to divest its gaming division aligns with AppLovin’s long-term strategic focus on ad tech, a business that has consistently delivered higher growth and stable margins than gaming.
In its Q1’22 report, AppLovin stated that it would treat its gaming business as a separate financial unit rather than an integrated asset. While this did not indicate an immediate decision to sell, it revealed that top management was already evaluating the gaming division’s long-term role within the company. This separation allowed AppLovin to better assess its gaming operations’ financial impact while ensuring that ad tech remained its primary growth driver.
Over time, it became increasingly evident that ad tech provided a more sustainable revenue model, with higher margins and fewer operational risks than mobile gaming, which faced rising competition and growing user acquisition costs in a post-IDFA environment.
CONCLUSION
Divesting its gaming assets is a logical next step for AppLovin. This will allow the company to concentrate fully on its high-margin ad tech business, which continues to show solid growth and fewer forecasted challenges.
With this transaction, AppLovin is completing its transformation into a fully ad tech-focused company, offloading its gaming operations while maintaining a stake in the acquirer, ensuring it retains some exposure to the gaming industry’s future performance.
Notable Transactions
MERGERS & ACQUISITIONS🤝
UPD: Sweden-based gaming holding Modern Times Group MTG AB (STO: MTG-B) has closed the acquisition of Israel-based multiplatform games developer Plarium from Aristocrat (AX: ALL). The deal’s total value was equal to $820m, including all earnouts. Please read more details about the deal in our material.
US-based entertainment company Skybound Entertainment has acquired US-based mobile media and technology company Maple Media for an undisclosed sum. The acquisition will support Skybound’s expansion, enhance its technological capabilities, support cross-platform monetization strategy, and grow its subscriber base while leveraging Maple Media’s expertise in mobile app operations. Maple Media has generated over 600 million lifetime downloads across various platforms.
UK-based PC & Console game developer JUMPSHIP has been reacquired by its founder, Dino Patti, for an undisclosed sum. The studio, known for the Somerville title, was acquired by Thunderful Group (ST: THUNDR) in 2022 for $35.4m but faced layoffs in 2024. Additionally, Dino Patti has invested an undisclosed amount in Scotland-based game developer Sad Owl Studios. Through these deals, Patti plans to reboot Jumpship.
UK-based PC & Console game developer Kepler Interactive has acquired France-based game developer Tactical Adventures for an undisclosed sum. Tactical Adventures will become part of Kepler’s game group and focus entirely on Solasta II, a tactical RPG set for Early Access in 2025.
VENTURE FINANCING 💰
Sweden-based PC & Console game developer DEAD ASTRONAUTS has raised $4.1m (€4m) in a Seed funding round led by Behold Ventures. Founded by four industry veterans from Massive Entertainment, Ubisoft, and Epic Games, the studio is currently developing VEIL, an open-world action-adventure title powered by Unreal Engine 5.
UK-based cloud platform developer PHȲND has raised $10m in a Seed funding round led by Wellington Management, with participation from Bessemer Venture Partners, Connecticut Innovations, and other investors. The funds will support the development of the company’s subscription-free smart TV cloud gaming platform, with a beta launch planned for 2025. The platform aims to offer a subscription-free opportunity to play games on smart TVs and other connected devices.
US-based game developer Hydratac has raised $3m in a funding round led by 1AM Gaming and HGM Fund. The funds will support the development of a realistic shooter title, set for consumer release in late 2025 for PC. A 1AM Gaming Venture Partner Dan Bunting has joined the company’s board of directors. The company was founded by 1AM Gaming Venture Co-founder and Partner Louis Gresham.
Saudi Arabia-based mobile game developer Spoilz has raised an undisclosed amount in an investment round led by Impact46. The funds will support new IP development, enhance monetization, and establish new partnerships. This funding is part of the National Development Fund initiative to boost Saudi Arabia’s gaming industry. Spoilz previously raised $690k in a pre-Seed round in Apr’22.
PUBLIC OFFERINGS 📈
Sweden-based gaming giant Embracer Group (STO: EMBRAC B) has divested France-based board game publisher Asmodee. Asmodee became a separate entity trading on NASDAQ Stockholm via Class B shares. The amount raised during the IPO remains undisclosed, but Embracer recently contributed $420m in Asmodee equity in Nov’24.
EARNINGS REPORTS 🧾
We continue our earnings reports section, providing a concise overview of the latest financial results from gaming companies (Report Date vs. 16-Feb).
However, the question is, where is the end of that?
Most of the gaming publishers are already complaining about the current monopoly.
AppLovin Empire: Monopoly in Mobile Gaming?
Wanted to share Fernando’s take with you here:
