All right, since it is now 2:15 P.M., why don't we go ahead and get started? So hello, everyone, and welcome again to the Raymond James TMT and Consumer Conference. I'm Andrew Marok, and I cover digital advertising and digital media here at Raymond James, and we're thrilled to have Tremor International, potentially soon to be Nexxen, joining us at this year's conference. And with us from the company is CEO Ofer Druker. Thanks for joining.
Of course. Thank you, Andrew.
So I have a few questions prepared, but if anybody in the audience has anything that they'd like to pose to Ofer, we'll have openings at some point in the chat. Just feel, just throw your hand up, and we'll get something in. So maybe before we dig in, why don't we start with a bit of background? So why don't we take the 30,000-foot view of Tremor International as a company? What are some of the most recent happenings with the story, and where do you fit into the digital ad ecosystem?
Great. We started our journey in 2017 with a very clear strategy about what we want to build. Most of the people that are in the company are in the ad tech business for many, many years. I will celebrate 26 years in this ecosystem.
Okay.
1 50 years in other industries, I think—from everything that is happening. But we put... We placed in our, as a major strategy to deal with, video and data-
Mm.
as the first step. We believe that video is the most engaging format in the industry, and since we started in this industry, everybody was talking about the linear big advertisers that are using video in order to get engagement, and one day they will move to digital. So we said, if we will basically use this format, it will serve us in the future. The second thing is about data, which we believe that is really necessary element in targeting for advertisers to basically use their money and their resources in a smarter way, and to get attraction and reaction from customers, potential customers. So we placed this as the major theme in our strategy in the beginning.
In 2019, we made a small adjustment that we felt that we need to do even before, because we made the acquisition in 2019. We became an end-to-end solution, basically, and we put our bet on CTV. We acquired RhythmOne. We merged with RhythmOne.
Mm.
RhythmOne basically connected a lot of technologies-
Can we take one second? Sorry, I think maybe your microphone is... Oh, there's just a very quick delay.
No problem.
Good?
So in 2019, basically, we added two elements to our strategy. One of them was end-to-end solution, and the second part was CTV. We basically merged with RhythmOne, that owned an SSP and exchange, and they were very strong and focused also on CTV because they acquired YuMe, if you remember them.
Mm-hmm. Mm-hmm.
And many other assets around CTV, and we connected everything together. In general, our company, over the years, grow on two horizons or two paths. One of them was organic path that we grow year over year, and the second one was through acquisition. We made four major acquisitions in the last since the beginning of 2017. We acquired Tremor in 2017. In 2019, we merged with RhythmOne. Then in 2020, we basically acquired Unruly-
Mm-hmm.
... that was an SSP. And in 2020, in the end of 2022, we acquired Amobee-
Mm-hmm.
That was the biggest company and that we acquired, basically, and we connected all of them together. So in general, what we did, we focused on this element of video, CTV, data, end- to- end, and we connected now, during this year, the last year, we connected everything to one platform. As you mentioned in the beginning, that we want to rebrand as Nexxen.
Mm-hmm.
... because we want to have one platform that basically can offer everything to the market, and it's like video, focused and data-driven platform that can provide both sides of the equation, basically the publishers and the advertisers, a lot of advantages. And many people are talking about video and CTV, but for us, if you look at video, it's about 67% of our revenue, and CTV, in the first nine months of the year, was 29% of our net revenue. So it's meaningful part of that, and we believe that this is our growth engines for the future. So this is in, like, 30,000 feet, as you asked.
There are lots, a lot going on. I mean, it, it's always interesting in digital advertising how these stories kind of come together like this. And so I wanted to touch kind of on that concept of the end-to-end platform. Can you highlight just what are some of the key advantages to that model for you? And maybe in this era of supply path optimization, when you have advertisers and publishers maybe working with fewer partners, how that positions you to be one of those partners that remains on the list?
Of course. So I remember the day that we basically merged with RhythmOne, and we announced that we'll be an end-to-end solution. It was not so popular.
Mm.
So I remember that the editor of one of the magazines came to our office and said, "You know, Ofer, all the others are talking about non-bias and about specializing. Why you are mixing everything? Why you're connecting these dots?" Because we bought Tremor out of Telaria that want to be specialized in just the SSP side. So basically, what we did, we said to them that we believe that basically it give us a lot of advantages. First of all, of course, is for our shareholders and our company is the margin business. That you can keep much higher margins than when you are one-sided. And we see that today, most of the companies that are one-sided are facing difficulties to maintain their technology forces and to keep their business running.
When you are two-sided, then you can increase your margin. It makes a lot more sense. From every dollar, you can keep more, much more. The second thing is about pricing for your clients, because when you own both sides, you can be more flexible on pricing, and you can compete with much more companies when you're doing that because it's you have the flexibility to lower a little bit your margin in some cases in order to win the business. The third element that is just growing and growing is about basically privacy or cookie sync. That is much better when you're sitting on both sides. So the cookie sync, when you want to target, and when we are, Google is now talking about removing cookies altogether.
When you have both sides, it makes it easier for you not to rely only on cookie in order to target and to measure.
Mm-hmm.
This is something which is very important in our opinion. The last point is about simplicity. Meaning when you are a brand manager, you don't want to run another business in parallel. You want to run your business. You want to get your KPIs. You want to be strong in the market that you are in. You don't want to manage also ad tech ecosystem in order to fine-tune and to be the point of contacts of so many providers that are basically enabling you to run your campaigns. So basically what we are offering, if they want to, they can choose to use any element that they want, but if they want, they can use our full platform, and it's making their life much more simple in many ways.
Now, you mentioned that a lot of companies are talking about now, in different names, about this solution of supply path optimization and all that.
Sure.
First of all, it's a great indication for us that we were right in 2010 to do that. But apart from that, most of the players that are doing that, they don't own really the best of technology on both sides. Usually, there are an SSP that are basically using an old ad server or an ad server in order to run ads, or there are a DSP that basically try to reach advertisers, the publishers and sign with them. We own a very sophisticated SSP and exchange. We own a very sophisticated DSP, full function. So when you have these both systems inside, I think that we will have an advantage in the coming years, unless these companies will start, evolve, build, or acquire these type of companies. But we don't see that happen right now.
Interesting. So kind of on that point of building up the capability set, let's touch on the acquisition of Amobee. Can you give kind of a brief summary of how Amobee has been additive to your CTV and Total TV business, and what types of new business are you accessing as a result?
Of course. So when we looked at... First of all, we generated in the past few years a lot of cash.
Mm.
We felt that the best usage of cash will be to acquire additional capabilities that we feel that is needed, that are needed in the market. When we acquired Amobee, we looked at a few elements that we felt that are needed. First of all, the DSP of Amobee was a little bit different than ours. It was more enterprise-oriented, which means that we can offer to, to agencies, independent agencies, we can offer to brands to use our DSP, and they can basically find a state-of-the-art DSP that is built for enterprise purposes. Our old DSP of Tremor was not like that. It was more specialized in buying media smartly on video and CTV, but less enterprise-focused. When we acquired Amobee, basically we added these capabilities to be able to reach out to agencies, reach out to clients, and integrate our DSP into them.
The second thing is about the discovery tool that they built or acquired. They have a very powerful discovery tool, BI system, that has enabled them to create segments and for advertisers, basically to learn much more about their audiences and to use it. And we have a slogan, "Better planning, better results," which is true.
Mm.
So I think that when you are integrating into that also ACR data like we got, and we can talk about it, I think that we are getting a very powerful system. The last point is about their linear knowledge and cross-platform that we created from that. Since I was young in this industry, people were always talking about converting and conversion of this linear TV into digital. And when we looked at Amobee, we saw that they basically acquired a company called Videology. That Videology was very deep into linear planning.
Right.
We felt that if we will buy them, we will be able to be, in the future, the cross or the bridge between basically linear and digital. We launched the product, the first product in April this year, that is basically cross-platform, that basically enable linear advertisers to cross into digital and avoid duplication, and to understand what is the additional reach that they are getting, which is a very unique and very advanced tool. To be honest, I didn't, we didn't build it, we acquired that. But when you look at the efforts and the money that, and resources that was associated with that, it's like more than $100 million, I think, in general, in cost that was invested in this in this platform in order to make it happen. So these are the assets.
Now, if you're looking at CTV, like you mentioned, I think that the major thing is the last point.
Mm.
Meaning, in the past, it was a luxury. When people talk about you can move from linear to digital, and people said: "Wow, sounds interesting or great," I think now it's a necessity.
Yeah.
Because when you're looking at linear, the linear basically reaching the market is going down. So when advertisers wants to reach their clients, they cannot just rely on linear anymore. They need to move also to digital, and I think that when they are running on digital, they would like to run on streaming and CTV, and we are there. So we can offer them this technology, and we can use them, we can offer them this user extension that will be on CTV.
... Great. That's really interesting. And then kind of just in general on market shifts within CTV, obviously, a very important format for your company, and we hear about kind of the twin shifts that you need to have happen for CTV to be accretive to your guys' revenue, and then not just Tremor’s, but anybody in the programmatic ad industry. And that's the shift of linear dollars to CTV and of CTV going from directly purchased to programmatic or PMPs. So in that case, you know, how are those shifts kind of shaping up and providing the tailwinds to your business?
I think that, it's related to all the ecosystem that we basically created.
Mm.
I think that sometimes people mistaken in thinking that CTV is just another format, but it's not. You need an ecosystem in order to serve it well. You need the data, you need the right ecosystem, the DMP, what information to get from the CTV in order to make it more accurate, to control the frequency capping and all that. So I think that in general, when you're looking at that, I think that all the ecosystem that we built basically helping us to bring more publishers to our system because they see the value of us owning also a DSP-
Mm.
... that can bring them demand to the platform. This the first thing, and the second thing is also the data. It's not a secret, but people prefer to buy targeted media, and we have ACR data through the agreement that we've done with VIDAA, which is a long-term agreement. And to the people that sometimes it's Hisense, but just for you to know, because sometimes it's like misleading, but Hisense acquired Toshiba TV division about five or six years ago, and basically Toshiba now is in some parts of the world because it's spread all over, but it's moving now to VIDAA, which is the platform that we invested in and have partnership with.
So all this data is also fueling the platform because advertisers wants to buy CTV through data, through ACR data, in order to get basically targeting, and we build a product that's called TV Intelligence that basically providing these capabilities of ACR and other data segments that we got.
Great, and I did kinda wanna drill a little bit deeper on the, on the VIDAA partnership. So we're seeing geographic expansion. You know, you guys have devoted that, that upfront capital, the $25 million for the partnership. I guess just in, in general terms, how big of an opportunity or an, a revenue unlock can VIDAA be for you? And then does VIDAA and the ACR data exclusivity change your revenue mix at all to have maybe more of a data revenue stream component as opposed to being levered to the more spend-related streams?
So first of all, VIDAA and Hisense is... Hisense, let's start with Hisense, because Hisense is the owner-
Sure.
... and VIDAA is a subsidiary, basically of Hisense. Hisense is one of the strongest and fastest-growing partners or players in CTV today. If you look at the numbers, you know, I think—I feel that sometimes we bet right, because when we invested in Hisense, they were like number four or five in growth. Now, they are number two in numbers of growing, in percentage of growing in the industry. And they are pushing very hard on, on more partnership because VIDAA can, can basically integrate it, as we mentioned, into Hisense and, and Toshiba, but also to other 100 brands that are using it, that we are not sometimes familiar with these brands, but for them it's worth to integrate VIDAA-
Sure.
... to push it to the market and to generate also revenues. VIDAA provide us... By the way, the $25 million that we made, it's not like an advance payment, it's an investment, so we are shareholders in VIDAA. But in general, when we are looking at that, ACR data is like the glue of all the machine that we spoke about before.
Mm-hmm.
So it's basically helping advertisers to basically reach the audience that they want. It will enable measurement company to collect data and use this ACR data in order to provide measurement to these advertisers and so on. So it's very meaningful, and we are going to use it in a few elements. One of them is to provide this ACR data into big DSPs that are offering, like self-serve, to big agencies in order to target their audiences. The second one is to use it by ourself in order to sell it to agencies and clients. And the third element is to license this to measurement companies, that we are not doing it by ourself, but we can license the data to measurement because we have the right for targeting and measurement for a couple of years ahead, globally.
So when you're looking at that, I think that we just started, like in the last year, but it's sometimes we are, we don't have patience because so many things happen in our industry. But I think that in this case, after working so hard in order to build this infrastructure, to release it this year and to start enjoying from that, I feel that in the next couple of years, it will become a very meaningful engine for doing two things. First of all, to increase our organic growth, that growth, that basically we are coming to the agencies and clients with a much more interesting product to buy and target on based on that.
The second thing is to basically create partnership with companies around the globe that wants to use the data, and in exchange, they can buy media on our platform or can use our DSP and so on, in order to do that. So I feel that the VIDAA and the relationship with Hisense are very meaningful for us.
Mm.
I think that CTV, as you said, it's a very meaningful element, so we tied and we have relationship with, with Hisense, which is one of the giants in this industry, and they are growing very fast, and they have very nice already, very nice, user base in many countries, including in the U.S.
Great, and then kind of in addition to those platform elements, the Amobee acquisition, the VIDAA partnership expansion, and things like that, you've also got a couple other corporate things going on in terms of the Nexxen rebrand and the hiring of a new Chief Marketing Officer. So I guess, what kind of spurred those moves, the rebrand and the CMO hire, and what kind of needs to happen from those to be considered a long-term success?
Okay. So we just mentioned so many brands that we acquired and connected together. So when we look at Tremor, Amobee, RhythmOne, Unruly and all that, it's confusing. And when we acquired Amobee, we said to the employees and that were supposed to join us, we said to them, "We are going to create a new brand." First of all, that everybody will feel that is connected to the same brand and starting from fresh, so nobody has, like, an advantage of someone else. And the second thing is that the market, our markets, I'm not talking about now the investors and finance market, I'm talking about our market. When you're coming to sell something and you are mentioning so many brands, you're already in a problem, so you need to create one brand that will do that.
And for us, the investors, the shareholders, the financial markets, most of the investors are generalists. You know, they don't have time to learn about each product that we basically built and did. So I think that when you are building one brand, it's easier for people to comprehend what we built and what we are doing, and I think that it's very meaningful for us. And the CMO that we basically brought in is someone that was a product marketing guy. Why? Because I think that all the events and all this experimental marketing that we are doing, we are doing a very good job. But I think that when you're looking at what we needed, we needed someone that will learn how to tell our story from technology perspective, how we connected everything, how everything is working together as one piece.
We needed to do that in a better way, so we brought someone with a background of product marketing that will enable to do that, and he came from the industry.
Hmm.
He worked in Twitter, in Meredith, in PubMatic in the past, so he has the knowledge about the industry, and he can basically help us to build this story in a better way. When we're looking on the sales side, again, we incorporate here a lot of capabilities. Sometimes you need to create new sales teams, so we have now more sales. We have a few sales, type of sales team. We have people that are selling technology, and we have people that are selling media, basically.
Hmm.
So we are hiring these people, we train them, we build their knowledge, and I think that success, as you mentioned, is being, in this case, measured over time. If we will be able to connect the story together like we feel that we do, and hire the right people like we feel that we do, I feel that our future is good because I think that we have a very comprehensive technology platform, and we have a good story in the market that is basically, if you go through all the trends, and you're a professional, if you go on the, on all the trends and everything that is happening in the market, you will see that we give, we provide a very good answer to all these trends, basically through our structure and through our partnership and technologies that we basically built lately.
Okay. And then kind of on that, in terms of the trends, so why don't we do a quick level set, maybe on the state of the macro environment as you see it? So how would you classify macro conditions, maybe outlooks for 2024 and the effect to Tremor? Specifically, kind of what are some of the moving pieces within CTV and non-CTV video?
Okay. So I think that in the last two years, the macroeconomics basically affected two things.
Hmm.
First of all, from the advertiser side, when we are in branding business, so people needs to feel that when they are investing in branding, they will get a return over time for that. There is some cautiousness and some loss of confidence, basically, in what's going to happen in the market, in the on the advertiser side. The second thing that is happening in the market, I feel, is the buying power of the users went down. We need to remember, after the Corona, there was a lot of money spread in the market for people to buy things, to do stuff, but it's over.
Hmm.
So the buying power of the typical user went down. So I think these two elements basically created headwinds for our industry, not just for Tremor, but for the industry. And when we looked at that, we said, "Okay, we will lower our head and cross this storm and build. We will, you know, consolidate the acquisition that we made." Just to give you a perspective, we were 600 people when we in Tremor, before we acquired Amobee. Amobee had about 1,000 people. Now, we are together, about 900 people, 900 full-time employees.
So we made a lot of changes over the time in order to build this company, and I think that hopefully, when we look at 2024, that you mentioned, we hope that the market condition will improve and will enjoy also from some tailwinds, that people will feel again secure about spending their money and investing their money in marketing and so on. And I feel, I think that we will feel it in our business in a very big way, like we did in the past. So I think that when you look at the macroeconomic, I think that the last two years was not easy, as you know, and we hope that you know, the future will be brighter very soon.
Okay. Obviously, you've historically been an acquisitive company, as we've discussed, with the multitude of brands that you had previously under your portfolio before the rebrand. You've also since built up a cash balance of about $200 million since the Amobee acquisition. What's the outlook for capital allocation looking like, and is there anything kind of in particular in terms of tech or capabilities on your shopping list?
I think that, you know, to buy a company, it's not just to buy.
Hmm.
It's not that you are wrapping it and leaving the store, and you are happy. It's also to integrate. So I think that we just concluded a very busy year to integrate. We took two DSPs, integrated them into one. We took two DMPs, integrated them into one. We took so many brands, and we are integrating them into one brand. We integrated people, which is also difficult, you know, sales team, platform, sales, sales force, all that. So I think that to make additional acquisition, it's easy, but I don't think that honestly, it's something that you can do repeatedly without killing the company in our size, to do so many like that every year in this size. The second thing, I feel that when we are looking at our technology, we have everything that we can dream about, honestly.
We have strong DSP, planning tool, cross-planning tool, DMP, SSP, CTV ad server. Everything that you can basically look into the market, we got it, and we got it in a very good shape. So I don't see any particular platform or system that we should buy. But as we know, in the future, we are looking always at buying, like we call it, three Cs: one, capabilities, more capabilities that maybe it's like a niche capability that we need. The second thing is, can be clients. If someone own a lot of clients and you want it, or you want to expand to new countries. So it can happen, but right now we don't see a necessity to that, and we don't feel that it's the right timing to do an act like that.
Okay. So and then with the tech arms race kind of seeming to accelerate, especially within the ad tech industry, Tremor's typically been on the high end of the margin rankings, kind of ex Amobee. How are you thinking about balancing that need for continued investment in tech and product, with dropping incremental revenue or margin savings to the bottom line?
I think that we always, if you will check, you know, like, our company from numbers of full-time employees compared to revenues to EBITDA, you will see that we are very efficient usually. I think that I strongly believe that our industry is driven by technology.
Mm.
The days of other tricks are over. I think that it's all about technology. So you cannot save around technology. I think that what you need to do is to balance it right. I think that we always like to be an innovative company. I think that we proved that. We have a long list of things that we did first, I think, in this industry, and we want to keep doing that. And I think that in the end of the day, if you are investing in the right products, in the right... in the, with the right people, it will drive you healthy growth in the future. So sometimes you don't see that immediately.
Mm.
But I think that, as I mentioned before, like the cross-planning tool and this tool, ACR, that we invested a lot of money in just now picking up, it's investment for the future, but I feel that it's needed in order to keep an edge. Because we need to remember that to build a technology, it's not a matter of months. Sometimes, even if it's like we are living in a quick world, it still takes time to build a good product and to stabilize it and to push it to the market. So I think that what we are doing all the time is we are building the future.
Right.
I think that we will not... Our philosophy and our strategy is not to stop doing that, but to keep investing, but in a balanced way. We are profitable, we are cash generative. We always put an emphasis on that, but we will not lose our edge on the technology side.
Great. Before I get my last question in, is there anything in the audience that would like to be posed to the company? All right, seeing none, I always like to close with the question that I ask all of my companies who come in, as we get into 2024, what's likely to be a quite interesting year in advertising, is there any one thing that investors should focus on or you feel is misunderstood about the Tremor story, soon to be the Nexxen story, that we should keep an eye on into next year?
It's a very good question, first of all. I like it. I think that sometimes investors and people in the... not just investors, but outside people that are not in the company, they don't see all the efforts, all the work that was done in an obvious world, because as I mentioned, we started this journey in 2017. We are six years, almost seven years in this process. We just finished concluding everything that we've done, from building DSP, end-to-end platform, investing in CTV, investing in data, investing in all these different technologies that are basically building this ecosystem. We concluded that, as we reported in the second quarter of this year, we basically finished the integration of the two DSPs.
Until the end of the year, we'll manage to build one DMP from all the elements that we got. I think that one thing that I'm sharing with the people now is that basically, we are ready for 2024 with a full stack, with everything consolidated, everything integrated, and we are waiting for a strong 2024. If, if, again, as I mentioned, if the macroeconomics will change, I think it will be a wonderful year.
Great. Well, we'll definitely keep our eyes peeled for this one. So, just remains to say thank you again for, Tremor International, for coming to this year's conference, and CEO, Ofer Druker.