2 days Ago By Thomas Claburn
AppLovin, which provides a way for software developers to make money by embedding ads in their mobile apps, has been sued for a third time this month – after short-seller reports accused the biz of fraud and deceptive revenue practices. The two US federal district lawsuits [PDF] filed on Monday in northern California, along with another complaint [PDF] filed on March 5, 2025, claim the advertising network has misled investors by making false statements about its sales. The litigation cites critical reports published last month by Culper Research and Fuzzy Panda Research, both of which disclosed short positions in AppLovin stock - meaning they stand to profit if the share price falls.
As well as slinging ads within apps, AppLovin also owns a mobile gaming arm – a collection of ten studios – that it announced in mid-February it will offload for $900 million to double down on digital advertising. The Culper report [PDF] claimed, at the end of February, "AppLovin’s recent success in mobile gaming stems from the systematic exploitation of app permissions that enable advertisements themselves to force-feed silent, backdoor app installations directly onto users’ phones, with just a single click – an event that is often inadvertent thanks to the company’s notorious UX gimmicks." Essentially, AppLovin is accused of tricking users into installing apps, often without their clear consent.
Companies advertise their apps in other applications via AppLovin – tapping on the ad starts the install process – and pay per installation. When a mobile device user touches an ad that installs an app, that event generates revenue for AppLovin. So being able to force advertisers' apps onto devices, through some form of user-interface trick, would be lucrative – if that's occurring as claimed.
The Culper report also contends that the ad biz abuses advertisers by taking unwarranted credit for ad sales through its MAX ad mediation platform. Advertisers pay app makers when app users engage with ads – such as clicking or making a purchase. These ads may be presented in a convoluted process that involves multiple intermediaries.
AppLovin, it's claimed, is cheating by violating platform rules to gather ad identifiers that it can use to claim credit for successful ads. The Fuzzy Panda Research report makes similar allegations and contends that AppLovin appears to be illegally targeting children with ads. "Our tests on children’s devices uncovered AppLovin serving sex ads to 7-12-year-old girls," it's claimed.
AppLovin CEO Adam Foroughi responded to those allegations when those reports were published, arguing that "a few nefarious short-sellers are making false and misleading claims aimed at undermining our success, and driving down our stock price for their own financial gain, rather than acknowledging the sophisticated AI models our team has built to enhance advertising for our partners." On Thursday, a third short seller, Muddy Waters Research, piled on with its own report [PDF]. "Code evidences that [AppLovin] is collecting and structuring user IDs from its key platform partners, which appears to be a major violation of the platforms’ terms of service (TOS)," the firm said in a note on its website.
"[AppLovin] therefore, in our opinion, could be deplatformed, similar to Cheetah Mobile." That led to a 20 percent drop in the outfit's stock price, which has since recovered about four percent. Foroughi again responded in a blog post , arguing that the biz's advertising pixel – used to track and attribute online ads – is no different from those used by Google or Facebook.
"Our business is technical, and we get it—it’s not always easy to understand," said Foroughi. "It’s also incredibly hard for some who don’t understand this technology to fathom that we are building the world’s best advertising AI model, so they need a simple narrative that we’re violating policies in order to comprehend our success. This complexity leaves room for short reports to stir fear and doubt.
To investors, I’d say: Dig deeper. Given the AI tools available today, it’s easy to discredit a short report like this in minutes." On Friday, AppLovin said it had hired the law firm Quinn Emanuel Urquhart & Sullivan to look into trading activity following the short seller reports.
We are fully committed to vigorously defending the company, its operations, and its reputation from false narratives Asked about the lawsuits, an AppLovin spokesperson said, "As we have stated previously, we are fully committed to vigorously defending the company, its operations, and its reputation from false narratives, which includes the three pending lawsuits." Despite seeing its stock price increase from about $40 per share at the start of 2024 to about $350 by the end of 2024 – an increase of about 775 percent – company shares on Friday were trading around $270, roughly half what they were in mid-February just prior to the initial short seller reports. AppLovin has also been cutting staff.
Per its 2024 annual report , the firm had 1,563 employees, comprising 1,533 full-time and 30 part-time/intern employees, located in 17 countries, as of December 31, 2024. The year prior, it had 1,745 employees. Since August last year, the biz has laid off almost 400 people in California, amounting to about a quarter of its staff.
Just a week ago, on March 21, AppLovin laid off 97 people from its Palo Alto headquarters, as noted in the Golden State's WARN (Worker Adjustment and Retraining Notification) report. That's after letting go of 89 employees from the same office on January 15, another 120 on November 13, 2024, 58 more on October 15, 2024, 65 on October 3, 2024, and 61 on August 15, 2024. ®.
