All right, we are going to get started. Good afternoon, everyone, and thank you for joining us. I'm Maria Ripps, Internet Analyst here at Canaccord Genuity, and it's my pleasure to introduce Tim Vanderhook, Co-Founder and CEO of Viant, and Chris Vanderhook, Co-Founder and COO. Gentlemen, thank you so much for joining us today.
Thanks for having us.
Thanks for having us. Yeah.
Great. So, let's start with, with your Q2 results, which you, which you just reported earlier this week, and results came in pretty strong. Maybe just talk about sort of what's going on in the space, sort of what's happening with your platform, and maybe more broadly, what are some of the core strategic priorities for the management team over the next couple of years?
Yeah. I mean, more than just our last earnings call, we've had four quarters of greater than 20% growth, and I think there's been a consistent track record there that we've put up. One of the big tailwinds that we see in our business is connected TV. It continues to fuel the growth. We had over 40% growth in the quarter, this most recent quarter. It was 50% in the quarter prior to that, and we just see this as a long-term tailwind of money shifting out of linear television into connected TV. Another big area to call out, which almost doubled year-over-year, is streaming audio.
Right.
And that has been a consistent performer and growing more and more as a larger percentage of an advertiser's spend. So we think these tailwinds are sustainable long term, and we've got many years of growth to come.
Got it. So, earlier this week, you announced Viant AI, which is a rebranded suite of AI, AI solutions. Maybe talk about sort of... talk about that set of offerings and sort of tell us about what you're sort of hoping to unlock with this product.
Yeah. So our first one that we've previously launched was Bid Optimizer. This is sort of bid shading. Basically, we lower the prices of bids for customers, saving them probably around 50% on their bids. That's probably the biggest factor. It's really, really saving them a lot of money and really helping us as well.
One of the newest products that we're launching under Viant AI. We're gonna release it this quarter. We've re-released it internally to the team, but it is a chat application similar to the interface that consumers are now familiar with under ChatGPT. But it's a very simple product, but it does what reams of people did in about 60 seconds or under. And to describe what it is: you give it the advertiser name, the start date, and the end date, the budget that you're willing to spend, and the goal you're looking to achieve, and it automatically executes a media plan that should achieve those goals. So we're very excited about that. The feedback has been tremendously positive, and we'll be rolling it out this quarter.
Got it. Can we talk a little bit more about bid optimizing, Bid Optimizer 2.0 launch? I know you said sort of, some metrics that you are seeing are better than the prior version. Maybe talk about that and sort of, what is this product and sort of how is it going to impact your platform and sort of broader budget allocations?
Yeah. I'll start, add anything.
Yeah.
We released the first generation of an AI-powered bidding engine last June, and we saw tremendous results for customers. It was saving 35% off of their CPMs. That's the per unit pricing in advertising. It's an interesting take because our customers are saving 35% on the money that they were previously spending, and we have a value-based pricing model. We negotiate a contract term for a take rate with a customer of what they pay us to manage their ad spend, and in the savings of the 35%, we keep 20% of the savings, so it's a win-win for both parties. We recently re-rolled out generation two in the second quarter, and those savings went from 35% north of 50%.
And so it's not just driving more customers, it's like a flywheel effect of making the platform more efficient, their ad spend more efficient, but it's also increasing our margin as well. We see this continuing to play out into the future with future iterations as well.
To be clear on that, when we give customers lower pricing-
Mm-hmm
... they're getting their customer acquisition costs when they're trying to acquire new customers with their advertising, that advertising performance is increasing. So when customers get better performance, they're then also spending even more money on the platform. Their advertising budgets are heat-seeking, so they're gonna be choosing between their programmatic investments in Viant and, let's say, their investments in social or search. When they're getting better and better performance, they're gonna move that money over. So Bid Optimizer is just an incredible product. I would say, the other one that Tim didn't mention was not only has the savings gone up, but more customers have adopted the version 2.
Mm-hmm.
When you get more customers adopting, that's even more people getting better performance. And again, it is a premium product of ours. It does increase our contribution ex-TAC or our revenue.
Mm-hmm.
So it's just a win-win on both sides.
Got it. Maybe for the broader audience, talk about your monetization strategy here. Are you monetizing, this sort of set of-
Mm-hmm
... these products directly, or the plan is to just sort of that will help you bring more ad budgets onto-
Yeah
... the platform?
I think in the AI suite overall that we announced, so there's kind of four key areas that we're talking about here: the planning, the buying, the measurement, and the optimization. In the buying portion here, Bid Optimizer, yes, we are charging for that, as Tim mentioned. We will have other features. They're just gonna be part of the platform to help increase customer performance that we may not necessarily charge a premium for, but the reason why we will choose to not do that is we believe it will drive so much value that it's going to, again, increase performance and drive more spend in the platform. Other products that we have out there is our Viant Data Platform, a good example.
We do charge for that, but we have a product coming called Chat with Data.
Mm-hmm.
That, yes, is a premium product, but we're not gonna charge more for that. Really, we believe that if we can give the Viant Data Platform access to the traders in the DSP. That's gonna unlock a lot of insights. That's something we don't wanna slow down, and we're not gonna charge a premium for.
Yeah, customer adoption of the Viant Data Platform, you have to have the knowledge or skill set of writing SQL or Python. Chat with Data replaces that need and puts simple natural language on top of it. So we think that it will drive revenue just through usage of customer adoption.
Got it. And can you maybe expand a little bit more on Viant Data Platform, kind of what are some of the capabilities, and how does it help sort of your advertisers or partners sort of-
Yeah
- increase their ROI?
So the Viant Data Platform, this is all about getting customer first-party data. Well, what do we mean by that? That's the client CRM data, their sales data, any other marketing touchpoint data they have, they want to use that in their advertising. So we need to be able to connect to their data warehouse, wherever they have that. That could be Snowflake, it could be Google, it could be AWS. The Viant Data Platform does integrations with all these companies, making it really easy. They click a button in Snowflake, they can move the data into our Viant Data Platform. The problem with the Viant Data Platform is that it requires, you know, a data scientist to be able to query that data.
You know, "Hey, give me my most high-value customers in the last 30 days." They want to then build audiences off of that and create lookalikes off of those, and then port that into the DSP, and then target people just like that, get more high-value customers. That requires a data scientist who knows Python or SQL. But really, this is about we have to be able to grow the usage of that. Last year, 7 of our top 10 customers used the Viant Data Platform. They're our top 10 customer... in the top 10 because they get greater insights, and they run circles around their competitors because they have access to better data. We're trying to unlock more of that outside of our top 10 customers.
So if we can get that in the middle third of our customers, we think that they'll be able to, you know, spend a lot more and be in the top ten as well. Chat with Data is really aimed at that. So we have seen really good adoption, continued adoption. It's one of our fastest-growing products, the Viant Data Platform, and there isn't another competitor in our space that has anything like it.
Got it. So let's talk about channel mix next. Tim, you talked about sort of CTV growing nicely more recently. I think it was up 40% in Q2. What are some sort of drivers behind this momentum, and sort of how do you see this evolving over time?
Yeah, I mean, CTV, the driver is just the tailwind and shift of linear TV moving into streaming television and connected TV, as all of us, ourselves, as consumers, have likely done, and we see that just continuing to go. There's probably another $50 billion still transacted in linear TV, but the consumers are shifting quickly over to connected television. That's one big driver. The second big driver is large CTV apps that previously wouldn't allow programmatic platforms like ourselves to now connect and purchase the ad space on behalf of our advertisers. The biggest announcement there is Netflix that came into the market and is now really reducing a traditional approach of an ad sales force in favor for programmatic connections through DSPs like ourselves, so which is another one.
There's much more inventory being created because consumers are now there, spending their time there, and in the apps themselves, they're now forgoing traditional sales force for programmatic channels. And so this is why I say there's a dual force of growth there and why we think it's gonna continue for many years.
So let's talk about your Direct Access program. So you have a solid list of premium publishers. How satisfied are you with sort of with the quality of inventory today, and where sort of do you see over the next-
Yeah
- few months?
So Direct Access, for anybody who doesn't know, this is aimed squarely in CTV. We're out battling every day against our competitors to win the battle for CTV. Meaning, there's money, as Tim said, shifting over from linear. We want that to hit in our platform, so we need to have great products in CTV. Direct Access is about integrating directly with content owners. This is the Disneys, the Paramounts, the NBCs, as well as platforms like Samsung, Roku, Vizio. Integrating directly with them eliminates fees from middlemen, and when we go to marketers, we say, "Do you want to buy CTV direct, straight from the source, or do you want to buy it from a middleman?" It's an easy, it's an easy choice.
These are premium channels that have big CPM, so when you're cutting off 15%-20% off of the buy, they're gonna funnel those dollars through to us. The other thing is, we haven't—as part of Direct Access, we are not going to the long tail of, you know, of long-tail CTV apps. We want this to remain very premium, super high quality. That's why the biggest names are here. So the success of it has been incredible. More than half of our CTV spending running through here in Direct Access, it's growing like crazy, and I think it's a big reason why clients are spending their CTV dollars in Viant.
Got it. Are there any sort of larger publishers that you still would like to add onto your platform?
Netflix.
There you go.
Netflix would be one. Obviously, with the Google antitrust lawsuit that happened, we're gonna wait to see what the outcomes of that are. It'll probably be another few years till that really gets separated out. But YouTube is the obvious behemoth that's out there that we can't access today. I do think over time, YouTube will open up to third-party partners like ourselves, but Google has a competitive DSP, and the reason they're on the buy 99% of the time is you have to use Google's DSP to purchase YouTube. So I think, Netflix and YouTube is a huge swath of inventory that's probably more in the near term-
Mm-hmm
... out, not necessarily the short term. But when those open up, the amount of dollars flowing through the platform, which should translate to revenue and EBITDA for us, should skyrocket.
... Got it. Got it. That makes sense. So non-CTV video makes up about 20% of spend on your platform. Can you talk about some of the moving parts sort of within that bucket?
Yeah, I mean, I would just break it down between mobile and desktop. Desktop is flat to down, and mobile is still growing very nicely. So you've got different forces. And just to back up for everyone in the audience, we're an omni-channel DSP, meaning we place ads for advertisers on connected television, streaming audio, desktop, mobile, and digital out-of-home. Just kind of how an ad agency plans media buying historically. So desktop is definitely flat to down. We've seen that trending. We have seen it moderate with Google's recent announcement of not deleting cookies. You've seen desktop decreases kind of subside, but mobile's been a fast grower for many, many, many quarters. And certainly, CTV is leading the way, but streaming audio is the fastest-growing channel on the platform.
In the most recent quarter, it almost doubled ad spend in that channel year over year. And it, you know, it's very similar numbers when you, when you go back over the last three or four quarters. So huge swaths of inventories are coming online. If you think of the big apps in streaming audio, it's Spotify with podcasts that it last year opened up to streaming or programmatic players like ourselves, and that's been fueling a lot of the growth. Very similar tailwinds as connected TV.
Got it. So I actually was gonna ask you about streaming audio. You sort of answered this question. Is most of this growth coming from, like, content like podcasts? Is that what's driving this? And just kind of-
Yeah.
Where do you see streaming audio in your overall mix over time?
Yeah. Streaming audio, it. So anytime you have a new channel that opens up, whether it be digital out-of-home or, you know, 5 years ago, we had an emerging channel called connected television, most of the growth usually comes by more supply coming online, and being connected to programmatic pipes. That's one leg of growth. The next will be the targeting. So how good is the targeting, and how addressable is the audience? And I think that's what you're seeing in—you're seeing both of those hit right now in streaming audio. Most of the supply that's out there is now fully connected into programmatic pipes.
Mm-hmm.
And now the addressability is coming. This is companies like, you know, Pandora and Spotify, matching their subscriber base with our what we call our Household ID. But doing a match so that you can give marketers the same type of addressability they get on Meta, but they get it in really premium content environments. So that's those are the two factors that are driving the growth there. Where does it end up? It's roughly, it's, you know... I think in the last quarter, audio was just shy of 10% of share. We think that it definitely can be kind of in that 15%-20%, maybe even higher, because what you get in audio that you also get in Connected TV, but you don't get in, say, mobile video, is you get co-viewing and co-listening.
When marketers buy a connected TV ad, there's at least, on the average, if you pay attention to Nielsen, there's two people at least in the room. There's co-viewing happening. Same thing in audio. There might be multiple people in the car, or you're hearing it on Sonos. So you're influencing many more people with just the same impression, whereas mobile video or display ads, it's unique to one person. So I think that that's another reason why these formats and channels perform so well, certainly. So I actually think that audio, it's possible that audio actually gets even higher.
Mm-hmm.
Because if you just look at the radio market, terrestrial radio market, it's much smaller than linear television historically.
Right.
But because now it's all wired up, it's connected, and it's addressable, I think marketers are truly gonna see the real value. The big thing that's probably holding it back is creative, but I think, you know, with AI, helping a marketer create creative and audio is the easiest... It's the easiest format for AI to make creative of any other format, whether it be display or video or audio. Audio is the easiest.
Mm-hmm.
Just to talk about mix within streaming audio, I would say half is music and half is podcast, but prior to Spotify opening up the podcast, that the growth has really come from the podcast side as marketers experiment with this new type of long-form audio content that's available.
Got it, got it. That makes sense. So, I want to ask next about Google's decision not to deprecate 3P cookies. How do you think this decision impacts your business and sort of your ability to gain share?
Well, twofold. On our platform, less than 10% of the ad spend that flows through our platform is targeting cookies, so we think it's a de minimis impact, whether they're there or not there. Most marketers are choosing our platform because we have a solution for all these channels that don't operate in cookies, so CTV, digital out-of-home, all these non-cookie based channels. So I think we've already sold through the value of our ID and how well it works and is interoperable across all these various touch points that they can buy advertising. Getting to the cookie question, I do think Google is going to delete cookies. That choice really wasn't up to Google. It was up to a UK regulator, called the Competition and Markets Authority, that Google had handed that decision over.
The CMA went around and asked all of our competitors. We don't operate in the U.K. We're U.S. only. Went and asked all of our competitors, "Hey, if Google deletes cookies, would that be bad for your business?" Primarily, The Trade Desk is the large market share competitor there, and they said, yes, it would. So because these other platforms are legacy and based on the cookie, they're saying it would harm them, therefore, Google wasn't allowed to delete them....
What Google's strategy is, I believe, is the same strategy that Apple did already about a year and a half ago, which is to remove the regulator from the decision and actually put it in front of every consumer and say, "Do you want to be tracked across the internet?" And I think those percentages that we saw across Apple devices will play out on Google devices as well, where 85% of consumers say, "No, I don't want cookies." So I think a lot of this was just a shift in strategy because they're stuck between a rock and a hard spot, between a regulator and possibly having another antitrust issue by pulling the trigger. But by removing that decision and, and giving it to consumers, it's actually a better solution from a Google perspective, to still delete cookies and actually not have the antitrust issue.
Got it. Got it. That makes sense. So let's touch on financials and your outlook briefly. You guided Q3 contribution ex-TAC to be between 13% and 18% year-over-year, which is pretty impressive, especially given a difficult comp. Talk about sort of some of the assumptions sort of under- sort of underlying this outlook, and how should you-- how should we think about sort of Q4 and sort of your... Any, any thoughts on Q4 maybe going forward?
I would say, you know, a lot of the questions we're getting right now-
Mm-hmm
... is around political. People are saying, "Hey, how much political is baked into that guide?" So that's the big question we're getting. In the second half, in the last cycle, in the second half, we're about 2%-3% of our business in the second half was political. We're basically in that guide; we're projecting we're gonna be about the same. We might do better, we hope we are, but that's kind of... There's a lot of uncertainty. There's a lot of uncertainty right now, especially on the Democratic side and where the budgets are. But we think, you know, that that's sort of right in the middle of our guide is where we plan to do that.
Other expectations, I think that if you just take a look at Q3, typically, Q3 is a softer quarter. I would say 7 out of 10 quarters, if you go back 10 years, 7 out of 10 quarters, Q3 is a softer quarter than Q2. When you look at our guide, we still have to step up there, so we feel good about the performance of the business. In the fourth quarter, we haven't given any guidance on that, but we think it's a pretty robust market right now. A lot of confidence out of the market. Marketers are. We don't see pullbacks that are happening, even though there's been some volatility in the on Wall Street, and there's an election going on.
The midyear—we say it all the time: there's a tale of two halves, every year. The second half, I would say, we think definitely the sentiment is much stronger in the second half. And we actually see that marketers wanna make some moves. A lot of times marketers get, you know, they're picking their partners, and it might be... You know, if you look in years past, it was all in on walled gardens. We see in that search and social, we see a big shift out of that right now, and we see a lot of marketers look and a lot of balls up in the air, marketers looking for alternative platforms. So, we feel really good about the second half.
Got it. So you've seen a lot of momentum in the public services vertical. Talk about what's driving that strength, and how sustainable do you think that is?
Yeah, I mean, it's not just one vertical, it's primarily all the verticals, and I think just for the audience, digital advertising is winning over traditional forms of advertising. The way marketers purchase digital advertising is through a DSP. That is the way 95% of them transact and buy. So when you look at the landscape of demand-side platforms, there are four that are left available globally. There's Google, number one, ranked in order of size. Google is number one, The Trade Desk is number two, Yahoo! actually is still the third largest, and then there's Viant. So what we're battling is not about whether we're in the right part of the sector within a vertical category. We're just battling our lack of awareness and the technical solution against three very large, well-known internet behemoths.
More and more, we continue to roll out technical innovation like the AI suite. We've talked about the identity solution of our Household ID, which doesn't use cookies, and all we're driving is awareness in the market. So if you're an investor, and you believe in digital advertising, there's four companies to put your money on. We are probably the one that has the most upside when you look at our current valuation. Yeah, we're up against big companies, but we've been up against them for a decade, and you can go back and see the historical financial growth. So to us, it's not about public services or travel or automotive. You always have seasonality and cyclicality within a given vertical at any given quarter based on their business. Like, retail is gonna spend a lot in Q4.
Everyone knows it, and that will be their highest spending time. For us, though, for Viant, it's just about driving awareness of who we are and that the platform is available, and we have great unique value propositions that marketers love. Primarily, that we only work for the marketer. We don't work for the seller of the advertising. And when you take those four companies and break it down that way, who is buy-side only, we call it? There's The Trade Desk, and there's Viant, and there's a growing negative sentiment in the industry against The Trade Desk, that they have too much market power, and they're abusing it very similar to the same playbook that Google did, that they're up in court for, against the United States government.
So you have the two large players of Google, The Trade Desk, and what we're doing is capturing that negative sentiment in the market against The Trade Desk. Trade Desk was the antithesis of Google. That's how they built their business and became so successful. We are the antithesis of The Trade Desk, and that's how we're building our business and continuing to be successful.
Let me give one other insight on that, on the verticals, why we're doing so well in so many of these, like in public services and healthcare, even in CPG. What we understand... if you think about the biggest advertisers in the world, the Fortune 50 or 100, Google won't even speak to you unless you spend $250 million a year with, with them. They will push you to a reseller company. So we understand that... You know, we talk about we service the mid-market, customers that spend $100 million a year to $1 billion a year in advertising. Those are companies that Google rarely services. We go out and service the heck out of those customers, and we build products that are very data-driven for them and get them great results.
That's why we do so well there, because we focus in a customer segment that is underserved, and there's just a ton of room to grow there.
Got it. Well, with that, we are out of time. Tim, Chris, thank you so much for joining us.
Thank you.
Thank you.