Shares of AppLovin (NASDAQ:APP) fell as much as 7% during the session after industry feedback pointed to softer e-commerce spending trends and signs of customer churn during the first quarter.
The decline followed comments from e-commerce advertisers highlighting scaling difficulties on the platform, with returns on investment tending to weaken as marketing budgets grow beyond initial levels. According to industry checks from Cleveland Research, the company has yet to generate enough new client activity to offset customer churn observed earlier in the year.
Feedback from e-commerce brands suggests that scaling campaigns has been a recurring challenge, limiting growth opportunities. Creative production constraints have also continued to act as a bottleneck for both existing advertisers and potential new users, restraining media spending or preventing some companies from adopting the platform.
However, generative artificial intelligence tools for ad creation are increasingly viewed as a potential solution that could reduce these barriers. Such tools may help new advertisers onboard more easily while also improving campaign performance and scalability. Industry feedback on AppLovin’s internally developed creative tools has been positive, with partners reporting improved output quality and progress in addressing these issues. Some partners are also investing in third-party tools to help ease creative limitations.
Within the gaming segment, AppLovin is still regarded as holding a strong competitive position. Meta Platforms is reportedly seeking to expand its presence in the mobile advertising market in an effort to capture more user acquisition spending, while CloudX has begun initial outreach to potential clients.
Despite these developments, many industry participants believe AppLovin is unlikely to lose meaningful market share due to the strength of its Max mediation platform, which offers enhanced data and insights and helps keep advertisers operating within the company’s ecosystem.
The company’s ability to retain gaming clients through its mediation services may provide a degree of stability as it works through challenges in its e-commerce advertising business.