CEO Tim Vanderhook and COO Chris Vanderhook. And we're going to run through some questions, and I think we'll leave a little time for the audience if we have a few minutes at the end here. So Tim, Chris, thanks for joining us.
Absolutely. Thanks for being here. Thanks for having us.
All right. So why don't we start with a traditional 30,000-foot view question for those who are maybe newer to the story or aren't as familiar with Viant. Can you talk about maybe where you fit into the digital ad ecosystem and maybe some of the most pressing things that you've had going on in the last couple of months?
Sure. Yeah. You want to start?
We are a demand-side platform, just 30,000-foot. Marketers and agencies use our software to buy advertising. Just think of it like electronic buying. We're like the E-Trade for advertising. You can log in, buy any ad anywhere in 60 seconds. DSPs are a pretty powerful technology. There's only four DSPs that exist in the world today in order: it's Google, The Trade Desk, Yahoo DSP, and Viant. When I say four, those are self-service omnichannel platforms. You give a customer a log in, they log in and self-direct all of their advertising activities, put their investments wherever they want. That's really what a self-service DSP is, and there's only four of them. Two of those four are both on the buy side. They service the marketer and the sell side. We believe that's a conflict of interest. We have no interest in anything on the sell side.
We don't own a publisher, so we don't have any skin in the game as to where the money's going. We only represent the buy side or the buyer of advertising, and so does The Trade Desk, and so we believe that's the winning model. There's no conflict of interest there, so really it's a pretty skinny landscape when you think of it like that, but that's at a high level. That's really at a high level what we do.
Want to add anything?
No. And we've got huge tailwinds, and digital advertising is obviously growing. If you think of that market, it's a CAGR of about 12% year over year. Within digital advertising, connected television is one of the biggest tailwinds that we have. In market, that's growing about 18% year over year. And our products in CTV are being adopted at a very high rate. So our growth in CTV last quarter was just shy of 50%, so drastically outperforming the market growth that's there. So what's driving that tailwind? Linear TV. The marketers used to spend more in linear TV. As consumers have moved to streaming, those budgets are following where the consumers are going. At our last quarterly earnings call, we announced an acquisition of IRIS.TV, which gives us even more granular targeting and reporting in connected TV.
With the acquisition of IRIS.TV, I believe we have a better connected TV buying platform out there relative to The Trade Desk. So if you think of The Trade Desk or pre-IRIS.TV for Viant, you can target at the app level. So I can target Hulu, Paramount+, et cetera. One thing that's, I guess, more of a secret in the investor world, so that was the level of targeting: Hulu, Paramount+, Max, all these app level. What IRIS.TV gives us is the ability to target show within that app. So in the example of Yellowstone, a very popular television show, when a marketer's buying Paramount+, they may or may not have their ad show up in Yellowstone. Now that we have acquired IRIS.TV, we can specifically target the ads for Bass Pro Shops in Yellowstone and try and drive those connections. So big, big, another wave of growth.
We're busy integrating that, and we think in the second half of 2025, it will start to produce bigger financial results for Viant. It was a small acquisition of about a team of 20 individuals.
Yeah, go ahead.
There was a lot there.
Yeah, no, it's all great information. We're definitely going to spend some time on the CTV and IRIS.TV components here as we move our way through the questions. But maybe one more on the macro side before we get into that. You talked about a very kind of limited list of DSPs who are kind of pure-play DSPs, not interested in reaching into the supply side. But one thing I think we've seen that you've done a really good job at is cementing your hold, especially among small and medium-sized advertisers and agencies. So I guess can you talk about the market segmentation within that space and why you've been able to succeed there?
Good point. Great question and very helpful for investors too. So if it's just us and The Trade Desk that are buy-side only, how do we further differentiate? And it really comes down to the customer segments that we go after. So if you think of The Trade Desk, they're sort of in that Fortune 100. They want the big multinational corporations like a P&G, a Unilever. That's who they want. They are in 40 different countries. Those marketers operate all around the world. They need a platform that's also in every country around the world. So The Trade Desk is that. We are U.S.-focused. All of our operations are in the U.S. You can buy internationally in our platform, but our operations are only in the U.S. We go after what's called the mid-market. Think like that Fortune 250 and below. But we're not in the SMB space.
We go after a U.S.-based national advertiser. They spend anywhere between $100 million and up to $1 billion a year in advertising. That's who we go after. That segment of marketer is also much more data-driven than, let's say, a P&G or a Unilever. Some people are like, "How can that possibly be? Those are the largest marketers in the world." Well, they sell toothpaste and toilet paper. You don't need to be very data-driven to show everybody needs toothpaste and toilet paper. They also aren't the advertisers that own their customer relationship, so they don't have transactional data to then marry up with their advertising to see what they're getting for their money, if that makes sense. Our customers, if you look at, let's say, The Trade Desk, they'll go after P&G, Unilever, McDonald's. We have Sonic Burger, Whataburger, New Balance. They pick up Nike.
Do you guys see the customer segment difference? They're still large customers, and they spend a lot of money in advertising. But they need to know that when they spend money in advertising, they need to know that it works. So what we do really well is 70% of our customers today onboard their first-party data to us, their sales data, their CRM data. Why are they onboarding that to us? Because they want to connect it to their advertising, because they want to know what they're getting for their money in real time, and they want to be able to optimize their ad spending accordingly. That's a huge difference between us and, let's say, The Trade Desk.
Great. So maybe why don't we start on that CTV point, because I think we can cover a lot of ground here. So you talked about the benefits that Iris can provide. But even before you picked up Iris, you were outgrowing the market, and CTV was becoming a bigger and bigger proportion of your spend share and revenue share. So I guess what had you done well up to the Iris acquisition that had allowed you to outgrow the market?
Yeah. In this world of targeting and measurement, so we want to show ads at the consumers who are likely to buy the product and service. How do we do that is the ultimate question. And that's where we differentiate from The Trade Desk again. We offer something called Household ID. It's a patented technology where we group all devices within a household. Just to unpack what Household ID is, it's not a mystery. It's your physical home address. So think of it as your physical home address, and we're finding out who lives there, what are the phone numbers associated, what are all of the email addresses associated with this house. Chris and I actually invented what our competitor uses today as well. It's called UID2. At The Trade Desk, it is your email address, they believe, is the silver bullet.
Why is Household ID and UID2 even relevant? Because there's been for years now this discussion that cookies in your web browser are going to get deleted. But obviously, cookies never existed in CTV. They weren't really applied in mobile. It's an old thing, and cookies are still there today as well. But in this next generation, when cookies are deleted and we're buying ads everywhere, from digital out of home, Household ID has more scale than UID2 at The Trade Desk. At any moment in time of all the ad requests we get every millisecond, we can identify and resolve. We call that household 80% of the time across every channel, every ad request. Those are our stats. If you contrast that to The Trade Desk with UID2, this is 15% or below of available ad requests. So they've made a big bet on UID2.
What we're seeing in market is there is no scale when marketers go to deploy money. We know there's no scale because you're looking at the two guys on stage who invented what they offer. And we had the same experience that at about 25%, it caps out. And why? A consumer to read a blog is not willing to exchange their email for one article, or there's a multitude of reasons. But the concept of email as a replacement of cookies, we don't believe is the future. We have a different approach. We patented that approach. It's called Household ID. And that's what's been driving all that growth in connected television.
I would say one other point on connected TV as well, why we're outgrowing the market. There's something in our space. There's a trend that's called supply path optimization. When a marketer uses a DSP, historically, they believe that when they bid for an ad on a publisher, let's say it's Hulu, that it goes through from the DSP to the SSP to the publisher. But what marketers started to realize is that, wait a second, when I bid into this SSP, this SSP is actually trading that bid among other SSPs. So that's a problem. Because each hop, think of those as hops, each time that bid request hits another hop, someone's taking a fee. And so marketers four or five years ago came to the DSPs and said, "Hey, we got to stop this.
And I want to ensure that when I bid, it only goes from the DSP. It goes one hop, then to a publisher." But what's happened is that the obfuscation from the publisher by some of the sell side, not all, but some players there, has caused marketers to put pressure on DSPs to then eliminate that activity. That's one piece. So what has happened over the last two years is that large content owners are now coming to us and are connecting directly with us in CTV, bypassing any of the middlemen, because they believe in CTV. They don't need all of these SSPs running multiple auctions. They're connecting directly to our demand. That's good for our customers. There's less fees in the middle when we connect directly to, let's say, Disney or Paramount or Peacock. And that's what we've done in CTV.
We have a program called Direct Access, where, again, we're connecting directly with that content owner. It's lower fees for our customers, which means they get more working media. So there's something called the tech tax that everybody talks, ad tech tax, because you use a DSP. There's an SSP. There's data companies. There's measurement companies. How much working media goes to the publisher? So we aim to cut down on that tax on behalf of our client, the marketer. Again, we only service the buyer. And so when we go to market, and we call it internally the battle for CTV, there's so much money in CTV coming from linear that we need to create great products, and we need a great argument why a marketer should spend their CTV dollars with us versus a competitor.
And we just simply say, "You want to buy direct or you want to buy through a middleman?" Pretty simple. So that's another big reason. And I think half of the CTV spend we said on our last earnings call, half of the CTV spend in our platform is actually running through Direct Access. And this program is just barely over a year old. So it represents about 23 or 24 of the largest premium content owners in the world for CTV. All the big guys are part of it. And in CTV, you don't really have this massive long tail of apps. There's 25 million websites that auction off advertising, display ads all day. We're not really focused in that area. We think the SSPs do provide a lot of value there. But in CTV, it's really just the largest content owners.
So it's an easy lift for us to connect directly with them when they want to do that. And maybe extending on that last point a little bit, because we have heard SSPs also running their own supply path optimization initiatives where they're kind of going in the other direction. They're connecting directly to demand. So I guess from your perspective, is there either the DSP or the SSP that has the upper hand in this initiative? And could SSPs' initiatives like that kind of be beneficial to you guys maybe in just promoting a cleaner ad tech ecosystem?
You know, I think the SSPs don't know what buyers of advertising want. They think like a seller of advertising. So they think it's going to be easy. But when you get onto this side, there's "I want to track, measure my spend across 1,000 different metrics." And so I think their ability to be successful in entering the buy side is sub 10% probability of success. You also have to remember, if I'm a marketer, why would I trust the person trying to sell me the advertising to then get me the lowest possible price? So there's too many conflicts of interest. It was a terrible strategy to execute. SSPs should focus on driving the highest price possible for the seller of the advertising, where DSPs focus on driving the lowest price for the buyer. And that price discovery is what makes markets markets.
And so a lot of pressure on SSPs there. Really, in the long run, there might be too many SSPs. There might be some consolidation there. But someone needs to represent the long tail of web publishers out there. Not every company is big enough to have a sales force and go talk to ad agencies and big marketers. So there is a role for SSPs there. But their odds of being successful on the buy side, I think, are close to zero.
Yeah. And I think that there's been a lot of talk going back and forth. What's the better business model, a DSP or an SSP? Who's better positioned? I think that what is likely going to happen is that these parties all retreat back to their proper camps, as to Tim's point. I don't think it's a credible risk. I don't think the SSPs are truly out competing with DSPs, haven't been in one pitch ever with a client and with an SSP at the table for the business. The reason why there's only four DSPs that exist in the world is that the feature lift to develop all of the features that a marketer wants, and it's pure insanity of their list of requests. You're doing integrations with thousands of companies, and it takes forever. And there is no endpoint.
It's a mirage that you're constantly building towards. But that's what a marketer demands because there's new supply coming online. There's new channels all the time. There's new data companies. They just want integrations with everyone. So an SSP, the reason why there's only four is it's not a good business decision to build an enterprise-grade DSP because you will lose money for years and years and years. That's why there's only four. So I believe that that is maybe a narrative for investors. And sometimes with certain businesses, you got to figure out how you get some revenue. So they got to do what they got to do sometimes. But I don't believe it has made a dent in any DSP.
I think just to add to that, the cycle of innovation at a company like Viant is exploding. I mean, we've launched AI products, and I'm sure we'll talk about this, but Viant AI, our first AI products, we launched in the second quarter of 2023. In just a little over a year, we've had 90% of customers adopt that AI bidding product, which represents 75% of ad spend across our platform in the most recent. That was the adoption of a product in 12 months. Very, very exciting. The demand for AI products by the buyers of ads is very, very high. We're meeting that demand. Two months ago, we launched our second product called AI Planning, which basically automates generating an ad campaign from nothing.
You give it four pieces of information: who the advertiser is, your budget, the time frame, and what the goal of the campaign is, driving mobile app downloads or e-commerce sales, whatever it is. And the AI instantly creates an ad campaign for you in 60 seconds. This product exploded when our industry saw it, so much so that we released the product on LinkedIn. We had 150,000 people watch a 12-minute video and hundreds of comments. And if you want to read what those comments are, just go to my LinkedIn profile. We do it publicly so investors, agencies can read and see the response of what's actually happening. Because within ad tech, this is a murky business that's hard for investors to understand. But I think we provide a lot of transparency and very straightforward answers.
Yeah, great info in that video. And I did have a question on IRIS.TV. But while we're on the topic of Viant AI, why don't we stay there? So you talked about some of the products that you've already disclosed, I guess, as you're looking to, I guess, one, kind of the feedback from those products that have hit market. And as you're looking to expand the kind of Viant AI suite of solutions, what pain points have you identified or have clients brought to you that you think that would be a good use case for?
Yeah. Well, so Viant AI, just think of it, it's our product suite. And today, there's four capabilities within there or four kind of sub-products. Planning, as Tim just mentioned, AI bidding, which we launched in Q3 of 2023. And what AI bidding does is it bids on behalf of the marketer or the trader that worked, the programmatic trader. It does the bidding in real time, second by second. Agencies and advertisers have historically wanted to control that process. And that was fine a few years ago. But today, with as many channels we're in, there's over 5 million bid requests every second. And so a human cannot possibly change the price every second. And what do they do? They typically are changing price once a day across all of their campaigns. So they're leaving tons of money on the table.
We created an AI bidding model that lowers that price on a second-by-second basis. And what are we trying to do? We're trying to find out from the sell side, from the publisher, what's the lowest possible price you will take in this millisecond right now. This is a 365-day-a-year, 24/7 liquid market. And you need an AI bidding model to do this. That product that we launched in 2023, today, 90% of our customers have adopted it. And it's running across 75% of total ad spend on a platform. That's incredible. And we're out saving on average about 35% of the CPM savings. So to Tim's point about there's a big appetite for these products, that's why. So that's a second function. The third function is measurement and analysis.
Everybody can run reports in a DSP to see how much money you spent yesterday, how many clicks you got, and maybe how many sales on your website. But they want to know more. Hey, was that sale? These sales that I got yesterday, how many of those were from current customers? How many are from new customers? How many represented a product greater than $40? Right? Those are things that data scientists do that take engineering skill sets. This is literally a chat interface that you chat with. It writes Python code, pulls the data from a database, returns it to you in 10 seconds. Quite powerful. The more data-driven your platform is, the more money that they're going to end up spending because they're going to improve their campaign performance. So that's measurement and analysis.
The fourth function that we are launching in the back half of 2025.
Measurement and analysis coming out when?
Oh, I'm sorry. Measurement and analysis is coming. Well, we didn't really announce. You want to announce it? Yeah, fine. Probably first quarter. First quarter of 2025. And in the second half of 2025, we will launch what's called decisioning, which is full autonomy. Think of the self-driving car is to the automobile. Full autonomy, or what we call autonomous advertising, where it does all the decisions for you, optimizes your campaign on the fly, and you can watch it. That will be in the second half of 2025.
Yeah. And today, there are so many operators, humans, that have to log into these systems, determine which publishers to run on, what price you're going to pay, what data segment I'm going to target on Hulu, that publisher, and just constantly making changes. We did the math between the number of channels, like CTV, streaming audio, desktop, mobile, the number of channels times the number of ad formats, times the number of publisher partners, times the 300,000 different audience segments available. There's 98 trillion choices that a human would have to look at in combination. So it's impossible for a human to make the best choice. They can make a good choice based on reporting that they look at. But you can't make the best choice.
This is where we see our vision since we went public was to launch a fully autonomous ad platform where we remove the people from the process. We think we'll deliver on that four years after going public. We've made steady gains all along the way. The best part is these AI products are driving our financials. It's not an AI product for free. It's actually contributing and expanding what we call contribution ex-TAC or net revenue. We're not allowed to say that from the SEC. That's the money we keep, contribution ex-TAC. AI Bidding in one year expanded our contribution ex-TAC margin by about 500 basis points. Because remember how we priced it? We're driving savings for customers. We keep 20% of the savings and pass 80% to the advertiser.
So if we achieve better pricing for you, we keep 20% of those savings. And it's called a value-based pricing methodology. We create value for that customer, and we extract some of it. But they're getting the lion's share. With AI measurement, it's advanced reporting. If you want the AI tool, you must buy the advanced product. And that will expand the contribution ex-TAC yet again as we grow and roll adoption there. And ultimately, when you don't need people to pull all the levers for you, there will be yet another margin increase because we're removing lots of costs for these marketers who are diving into digital advertising.
I think we could spend all day on this because it's a really fascinating topic. We are coming up on time here. I did want to get in one, maybe two questions. Kind of continuing on that point on margins. Obviously, a lot of margin lift from the products that we're seeing. How does that balance against maybe some of the investment, incremental investment you might need to do in tech or talent or engineering?
Yeah. So just overall in our investment, our thesis is we are going to grow OPEX slower than our contribution ex-TAC. We committed to doing that at the end of 2022. We did that. You guys have seen, or if you've watched us, we've had five. And if you look at the middle of our guides, it would be six straight quarters of 20-plus% growth in contribution ex-TAC. And it's outpacing any growth that we had in OPEX. So you can see the leverage in the business. And that's why, from an adjusted EBITDA perspective, how the business is performing really well. I think that, yes, we will have incremental investment with these products. But again, we're going to stick to that. And we're going to do that in 2025. We're going to continue to grow contribution ex-TAC faster.
I will say, yes, we're investing in AI. But we get this question a lot. We're not NVIDIA making the GPUs. We're not a hyperscaler building the LLMs. That's a $150 billion investment. We are using the LLMs with our data, with unique data that we have in our DSP, all the transactional data, all the clearing prices, every category of advertiser that we have, performance, understanding what performance is like for them. And we're training those models. That's what we're doing. And then we take that AI to our customers. And think of us. We're like the AI infrastructure for advertising for our customers. Because what's coming for them, like an agency, they want to leverage these things. But they also have unique data. But they do not have the technologists internally to train these models, help them build these products.
And that's what we're seeing, I think, since we've launched these products, we see a lot of demand for that. And if you think an agency who needs to stay on the cutting edge, they're pitching customers, they need someone to provide that infrastructure to them. And ultimately, that's just going to drive more customers to us.
Great. And then maybe in the last 60 seconds here, so much of this has been an internal story, an organic story. But you did go out and buy IRIS.TV for their specific capabilities. I guess, how does that change your thinking about the potential for inorganic to provide incremental legs of growth?
Yeah. I would look at us from an M&A perspective. And just for the audience, we have no debt. We have $200 million of cash. We're generating cash every quarter. And we're not a, we need to go do a $1 billion transaction and transform the company. We're winning in the market. And the question is, how do we win faster? What strategic acquisition can we make that enhances our positioning in CTV? IRIS.TV was a great example that I was trying to explain of you can target by app today. But it's a heck of a lot better if you could target within show within the app. And so advancing these. And I would look for more M&A, small tuck-in acquisitions. To give you an idea on the IRIS.TV side, it was a team of 22 people. But they had no sales and marketing efforts.
So to take that product and engineering team, which was getting traction in the market, which gave a big advantage, and pop it into our sales and marketing engine after it's integrated, second half 2025, we think can start to have outsized financial results. And we'll look for more companies that give us more of a strategic advantage, either in connected television, artificial intelligence. Another big channel popping up is streaming audio. If you guys are investors in Spotify, podcasts are exploding. The amount of ad inventory is exploding. And it's just like you have radio transitioning to streaming, very similar dynamic to the television, linear into streaming. So for us, we look at small product leaders that we can take of small teams and leverage our sales and marketing infrastructure to kind of drive that business forward.
But I would look on the smaller side rather than the larger side. We don't really feel any pressure to do anything unless we see something strategic that's going to give us a leg up on our bigger competitors.
Awesome. A lot of ground covered in not a lot of time. But Tim and Chris, thanks for joining us today.
Thanks a lot.
Thanks, Andrew.
Thank you.