Muddy Waters Goes Short on AppLovin (NASDAQ: APP): 'Just Another Scammy AdTech Company'
On 27 March 2025, Muddy Waters Research published a short report on AppLovin Corporation (NASDAQ: APP), titled "AppLovin: Deep Data Analysis Shows APP is Just Another Scammy AdTech Company." The report alleges that roughly half of AppLovin's e-commerce conversions are mere retargeting, that true incrementality is low, and that the company's business is built on systematically violating the terms of service (TOS) of the third-party platforms it depends on.
Epistemic note: The publication of the Muddy Waters report is a fact. The claims inside it are allegations made by a short seller with a disclosed financial interest — they have not been independently verified by The Forensic Ledger, have not been adjudicated, and may be disputed by AppLovin. This article summarizes the published report with citation; it does not adopt its conclusions as established fact.
The core allegation: low incrementality, high retargeting
Muddy Waters' central quantitative claim is a web-traffic analysis of 37 million unique users across five advertisers in Q1 2025, which the firm says leads it to estimate that ~52% of APP's e-commerce conversions are retargeting and that incrementality is only ~25%–35%. The implication, per Muddy Waters: a large share of the revenue AppLovin claims credit for is sales that would have happened anyway — and AppLovin's advertising clients are likely sensitive to that true incrementality, which the firm argues should frustrate AppLovin's growth plans.
The report states Muddy Waters has already observed e-commerce client churn of ~23% in Q1.
The TOS-violation thesis: 'Persistent Identity Graphs (PIGs)'
The report's more serious allegation is that AppLovin's economics rest on impermissible data extraction. According to Muddy Waters, code evidence shows AppLovin is collecting and structuring user IDs from its key platform partners — named as Meta, Snap, TikTok, Reddit, Google, and others — which the firm says appears to be a major violation of those platforms' terms of service.
The report describes the mechanism in detail:
- AppLovin allegedly extracts proprietary IDs from those platforms and combines the misappropriated data to create artificial, persistent user IDs ("user graphs") — described as an iteration of old-school fingerprinting to target ads without user consent.
- These user graphs are augmented by Shopify events (items added to carts, checkout initiation), which Muddy Waters says gives AppLovin a "black edge" in ad auctions.
- AppLovin then allegedly uses these "Persistent Identity Graphs" ("PIGs") to repeatedly target and retarget high-value users, serving ads won at those auctions and claiming revenue from highly valuable last-click attributions.
- The subterfuge, the firm says, occurs outside the platforms' servers, making it difficult to detect.
The deplatforming risk
Muddy Waters argues that because AppLovin appears to be violating the TOS of the platforms it depends on, the company could be deplatformed — drawing an explicit comparison to Cheetah Mobile, which was removed from app stores after similar data practices surfaced. The report adds a competitive counterpoint: even if AppLovin is not deplatformed, because "there is little technology involved" in the techniques it describes, numerous competitors could logically start copying them.
What would falsify this thesis
Falsification would look like: the ~52% retargeting / ~25–35% incrementality estimates being shown to be materially overstated by independent measurement; the alleged ID-extraction and user-graph construction being shown to comply with platform TOS or to not occur; the platforms confirming AppLovin is in good standing; and the ~23% Q1 churn figure being reconciled with normal client attrition. Any company response or refutation should be weighed alongside the report.
Muddy Waters' disclosed position
Muddy Waters disclosed that, as of publication, it was short the securities of, or derivatives linked to, AppLovin — and that upon publication it intended to begin covering a substantial majority, possibly all, of its short positions. The firm states this risk reduction is not a reflection of reduced conviction, but prudent risk management for a fiduciary of investors' capital, and that it may be net short, net long, or flat after publication.
Sources
- Muddy Waters Research — MW is Short APP (report page)
- Muddy Waters Research — Full report PDF (March 27, 2025)
⚖️ Editorial Disclaimer
This article is based on, and summarizes with citation, a research report already published by Muddy Waters Research on its own website (report page · full PDF). The Forensic Ledger is an independent newsroom and structured archive; it is not the author of the underlying allegations and does not adopt them as established fact.
All claims, figures, and characterizations attributed to the report — including the ~52% retargeting estimate, the ~25–35% incrementality estimate, the ~23% Q1 churn figure, the 37-million-user web-traffic analysis, the alleged extraction of IDs from Meta/Snap/TikTok/Reddit/Google, the "Persistent Identity Graphs (PIGs)" mechanism, the Shopify-events "black edge" claim, the Cheetah Mobile deplatforming comparison, and any characterization of AppLovin's technology, compliance, or business model — are allegations made by a third party (Muddy Waters Research) that disclosed a short financial position in AppLovin at the time of publication. They have not been independently verified by The Forensic Ledger, have not been adjudicated by any court or regulator, and may be denied, disputed, or refuted by AppLovin Corporation.
This article is published for informational and journalistic purposes only — to report on the existence and contents of a publicly available research document. It is not investment advice, not a recommendation to buy, sell, or hold any security, and not an endorsement of the report's conclusions. Nothing herein should be construed as a statement of fact about AppLovin's operations, compliance, technology, or management. Readers should consult the original source, any company response, and their own due diligence before drawing conclusions.
To the fullest extent permitted by law, The Forensic Ledger disclaims all liability arising from reliance on this summary. Any reproduction of the report's substance is attributed to Muddy Waters Research; readers are directed to the original publication for the authoritative text.
Original reporting by Muddy Waters Research. This article is desk analysis prepared by The Forensic Ledger from publicly available sources, summarized with citation to the original.
Not investment advice. This is original reporting and analysis prepared by The Forensic Ledger from publicly available data. Nothing here is a recommendation to buy, sell, or hold any security. Always consult the original source and a licensed professional. See our full disclaimer and source-citation policy.
