All right. We're going to go ahead and kick it off. Thanks, everyone, for coming. My name is Arjun Bhatia. I cover DoubleVerify here at William Blair. I'm joined by Mark Zagorski, who is the CEO of DoubleVerify. Mark, thanks for being here.
Awesome. Thanks. Good to be here.
Let's get, just to start off on a high level, if you can just give everybody in the room a little bit of an overlay of what DoubleVerify does, what role do you play in the digital advertising ecosystem, and what's the value that you provide for your customers?
Yeah. Great question. So DoubleVerify is ad verification software. So we ensure that a digital ad transaction between a buyer and a seller of digital ads is fraud-free, that those ads are delivered to a real person, that the ads are viewable, delivered in the right geography, and are brand safe or brand suitable. So think of we ensure that transaction meets the requirements of the advertiser, is safe, secure, viewable, and in the right type of contextual environment.
OK. And so, I don't know, this kind of role that you play above the digital advertising ecosystem, where are advertisers in terms of just adoption of third-party verification solutions? Is it still greenfield? Are we in a replacement cycle? Where do you think we are?
Yeah. Still pretty early days, because the verification that we do is across all different types of media. So social, display, connected television, mobile, mobile app. And all of those have different challenges for advertisers. And our product has grown in its coverage of each of those sectors as well. So we still think we're pretty early as far as market penetration goes. We did a study a couple of years ago with a third party and said that the TAM was only about 25% penetrated. I think we're probably a little bit past that now. But we know, as a company, we work with around 322 or so of the top 800 advertisers in some capacity. But that means they could be using one of our products in one market. So I think we're still pretty early.
And our growth thesis is we want to verify every transaction across every platform in any media in any market on the planet. And if you believe what some of the industry have said, they say it's a trillion-dollar digital media business. We want to take a piece of every one of those dollars.
And so if you have, hypothetically, an advertiser that says, hey, I'm going to switch my ad spend from one platform to another, how does that impact DoubleVerify?
Yeah. Going back to our thesis is we want to be everywhere where the advertisers are spending. As long as we're covering that platform, we're somewhat indifferent whether they move their spend from Facebook to TikTok or from TikTok to Netflix. If we're verifying the transaction and we have a coverage relationship with that platform, we want to be agnostic. We want to ensure that wherever ad dollars go, that we're there to verify the transaction. Now, in some platforms, we may have more products than others or more coverage. So there may be an opportunity to make more money from one platform to the next. But net-net, we are platform. We try to be platform agnostic as where spend goes, but also vertical agnostic, too. So we've got pretty good distribution across all major ad verticals. So we're not overconcentrated in autos or in CPG.
And I think that kind of diversification, both in buyers but also in platform, gives us a nice balance that allows us to kind of weather any specific sector or platform growth or shrinkage.
Okay. One of the parts of your growth story that has stuck out to me is the premium solution, specifically Authentic Brand Suitability. That's a fairly large product today. It's growing very fast. Talk about some of the drivers behind that growth, and how much room is there still left for ABS to continue growing?
Yeah, so ABS is our premium-priced, what we call, activation product, and what ABS does is it allows advertisers to select specific levels of brand suitability and allow specific levels of sensitivity within each one of those suitability categories in a pre-campaign filtering basis, so through a DSP like The Trade Desk or Google's DV360, they're able to filter out certain types of content and context that's not aligned with that brand's suitability requirements, so think of it as a pre-filtering protection product. We launched that business, really, at scale in 2018, so it's a five-year-old product but as recently as Q1 of this year, it grew 56%, so we still have got really good legs on that product, and yes, we're adding new customers all the time, because, as I mentioned, we're still adding new brands. We've not fully penetrated.
80% of that growth in Q1 came from existing customers. To that is really heartening if you think about the legs of a product that’s old when that large of your growth is coming from current customers. That means those customers are now turning ABS on in new markets, so new global markets, across new brands or sub-brands. Although 94 of our top 100 brands use ABS in some way, there’s still lots of additional penetration to do globally. Still some great legs. 71% of our top 500 use it. Again, more new clients to grow, more geographies to grow into. It, in Q1, grew over 50%.
Yeah. So I think, at least from what I've picked up, is that ABS is a big competitive differentiator for DV in the market when you're talking about expansion deals, when you're talking about new customers that are coming into the platform. Maybe just walk through the competitive dynamics in this space. Talk about how have your win rates changed over time, and what's the messaging that's resonating with customers when they are doing an RFP in third-party ad verification?
Yeah. It's an interesting space because, unlike a lot of the digital ad ecosystem, there's not a huge number of players. There's two and three, if you really stretch, players in the space that control a vast majority of the verification business. And the reason why is because it takes scale to do this. So advertisers want to work with one partner that can verify across all different types of media, that can look at social and CTV and in-app and mobile, et cetera. So they want one partner to cover everything. Last year, we saw 5.5 trillion transactions. So we see across everything that makes our systems smarter. And advertisers want that intelligence, but they want the scale, too. So the competitive dynamics really lend themselves to being a scaled business that sees a lot of different things. And there's a very small handful of companies that do that.
There's also another kind of built-in challenge for non-scaled companies is the fact that because we look across the open internet and walled gardens, we have to have a relationship with those walled gardens, and whether it's Meta or TikTok or Netflix, they need to allow us into their data pools and to their transactions to actually verify what's going on. They're not going to do that with a lot of companies. They worry about data leakage. It takes work for them to do that. They don't want to work with hundreds of point solutions or small companies, so going back to the competitive dynamic, there are some natural limitations around that. When we go out and sell against our main competitors, if any of you are software investors or look at the software space, this is very much a software RFP-type play.
It's not a wallet share play, like a lot of advertising businesses are, where someone will give a little bit of their money to Google and a little bit of their money to Meta and a little bit of their money to The New York Times and spread it out. In most cases, the RFP is a winner-take-all or winner-take-most, just like a software play. Those software RFPs usually have a bunch of checkboxes, but they ultimately end up in a competitive bake-off, like a real, let's put your system to test against your competitor's system to test. Let's run 10 million impressions between each, and let's see who filters out more fraud, who provides a greater level of granularity when it comes to brand suitability, and ultimately, who delivers the highest ROI. We win those.
Our fraud lab, which has been around for a decade, uses deterministic fraud measures, not probabilistic like our competitors do, but deterministic. That means we find 8.5 times more fraud on deterministic versus probabilistic. On the brand suitability level, we have more granular categories that allow for more levels of sensitivity than our competitors do. On the accreditation side, because trust is a big part of this, we have more industry accreditations than any other company on the planet right now. So all of those things are great, but it really matters what that ROI is at the end. And we deliver higher ROI because of that. Our win rate of competitive RFPs over the last 12 months has been 80%. We continue to gain market share. And I think it comes down to the power and the quality of the platform, period.
Yeah. Sticking on the ROI point, I think it's pretty evident the value that you provide for advertisers. What kind of pricing power do you have in this market, and how have you exercised that over the last couple of years?
Yeah. Just to take a quick step back, our business model is based on a fixed CPM per impression. So every time someone pings us for a piece of data, either on measurement or on what we call our activation to filter or make a call on a programmatic buy, we charge them a fixed fee. So think of it as like almost like a Snowflake model. You call us for a piece of data, we give it back to you. We charge you for that. Because of that, we are driven. Our growth is driven by volume. It's really a volume play. And we also want to make that fee as frictionless as possible. So it's like a no-brainer that we want everyone to use our software on every impression that they're buying and to make it a no-brainer for them to do that.
So roughly speaking, if you kind of ran it, we're probably 1%-2% of a transaction, the cost of a transaction. And depending on what the CPM of that impression is, it can be higher or lower. So for example, connected television, the CPMs can be $30-$50. A display ad is $1. So we charge a fixed rate. So it's a very small percentage of a CTV impression, a slightly larger percentage of a display impression. And so where our opportunity lies, getting to your original part of your question, is as we look at pricing opportunities, we've already done what we call pricing bifurcation last year for our programmatic products between display and video. I think there could be additional pricing opportunities when it comes to connected television.
If you look at the hierarchy of price, if a display ad's $1 and a mobile video ad's $5, CTV is $40, I think we have some opportunity in CTV to increase pricing. But our main driver is not going to be price as far as our growth. It's really going to be volume. And again, we want to make it a no-brainer for us for someone just to say yes, turn you on across all impressions.
Yeah. Part of the volume expansion play, I think, is going to be new partnerships. And you've announced, I think, several over the last year or so. One of those is an expanded partnership with Meta. Talk about that partnership a little bit. Where are you in deployment? What can that mean for DoubleVerify over the next two, three, four years?
Sure, so we've been working with Meta for several years at different levels, different products, different parts of the Meta stack, and what Arjun's referring to is there was an announcement last year where Meta said they were going to allow third-party verification companies to come into the News Feed for brand safety. That's something that we've been working on for years. We've been hoping for. A vast majority of Facebook volume comes in through the News Feed, and probably the highest demand solution across any social network is brand safety. So we currently have viewability and IVT measurement, so invalid traffic measurement, across Meta's News Feed. But what this is opening up is the opportunity to have brand safety across the News Feed, which is a big opportunity for us. I think only about 50 of our top 100 customers currently engage our social tools across Facebook.
I think that's underpenetrated when something like ABS is used by 94 of our top 100 customers. So I think what they're waiting for is really the highest value prop, which is having brand safety tools across Facebook. Even with that being said, Facebook is about slightly less than 50% of our social revenue. So we're making a good amount of money from Facebook with a relatively limited product. When the News Feed opens up for brand safety, I think there's multiples of growth opportunity for us across that. The schedule right now, which has not changed, is second half of this year, with hopefully monetization coming in 2024.
OK. Do you think the ramp on something like getting into Meta's News Feed would be relatively quicker or slower than newer channels, like let's say a Netflix ad-supported tier? Because presumably advertisers have an ad strategy on Meta's News Feed already. How do you think that dynamic might impact your time to revenue?
Yeah. There's definitely a more installed customer base on Meta. So the understanding of, again, how they spend, what they're spending there is much more seamless. So I do think it creates an easier go-to-market for us. There are still going to be multiple customer acquisition kind of steps. The first is turning brand safety on with customers who currently use us on Facebook for IVT and viewability. The next is going after that 50 of the top 100 and many more of the top 700 that don't use us on Facebook that are customers. And the third is going after an entirely new customer set. So I think we're going to have these tranches, or not tranches, but steps of incremental growth across Meta that will show a trajectory like this over time.
OK. Another social platform that's been growing very fast is TikTok. And I think you've expanded your presence within TikTok as well. What are you seeing in terms of growth trends with TikTok, and how are you leaning into that ecosystem to help your advertisers do brand safety verification with that platform?
Yeah. So we started our TikTok relationship over a year ago with two products, with viewability and invalid traffic, similar like we have with Facebook. We launched brand safety late 2022, and that's when things really took off. So we did more revenue in Q1 of this year than we did in all of last year with TikTok. And that's just on. We just launched English language support. But we'll be rolling out Spanish, Portuguese, French, German, and Dutch all before the end of the year, which will also be growth drivers for us. So TikTok now makes up. They went from literally zero to our third largest social platform after Facebook and YouTube. Still small dollars, relatively speaking, but growing at massive rates of growth.
It's probably the most in-demand product from an advertiser perspective because brand safety is the first thing on their mind when they're in a short-form video scenario.
Yeah. So just kind of zooming out for a second, obviously kind of coming into this year with the macro backdrop, the way it is, there's been some concern about the ad markets, like marketing budgets, ad spend, et cetera. What have you seen thus far in terms of spending to date, spending patterns, and how are you seeing that flow through to your revenue and to your financials?
Yeah. I think the year started off a little rough. Everyone was a bit worried about the universe in January. I think everyone came off of December with a pretty heavy hangover, and they were worried about what the year was going to look like. At a certain point, probably mid-Q1, dollars started opening up again. I think advertisers said, look, we've got to spend some money to make some money. Who knows when this recession is going to come, and a lot of the factors that impacted slowdowns in ad spend in the past, which were like supply chain issues and war in Ukraine, unfortunately, war in Ukraine has been normalized, so Europe has come back, and we saw that in Q1. Supply chain issues are gone. So the big macro issue now is what is consumer spend going to look like in the second half of the year?
So we had a good Q1. We grew at 27% year over year, which was faster than the overall digital ad growth rate. And a lot of that started happening in the second half of the quarter when ad spend opened up. But what we're seeing from a macro perspective is it is definitely still a quarter-to-quarter universe we're living in. No one's freaking out. No one's saying, we're not going to hit the second half of the year is going to be horrible. But I can tell you that dollars are being pretty tightly held until the last minute. So it'll be interesting to hear the feedback on the upfront buys from the media companies.
But I think you're going to see a lot more scatter, a lot more programmatic, those kind of buys that are kind of last minute because advertisers are still kind of in that wait-and-see mode when it comes to the macro.
And in your business, would you anticipate seeing that on the programmatic side, the direct side? How would it break down maybe on the direct side? Now that you mentioned programmatic, it might be a little bit more quarter-to-quarter than-.
Yeah. I think programmatic is going to be a bit more lumpy because money is going to come in and out much faster. We've been really pleasantly surprised with our measurement growth, which is a non-programmatic business. So that's across social, mostly driven by social. So a lot of dollars going into social. But I think it's an interesting time for us. One thing to note is if you look at Q1 data that came out of the major ad platforms, so from Snap and Pinterest and Meta, CPMs were down across all of them. But volumes were up. So impressions are up. That's good for us. So even in kind of macro downturns, which tend to mess up the supply-demand balance, which means there's less demand for a significant amount of supply, that generally tends to send CPMs down.
But it doesn't mean our volumes go down as much either. So in a macro, we're going to not benefit as much when CPMs go up. And you see ad spend go up because that usually means cost is going to go up too. So we're never going to benefit as much from those big pops. But we're never going to get hit as much either from spend reductions because those impressions still need to be filled. And whether that impression was sold for $10 yesterday and $8 today, it doesn't matter to us because we're still just getting the same paid for verification. So it's an interesting dynamic for us. We're not getting any help from secular tailwinds right now. So I think depending on what platform or pundit you look at, ad growth is expected to be low single digits, 3%-5% this year.
We grew at 27%. We've guided to over 20% growth for the year. And that's with no tailwinds whatsoever. That's just us, new products, new sector coverage, new clients, new international markets. And I think it just shows not just the resiliency of our model, but the amount of greenfield we have out there to still out and get new customers.
And at the same time, there is this dynamic of new inventory coming to market. We see Netflix adding an ad-supported tier. Disney is doing the same thing. I think there were reports today that Amazon might do the same thing with Prime. How does that impact you? How do you benefit from that trend? And maybe talk about some of the partnerships that you have in that arena.
Yeah. So all new platforms are good. If they're going to drive volumes and drive spend, it gives us another opportunity to verify something that we're not, particularly if they're platforms that are pulling dollars away from non-digital media. So linear TV dollars, we don't touch. It's not in our space. If they go to CTV, that's good. New social platforms that are open to third parties, like TikTok, that bring us in and cover us great because it allows dollars that were being spent in places where maybe we couldn't touch in the past to be verified. So those things are good. Ultimately, though, our thesis is we started the discussion with being we want to be as platform agnostic as possible by covering as many places as possible.
So whether that pie shift goes from one platform to the other, as long as we're getting a partnership there and we're building a partnership there, I think we'll benefit. So like you said, Netflix launched this year. We were one of their partners that they went out with. TikTok opened up the platform last year to third parties, and we were one of their partners. So it's important for us to get the coverage. New platforms coming to bear is great. And Amazon is wonderful because they are an advertiser client. They are a platform client. And they are a DSP partner. So we have a great relationship with Amazon. And Prime is actually one of our advertiser customers.
Oh, cool. Yeah. I want to touch on, go back to the business a little bit. One of the trends we saw, I think, late last year was international growth kind of slowed down going into the back half of 2022. Since then, we've seen a re-acceleration. What's been driving that uptick in growth again? And what changes have you made in the business that have contributed to that?
Yeah. So Q4 was a pretty ugly one, I think, internationally for everybody. The media market is driven largely by U.K. ad spend, which is the biggest ad spend market there. Inflation there was pretty rough. I think it's starting to slow down now. But net-net, international only grew 5% for us in Q4 of last year. This quarter grew 26% with EMEA at 23%, APAC at 31%. So we saw a really nice rebound. Some of that was macro. But a good part of that, particularly in EMEA, was the fact that we had invested in significant sales and marketing resources over the last 12 months in those markets. We had a strong pipeline coming into Q4.
We actually, I think we had mentioned this even on our earnings call. We had more deals in the pipeline in Q4 of 2022 than we did in Q4 of 2021 and more closed as well. I think we had a strong pipeline by investments. We had some investments in areas like the Middle Eastern region, which really started paying off for us as well. I think a lot of that had to do with sales and marketing investment that we've made over the last 12 months, as well as just some improving macros in those areas.
Yeah. When we think about international expansion for TV specifically, does that end up being net new international brands that are coming on and verifying? Or is it because you serve this group of large advertisers, is it multinationals that are in the Americas but also in Europe or in APAC?
Yeah. It's a great question, and the answer is yes. It's both, so for example, a brand like Nike, a couple of quarters ago, turned ABS on in multiple different global markets, so we have a relationship with Nike. They expanded their footprint there. We work with brands like Colgate in over 100 markets, and they're constantly adding markets, so a big chunk of our growth is expanding our footprint with current brands as those local markets become more sophisticated and look for solutions like ours to protect their spend, so A, that's a big part of it. We usually follow them into market, so for example, our deal with Yahoo Japan opened up the Japanese market for us. We opened a Tokyo office, and now we're selling local brands in Tokyo.
So we follow our enterprise partners into global markets, use them as the beachhead, and then establish sales with those local businesses or local brands after that point.
OK. I want to turn to attention, which is a new kind of premium product that you might launch. What is attention for folks that don't know? And where are we in the rollout of that solution?
Yeah. So we've launched a product called Authentic Attention easurement a while ago. And attention really is the cross-section of what we call exposure and engagement. So think of exposure as the ability for you to actually see an ad that was delivered on a page. So it could be seen. It was viewable, more or less. And engagement can be anything from consumers rolling over or scrolling through an ad, clicking on an ad, hovering on an ad, some level of engagement. Those two things together, we build basically an attention index score. And as you would probably guess, ads that have high attention tend to convert better. The whole premise behind attention is that we're moving to an era, particularly one around privacy, in which things like reach and frequency, tracking individual users, tracking those things are going to be challenged.
So advertisers are looking for proxies that are privacy-friendly and that have a direct relationship to performance. So even taking privacy issues aside of saying, I reached this person or I reached this many people, has that ever been a good proxy for performance? Isn't it really, was this ad engaged with? Could it actually be seen? Was it delivered when the TV was on? Which is, believe it or not, another thing we're measuring now. We saw that 25% of CTV apps were running ads when the television screen was off. Does not have good attention. You're not going to see that ad. So I think attention as a metric is one that's gaining traction with advertisers as they are looking for ways to attach what they're spending with, with what kind of engagement they get with advertisers, to what that means for sales.
Super early days. We've got good traction, though, two times the volume of two times the revenue in Q1 year over year. So revenue grew three times the number of campaigns set up. And still small dollars for us. But the amount of discussion around it is quite large.
We'll look forward to that to come in future years.
For sure.
That's all the time we have. Mark, thank you so much for us.
Absolutely.
Thanks, everyone.
Thanks, Arjun.
Thank you.