Interview, Fireside Chat
AppLovin CEO: Why Founders Shouldn't Angel Invest & Why the Best Don't Need Mentorship
- AppLovin's 2023 total compensation for CEO Adam Faroge was $83 million, ranking him the eighth highest-paid CEO in America, driven by stock-based compensation tied to specific performance thresholds.
- To receive compensation, the company's stock price had to clear a minimum threshold of roughly $9 and continue rising toward $38–$40 before tiered payouts initiated.
- Faroge's comp structure required the stock to reach the IPO price of $80 to unlock the full value, aligning his incentives directly with long-term shareholder recovery.
- In 2022, AppLovin's market cap fell 92%, dropping from approximately $40 billion to under $4 billion.
- The company undertook a massive strategic pivot in 2022 to rebuild its core recommendation engine from the ground up, replacing an older machine learning system with cutting-edge AI models.
- Faroge initiated a reduction of the workforce by 40–50% in 2024 to eliminate organizational bloat and accelerate the adoption of AI-driven automation.
- The reduction targeted process-heavy roles, including a reduction of the HR function from 70–80 people to 15, aiming to shift the company from "managers" to "doers."
- AppLovin eliminated C-level roles such as Chief Marketing Officer (CMO) and Chief People Officer (CPO) to streamline decision-making and remove management layers.
- The company now operates with a core engineering team of approximately 400 people, generating an EBITDA per employee of roughly $10 million.
- Faroge reports that 80–90% of the code written by AppLovin's engineers is now generated with the assistance of AI agents, though the company prioritizes value creation over token usage volume.
- To manage stock-based compensation (SBC) dilution, AppLovin restricted equity grants to the top 10–15% of the workforce, paying the remainder in cash.
- The company executed a successful share buyback program in 2022, utilizing cash flow and debt to purchase shares from insiders and investors, creating an estimated $50 billion in value for remaining shareholders.
- AppLovin generated a run rate of $11 billion in advertising spend a year prior to the interview, with revenue growth recently reaching triple digits year-over-year.
- The company achieved an EBITDA margin of approximately 84%, a metric Faroge attributes to the high efficiency of their performance-based advertising model.
- Faroge admits to historically neglecting his personal life, noting he was "never really present" with his children and prioritized work to the point of health deterioration.
- In 2022, Faroge implemented a health and lifestyle reset, including learning to surf and scheduling dedicated 10-minute blocks for family time to counteract burnout.
- He overcame his fear of public speaking to resume investor relations activities and conference attendance after the 2022 stock crash, recognizing the need to explain the business model proactively.
- Short seller attacks following the stock's 250% rise over 2.5 years were viewed by Faroge as an opportunity to force the company to improve external marketing and transparency.
- Faroge states his primary motivation is the fear of "blow up" and the drive to win, rather than the accumulation of personal wealth, which he considers a baseline necessity rather than a motivator.
- He believes that "founder mode" and heavy delegation are situational; delegation is optimal for large teams of A-players, while founders must regain control to reverse bloat.
- AppLovin's organizational structure merges product management into engineering, removing a traditional product team to ensure engineers possess full product ownership and accountability.
- Faroge declined to attend the 2022–2023 conferences initially to focus on internal turnaround but resumed them in 2023–2024 to challenge himself and educate the market.
- He does not believe a social network is a requirement for AppLovin to reach a trillion-dollar valuation, which he estimates could be achieved with $30–$35 billion in annual cash flow.
- Potential paths to a $1 trillion valuation include expanding current gaming monetization and bringing performance advertising to Connected TV (CTV).
- Faroge argues that token budgeting is a flawed metric for AI investment; companies should instead measure the revenue generated by AI usage against the cost of tokens.
- He predicts a wave of further tech layoffs as companies realize that retaining non-AI-native talent is a barrier to efficiency and innovation.
- Faroge stepped down as Chairman of the Board to allow Craig Billings (CEO of Wynn) to take the role, believing it was a better use of his time to focus on daily operations.
- He does not personally invest in other companies, reasoning that any time spent diversifying assets detracts from the sole focus required to maximize AppLovin's value.
- AppLovin's buyback strategy involved negotiating directly with specific shareholders to absorb selling pressure rather than buying shares on the open market.
- Faroge describes his management style as aggressive, prioritizing direct communication over kindness to avoid wasting time, though he acknowledges this can alienate some individuals.
- He believes the future of AI will lead to recursive improvements in R&D and product creation, enabling humans to launch armies of agents to accelerate output.