Let's see. I'm gonna test this. Can you guys hear me?
Yes.
All right, great. Hi, everyone. I'm Andrew Boone. I cover internet here at Citizens. I'm very happy to welcome Mark Douglas, the CEO and Founder of MNTN. Thank you for being here.
Thank you.
Let's just kick this off. Big picture question to start. Set the stage for us. What sets MNTN apart from other performance advertising platforms, and what also sets it apart from TV advertising? Talk about where you guys fit in the ecosystem.
Sure. Let's first define what do we mean by performance advertising platforms. Those are digital marketing platforms. I think the ones people everyone knows is paid search, Google AdWords, and paid social, like Meta app platform, TikTok app platform. There, prior to fairly recently, when MNTN launched our platform, there wasn't the ability to do direct response marketing, truly digital direct response marketing on television. We pioneered that, with the launch of the MNTN Performance TV platform, enabling any size company to advertise on TV for the first time and get live on every streaming network in, you know, essentially an hour. Doing that for streaming TV is what differentiates us in the performance space. Remember, television's the biggest device in the home.
Basic I think more people watch TV a day than use social media, than drive cars. It's the highest form of engagement in the world. Three hours on average a day, 5.1 billion people worldwide, it was completely unavailable to the SMB market previously. What sets us apart in the CTV space is you can think of the connected TV space as historically being very brand advertising-focused, meaning large brands running very large campaigns with global brands running global campaigns. They weren't really using it as a medium for performance advertising, and we pioneered that and created the market for Performance TV. That sets us apart again.
All the technology to do that, the self-serve platform, the measurement, the creative tools to do it because smaller brands don't have TV commercials, is what sets us apart in the overall connected TV market.
One of the things, again, going back to the IPO, so let's go back in the story, then go forward.
Sure
Is the first mover advantage that you guys have within the CTV space, specifically focused on performance. Talk about what that benefit is, and then talk about kind of how that reinforces the business at large.
Sure. I think the biggest benefit is the tech it takes to do performance marketing. I mean, serving ads to targeted consumers to drive measurable results, it takes a tremendous amount of data and technology to do that. I'll give you an example of that. Think of a large brand like Verizon. When Verizon is trying to reach consumers, since virtually everyone in America can become a Verizon customer, so they're really just trying to time you getting pissed off with AT&T or something like that, right? Let's take another brand, one of my favorites, which is Onewheel. Sells single-wheel skateboard, fun to watch. You know, most people go, "That looks really cool," but it also looks, like, really dangerous.
It's easy to serve ads that people be entertained with that product, but serving them to the people that will actually respond and then go to the Onewheel website, read about it, and buy one, that's much, much harder. It takes, again, we now have AI targeting to just literally pick out the right consumers, based on a lot of behavioral data, means prior shopping behavior, other behavioral data, in order to basically stream that ad to consumers who are likely to purchase. That's a really important part of what we do. It's the most important part of what we do, and I think it's the most differentiated aspect of our platform. One we uniquely pioneered, and we have a multi-year head start, which is a big part of that first-mover advantage.
Does that accrue a data benefit, or what's kind of the scale that you guys?
It's more the models applied to the data. I mean, think of it in comparison to, like, the AI space overall. The, like, it's not really the data that differentiates you, it's the models you apply to it and the output you get from those models. It's the same for us. We're inputting massive quantities of data, retail media data, shopping data, bid data, and other sources of data, but it's all the learnings over the years as to the modeling on that data, machine learning models, AI models, profiles of target consumer that accrue the benefit. The other thing was just longest time in market. I think our name is very well-known, especially in the advertising space. We have a very mature sale, go-to-market motion, which is unique. Most of the television space pursues agency relationships.
Agencies are less than 10% of our revenue, so more than 90% is direct to brands. That's very, very unique in this space. It's similar for Meta and Google. The vast majority of their revenue is coming direct relations with the brand as opposed to working through large holding companies and the complexity and revenue dependency. You have with MNTN, more than 95% of our customers are first-time TV advertisers. I believe that's the highest in the industry by a long shot. They are coming to us, and we're providing them, again, the platform, the creative tools. More than 95% don't have TV commercials when we meet them, so we give them a full solution that cuts across all their needs to go live on television for the first time and drive revenue for their business.
Let's connect that to some numbers. E xpansion rate was more than 115% last quarter. Talk to me about the drivers of what is that expansion rate, right? Is that going back to the algorithm? Are you guys accruing more share of budgets? What's the driver?
Ultimately, the customer, what they're looking at. The way to think about it is in the brand advertising arena, the area we're not really a part of, but has been the traditional realm of television, that's a cost to a business. Someone like Verizon is saying, like: "How much am I gonna allocate for brand presence in my competition with AT&T and T-Mobile?" In the performance advertising space, the way companies allocate budgets is more, t hey think of it as like they're allocating revenue, w hat we call share of wallet.
What percentage of my revenue is gonna come from repeat customers? What percentage from paid search, paid social, now Performance TV? The better the performance, the more they're likely to allocate. Ultimately, our revenue is driven by a combination of an efficient go-to-market motion to keep acquiring new customers, but also delivering the value in terms of the actual convert, you know, visits to their brand, conversions to their brand, and revenue they accrue from those, I mean, purchases when I say conversions. It's a combination of those two. Without the purchase behavior of the consumer, like television contributing to driving the purchase behavior, then that's the value that they're buying, and that's what they're buying from MNTN, and they're buying from any performance marketing platform.
Makes sense. Let's go to the other side of the equation. Let's talk about the onboarding of new clients. Talk to us about the unlock in terms of smaller clients and how you're bringing them on the platform. What does self-onboarding look like? Talk about the evolution of that, and what should our expectations be in terms of kind of those ads continuing?
Sure. A majority of our revenue has been what we refer to as mid-market. You can think of that as, established brands almost entirely direct to consumer. The not huge brands, but brands you've heard. Like WeatherTech is probably a brand that everyone has heard of, but not, like, a massive global brand. You know, kind of the number one brand in their space, right? They're the ThirdLove. I'm just throwing out names. Oh, I mentioned Onewheel earlier. Those are examples of mid-market brands. What defines them for us as mid-market is they have established product market fit.
Like, people know they want a, you know, a bed for their truck, and maybe they just got the truck and not familiar with WeatherTech, but they know what the need is, or they discover something like a Onewheel that they didn't know they need, but once they see it, they're like, "I need that," right? T hat's mid-market brand. F inding them, acquiring them, and stuff like that has one go-to-market motion. You mentioned, you already asked about small business. For small business, what we have to do is have a similar go-to-market motion, but one we can scale much, much broader because there are millions of small businesses. We think roughly 1.5 million that could potentially be on television.
There, again, we use multiple marketing channels to deliver our message to them, including the use of our platform. We stream MNTN-branded TV commercials into the homes of our future customers, and that's one of the ways they discover MNTN. It's kind of like the commercials are not worded this way at all, but it's a little like you see a billboard and it says, "Your brand can be here. I mean, that's subtly what the message is. Done in a much more clever way. We use, ironically, streaming TV to deliver our brand. We use social. We use, you know, email marketing. A number of different vehicles.
Again, give them the platform. What's key there is everything is self-serve. They can self-sign up. The most key part of that is for sure they don't have TV commercials when they hit the MNTN website. That's why we introduced last quarter QuickFrame AI in order to continue to give them an efficient way to build TV commercials so that they can go live on the platform and then keep updating the creative.
Well, let's talk about that.
Okay. Sure.
Right. Talk to me about the evolution of QuickFrame AI. Where is it today? What does that start to look like over the next two years?
Yeah. The creative need I think is clear, is if you wanna get small and midsize companies on the television, you have to give them an efficient, cost-effective way of actually having TV commercials. These brands are comfortable with video. They generally have social video, but the television is a little more demanding. T he ad has to be exactly 30 seconds. I think it has to be sometimes just a little more professional. We first started by acquiring a company in 2021 we call QuickFrame, and that was a marketplace of independent creators. With the advent of generative AI, we built QuickFrame AI. We launched it in late November.
There, the initial numbers we released on it was basically 5,000 people on in the first 30 days. Those numbers have grown since then. It's still in beta, so we're iterating on it pretty aggressively, but we think it's rapidly finding kind of like the sweet spot where either someone who's kind of a pro with video can use this or someone who's more of a novice can go in there. There's starting points for each in order to build really professional 30-second commercials. Our We've, we're integrated with a number, if not all, of the major generative models, meaning Sora, Gemini, and there are a number of other really, really compelling video models.
What we're doing is we're orchestrating those models, plus adding additional tools in order a brand can build, like, really compelling creative and do it really fast. Why that's important in, from the time someone says they wanna be a MNTN customer, it generally takes them about 40 days to go live. Like, 35 of the 40 days used to be creative. W e're shortening that time and lowering the cost so they can get live faster, and they can build more versions of their commercials, which is, are an important aspect of driving performance.
What's the bottleneck for that to go GA fully?
It's just a normal I mean, at AI speed, we're doing.
AI speed tomorrow.
What we're releasing literally almost every day. We're doing updates to the product. If we were to bucket the goals behind the releases, we're on, like, release four in four months. It's just, like, racing through the beta, getting customer feedback, seeing any obstacles. Like, one thing we learned very quickly is that a lot of people wanna do product-centric videos, so adding where we just go to their website, find all the products they sell, and then bring them into QuickFrame AI, and they can just pick the products and build commercials out of them. That feature wasn't in the initial release. But you know, you just kinda learn very rapidly. The half of the headcount at MNTN we have approximately 540 people at the company. Half of them are on the engineering team, a portion of that half are in QuickFrame AI.
Talk about your relationships with the streamers and t he publishers that you guys are sourcing inventory from.
Yeah.
What does that look like, as you guys grow, I'm assuming you guys are more important to them. Just talk through that relationship.
Yeah. I mean, the way to think about MNTN is almost like we're walled garden for the whole TV industry. What's nice is that I've referenced that 95% stat a few times, is that 95% of our customers have never been on TV before. This is net new dollars we're bringing into the television industry, which is great for all our streaming partners. We have partnerships with just about every media company in the industry, plus the television manufacturers, 'cause Samsung and LG now stream directly out of the TVs also. All of this has ad space, FAST channels. They generally, they love us because we're bringing in this new cohort of customers, which is the future of television.
It's where the growth in this industry is going to come from. You're seeing major media executives acknowledge it. A few years ago, they weren't acknowledging it. We had to evangelize it. At this point, all of those companies are MNTN partners. The relationships we have with them are very strong. Increasingly, we get new ad formats first because they can go live so fast. When I say new ad formats, things like that you probably experienced but may not have even noticed, like something called a Pause Ads. Like, you pause it. When you used to pause TV, it would just sit there on the show.
Now it switches to an ad and t hey call that Pause Ads, introduced very recently. We're one of the first to have it. Customers are loving it. It performs well. Also, what we refer to as super premium content, live sports and other things, we're getting very early and bringing, again, bringing that into the SMB market to drive performance.
Is that also leading to discounts? Are you guys seeing that affect the prices of the CPMs?
Yeah. The scale of our business, we have all what we call private marketplace agreements with the streaming networks. The pricing on that, we're very pleased with, and that's a result of a combination of scale and that this is new revenue to the streaming networks. That's been a competitive advantage for us. It's the first-mover advantage. If it gives us more scale, that scale is gonna lead to lower pricing, which actually improves performance, and then which then leads to more scale.
Let's talk a little bit about go-to-market , right? You talked a little bit earlier about using your own platform to be able to find advertisers. Can you flesh that out and talk about what you guys have learned and how that continues to scale to be able to unlock more marketers and marketing dollars that end up on MNTN?
Yeah. I think we see the early signs that the market's going from early adopter, which we essentially created, to mainstream, meaning that the, you know, they're just a group of marketers that don't wanna be first, right? In any market, there's a group of customers that are not the early adopters. As that's occurring, that gives us an opportunity to scale our own marketing more and do it, you know, at a lower CAC. I think we're seeing the first signs of that, which is we can scale it more. We see that reflected in web responses to our own marketing to drive customers into MNTN as well as website traffic, Google searches, things like that. We rank really highly on organic search so that AI searches and things like that. That just leads to a path to kinda growing, continuing to grow and do that efficiently.
Brand awareness is up, talk to me about what is the actual, the human nature of that, right? A lead comes in. Talk to me about the sales force and what's kind of been the evolution of converting what may be an inbound or outbound lead into a trial and then into, like, a live campaign.
Yeah. Our traditional sales process is basically we very broadly target, using our own platform and using other marketing channels. That leads to someone coming to mntn.com a nd asking for a demo to learn more. That very, pretty efficiently leads to them wanting to go live on the platform and doing a trial, a paid trial, and then increasing budget. What's happening now is increasingly the customer doesn't need a demo. They're already bought in, so they come to the website and they just sign up. Instead of demoing to get to a sign-up, it's signing up to getting their first campaign live, and t hat is starting to hit a tipping point where we get more self-sign up, like people just come to the website and sign up than needing a demo.
We still offer them a demo throughout the product or any assistance in getting live, but that's increasingly helping. That's one of the things why I said that there's signs that the market's going from early adopter, can you educate me with the product demo, to the more mature, not mature, but the mainstream, where it's now I already know I want this, I just wanna, like, create an account. Which is similar, like, no one goes to Google or Meta and asks for a demo, right? They just, like, create an account, go in there, and start creating campaigns. Now we're seeing that happen on Performance TV also.
We talked about this during your IPO process. T he reduction of spend minimums, right?
Yeah.
Was like one of the key unlocks as you guys do, again, shorten that funnel into a campaign. Where does that sit today, and what is the vision to have something look more like Google Search that you can spend $5 on?
Yeah, probably the lowest, but the minimums right now are $500 a month. I think, the lowest you generally see are more like $1,000-$1,500 a month. The averages are much higher than that 'cause people wanna spend. They want to. They're trying to grow. I mean, you spend on any of these platforms 'cause you're trying, you wanna grow your revenue.
Same for us. We spend marketing budgets because we wanna grow our platform, our business, and so forth. But by opening up those minimums and marketing more to smaller business, which I think is, you know, kind of what you're really asking, it's enabling a lot more small business. The real challenge is, you know, do they have enough knowledge to get live? One of, I mentioned earlier, one of the things that differentiates mid-market from small business, mid-market customers also have established marketing teams, like the person that generally uses MNTN platform is the same person that's probably doing the Instagram campaigns or the TikTok campaigns for their brand. Now they're actually pretty excited. Now they're doing television.
Right? For the small business, the smaller business, there's not generally as sophisticated marketing infrastructure in place, so we have to give them a simplified experience and we've been doing that and with, you know, results we're pleased with and that we'll probably be talking about a little more in the future.
Let's talk about the 1Q guide a little bit.
Sure.
This is a little bit more near term, but you guys had a strong fourth quarter , accelerated revenue.
Yeah.
There's an implied step down in terms of just the deceleration of growth for 1Q.
Yeah.
Can you just talk about the guidance philosophy or anything that you wanna highlight in terms of thinking through how you guys set up 2026?
Yeah, absolutely. We, you know, we wanna be prudent in the guidance. Our business is, t he vast majority of our revenue is direct-to-consumer brands. Their big quarter is Q4 which Christmas, holidays, stuff like that, and other holidays. That makes our biggest quarter Q4, so there's a natural step down in Q1 just as part of that cycle. We also, you know, wanna be very prudent in terms of the guidance and set up for, you know, kind of, the way investors like to see guidance and revenue grow over the course of a year.
Yep. just given the high incremental margins associated with digital advertising, talk about where you think you can take the margins kind of more in the medium term as the business continues to scale.
Yeah. Our gross margins, our goal has been in the 75%-80% range, and we're already there, and there were a number of factors that have led to that really efficient use of our hosting environments in particular. The business is extremely high volume in terms of data, just phenomenal scale and volumes in terms of data and the programmatic bidding, so being really efficient in that. We've moved around hosting providers in order to basically leverage the scale that we have and get the right pricing for hosting and other factors. That's important.
In terms of EBITDA margins, we wanna balance growth and profitability, so I think, you know, the EBITDA margins that we provided guidance on I think are, you know, right, at the right level for the business. There's room. e want to maximize those. There's room to do that. I think growth is really important, and you wanna balance the two.
Where are you guys investing back in the business then as we think about the next couple years?
Yeah. It's two areas. One is definitely sales and marketing, in particular marketing. We did sales investments at scaling the sales team more in Q4 leading into Q1. We're doing the same in marketing right now. Technology is always important. Ultimately, the customer is buying the output of the performance they get from our platform, we don't just stream ads. What we do is we essentially determine the exact person to get that ad for a particular brand. You cannot do performance advertising without, you know, I like, and some people call it sharpshooting. I like to refer to it as matching. What we do is literally match consumers with brands and products they're potentially gonna love.
That's like a one-to-one match, and then the ad is basically the way you can, you connect them, which is a different approach from brand advertising, which is let's stream to everyone and hope that someone will remember our brand when they, you know, are in a 7-Eleven, you know, buying their next soda or something like that. It's a different approach. If you want to grow revenue, you can do it with scaling the go-to-market motion, which is sales and marketing. The most important way of doing it is just literally deliver ever better performance and those companies that will be attracted to that and wanna, you know, place budget there to grow their business.
Yeah. All right. Last question.
Sure.
I know you guys are a relatively recent IPO, but talk about just the uses of cash. How do you think about capital allocation from here?
Yeah. We have a really healthy balance sheet. We have zero debt. We're adding cash literally every month. We'll allocate it appropriately as we see fit, you know? Right now we're looking, you know, we're opportunistic, where we see opportunities to use the cash, but at the moment, we think having a really stable and growing balance sheet's important, that's what we're doing.
Great. All right. Thank you so much, Mark.
Thank you.