That's sharp framing. Too often I see financial analyses that ignore the product reality.
META for sure has very strong advertising model. Pinterest has theoretically promising one (discovery implies traffic closer to the bottom of the funnel), but seems they struggle to make it work properly.
I would add that strong model sometimes also causes too much optimism. I often hear bull cases for META based on "AI will improve ads efficiency!", but they again ignore the product reality: efficiency can't be milked indefinitely and META will inevitably face diminishing returns here.
Thanks for the thoughtful comment and for reading! I completely agree that financial analysis without a grounding in product reality is how value traps are born.
Regarding Pinterest, $PINS, I actually shared that "theoretically promising" outlook for a while. On paper, a platform built on discovery and intent should be an advertiser's dream. But as I did more work on the actual execution—specifically seeing that "Value Trap" door swing open in the Q4 results—it became clear that the bridge between "promising model" and "working model" is much wider than it appears.
On the Meta side, you make a great point about AI and the law of diminishing returns. Efficiency gains can't be squeezed indefinitely. However, my core thesis is that the Meta Family of Apps has become such a dominant, gravity-defying ecosystem that it remains a "must-buy" for any serious advertiser.
Even if the AI efficiency curve eventually flattens, the sheer scale of the attention they aggregate makes the platform's position incredibly durable, regardless of the specific initiatives coming out of corporate.
Appreciate you engaging with the Pokémon Theory! 🤝✨
Agree on the dominant META position, and their business overall is exceptional; my scepticizm was about revenue per user as a lever for growth in lazy DCF models.
I will definitely check your posts on $PINS, thanks!
Any thoughts on where Unity sits? Think we all know it aint the same level yet as an AppLovin (and I get theres some fundamental differences) but curious if any 2c take? Thanks for the write up Simeon! Largely agree on the ranking.
Honest answer is I don't have a differentiated view on Unity haha, which is why I haven't written anything on it. AppLovin blew past Unity years ago on execution, and rather than dig into what Unity was doing wrong, I've chosen to focus on what AppLovin is doing right.
It's not a hard rule for me, but I often do not think it's worth studying the #2 player when the #1 player is strong enough and reasonably priced. As I write this on June 13th, AppLovin at $497 is trading around 23x 2027 consensus GAAP EPS. Unity is closer to 43x. For that reason alone, I wouldn't even start looking at Unity unless it sold off a lot.
Are you long Unity? I'm curious what your thesis is, so let me know.
As always, thanks for reading and subscribing Mike. I really do appreciate it.
If $RDDT can't pivot towards video advertising, probably they won't be able to achieve such high margins over the long term, at least that's what I'm getting from your article. Sounds viable. If video advertising remains the go to that is, which it probably will.
What I don't 100% get is why you see AppLovin as such a good platform. I would be afraid that Meta and or Alphabet pivot more and more towards AdTech and start eating AppLovin's lunch. I do have to say though. I don't know if they have the incentive to do so.
That's sharp framing. Too often I see financial analyses that ignore the product reality.
META for sure has very strong advertising model. Pinterest has theoretically promising one (discovery implies traffic closer to the bottom of the funnel), but seems they struggle to make it work properly.
I would add that strong model sometimes also causes too much optimism. I often hear bull cases for META based on "AI will improve ads efficiency!", but they again ignore the product reality: efficiency can't be milked indefinitely and META will inevitably face diminishing returns here.
Thanks for the thoughtful comment and for reading! I completely agree that financial analysis without a grounding in product reality is how value traps are born.
Regarding Pinterest, $PINS, I actually shared that "theoretically promising" outlook for a while. On paper, a platform built on discovery and intent should be an advertiser's dream. But as I did more work on the actual execution—specifically seeing that "Value Trap" door swing open in the Q4 results—it became clear that the bridge between "promising model" and "working model" is much wider than it appears.
On the Meta side, you make a great point about AI and the law of diminishing returns. Efficiency gains can't be squeezed indefinitely. However, my core thesis is that the Meta Family of Apps has become such a dominant, gravity-defying ecosystem that it remains a "must-buy" for any serious advertiser.
Even if the AI efficiency curve eventually flattens, the sheer scale of the attention they aggregate makes the platform's position incredibly durable, regardless of the specific initiatives coming out of corporate.
Appreciate you engaging with the Pokémon Theory! 🤝✨
Agree on the dominant META position, and their business overall is exceptional; my scepticizm was about revenue per user as a lever for growth in lazy DCF models.
I will definitely check your posts on $PINS, thanks!
Any thoughts on where Unity sits? Think we all know it aint the same level yet as an AppLovin (and I get theres some fundamental differences) but curious if any 2c take? Thanks for the write up Simeon! Largely agree on the ranking.
Honest answer is I don't have a differentiated view on Unity haha, which is why I haven't written anything on it. AppLovin blew past Unity years ago on execution, and rather than dig into what Unity was doing wrong, I've chosen to focus on what AppLovin is doing right.
It's not a hard rule for me, but I often do not think it's worth studying the #2 player when the #1 player is strong enough and reasonably priced. As I write this on June 13th, AppLovin at $497 is trading around 23x 2027 consensus GAAP EPS. Unity is closer to 43x. For that reason alone, I wouldn't even start looking at Unity unless it sold off a lot.
Are you long Unity? I'm curious what your thesis is, so let me know.
As always, thanks for reading and subscribing Mike. I really do appreciate it.
If $RDDT can't pivot towards video advertising, probably they won't be able to achieve such high margins over the long term, at least that's what I'm getting from your article. Sounds viable. If video advertising remains the go to that is, which it probably will.
What I don't 100% get is why you see AppLovin as such a good platform. I would be afraid that Meta and or Alphabet pivot more and more towards AdTech and start eating AppLovin's lunch. I do have to say though. I don't know if they have the incentive to do so.
Thanks for your article!