Great. Well, let's get started here. I'm Ron Josey. I lead the internet coverage here at Citi Research, and I'm psyched to have with us Frode Jacobsen. Frode, yeah?
Yeah.
Yeah. I always want to make sure I get the name correct. From Opera. Opera is a browser. I think most people know what Opera does. Been around for a while. Started on mobile, now going to really everywhere. And there's a lot of key drivers going on within Opera. The mix shift to Western MAUs, newer AI browsers coming on, newer capabilities, and everything else, all of which we will get into today. So Frode, thank you for coming. Welcome to the conference.
Thanks for having me.
Maybe we can kick off with just talk to us about Opera. Talk to us specifically about what gets you excited about the business from a product perspective.
Yeah. Okay.
Yeah.
To introduce Opera, we are the biggest independent browser, so the non-standard browser that people have to choose to install on their computer or on their phone.
Yep.
What we do is we
Check.
Oh, okay.
Just making sure the mic is on.
Is that better?
Okay. Now I hear you.
Great. Yeah. Great. We are the biggest independent browser.
Yep.
To get people to choose Opera and install it, we have to make it different and better than whatever standard browser would be. So more feature-rich, more functionality in the browser, more customizations, et cetera. Then by doing that, we attract the most engaged, let's say, people, the people that even consider that, "Oh, I could change my browser." That is also the population that has the highest monetization potential, spend the most money online, that we can drive the most transactions. The way we generate revenue is to essentially send traffic to partners. It is either the user is looking for something, so we call that query revenue. We send it to search partners or directly to an e-commerce player that sells the product that they are looking for.
Or it's more kind of lean back that we can show native ads in our product, so the advertising category. That one also includes targeting people outside our own product. So we buy inventory and show ads on websites or in apps, for example. So that's how we drive revenue. We've been growing it over 20% for the past decade per year, and we do it while keeping good, solid profitability, so we pay both dividend and buybacks. In terms of the era that we are in now, with all of these new AI tools coming in and these huge productivity boosts for everyone, that is a new level of dynamic ecosystem around us. The most interesting situation we've been in for a very long time. Because these tools, they kind of started out just like search, like a website or a dedicated app.
But they have the AI and LLM, so the additional potential that if you lift them above the website level and into the native browser itself, then they can act at the user level across whatever the user is doing. People have over time been spending more and more time in their browsers just because more and more tools are becoming web based, like ERP systems, presentations, spreadsheets, calendars, email, and all of that. You are logged into all the services that you maybe subscribe to, et cetera. Then if you lift the AI tools up to that level, you can have both a very informed companion and research assistant, but also you have the opportunity to have that agentic support-
Yeah
...which is a completely new thing.
So we've been impressed with just the consistent 20% growth. Before we sort of dive a little bit deeper on the advertising side, Frode, I wanted to get your take on just the product strategy within Opera. There's a lot of different browsers out there, each with a different purpose. I think within the Opera catalog of browsers, there's Opera One, there's Opera GX, there's Opera Neon, there's Opera Air. Just talk to us about the differentiation across these products and specifically where we are investing in going forward. So talk about the broader browser strategy, if you will.
Sure. The flagship browser is the Opera One.
Yep.
That is the one that most directly competes for attention from a standard browser, but adding on more to make it attractive. What we found is that with taking the same essentially technology core, we can create different versions of the browser that are more tailored to specific audiences. Opera GX is the one that is tailored to gamers. When you launch it, you see news about upcoming games, hardware, things that interest. The whole look, design, and some of the features of it is tailored for that particular segment. Opera Neon is a browser for the AI enthusiast, so the agentic browser. We want the agentic browser, and I can talk about that after, but that is something we want everyone to have access to.
We have progressed quite far on that. For the R&D of it, where we get the most feedback and the most demanding people, it is Opera Air. Sorry, it is Opera Neon.
Okay.
Yeah.
Opera Neon from an AI perspective.
Yes, because Opera Neon is a subscription browser, which essentially allows us to run all the compute on the back end, so you get a browser with completely native agentic capabilities into it. The user base is the people that are going after an agentic AI browser now is still a very niche segment.
Yeah.
Most people use AI tools, but having the AI tool be an agent on your behalf, it's still very early days.
Give us an example of what an agentic browser means, because I think most of the conversations that we have about the product set is we have the flagship with Opera One. I think we understand what Opera GX is. Opera Neon is a subscription-based, and getting the agentic benefits of what Opera Neon brings, that's always a question that we get. So talk to us about the benefits of Opera Neon.
I mean-
What do you use?
You essentially have an assistant to kill some of the tasks that would be tedious for the human to do.
Yeah.
For example, you've integrated all your platforms, you're logged into everything, and then you would say, "Here are the 20 companies that I like to follow. Populate my calendar with their next earning dates." Then the agent would search them, go to the investor relation sites, pick the dates, put them in your calendar, put a summary, etc. That stuff works pretty well.
Yeah.
Summarize this, send it to my team in a Slack message, send an email. That works pretty well. I think where it's still quite early days is, I need to go to New York for 3 days, find a good combination of flight and hotel, and create a schedule.
Like a full-on agent.
Yeah. That stuff, I think, still have ways to go.
Okay.
But there are definitely people who are enthusiastic about this and invest the time to try it out, right? Whereas most people, they just book their travel as the way they always did. So those capabilities will improve probably much faster than we expect today. And what we want is to bring this to everyone as soon as possible. And that will happen in our free browsers, in the flagship, in Opera One and Opera GX, where it's free. So the strategy we have is we use Opera Neon to learn how people use it, what they appreciate, what they don't like. You will see that the way it structures its tasks in separate groups, and then within each task, for example, it can have separate tabs.
So when you are a human and you work with your agent to get support, you can see, okay, so the agent is opening new tabs. It's researching flights and train or whatever. But it's all within one task. So you as a human can sort of follow along. So we learn from this. And then in terms of bringing it into the free products, the way we do it is we essentially want Opera One and Opera GX to be the best orchestration layer for whatever AI service the user wants to use. We are independent. We're not competing against any of these players.
Yeah.
We would happily partner with all of them, right? Already, we have integrated Google and Gemini as a long-term partner. ChatGPT, Claude, as either backend MCP based or you can put the plugin so that you can bring it up directly in the interface. Then also very big opportunity is just using local models. That is still very complicated. It is not mainstream, but it should be very easy. Just click here and the browser picks an open source model, downloads it to your machine, and then you can have the agentic experience without paying any subscription.
But going back a bit to integrating with all these other ecosystems is that means if the user already has a ChatGPT subscription, they can use that to essentially be the LLM behind making the Opera browser agentic.
Got it.
You do not have to pay separately for the browser, right? It does not really matter to us if the user prefers one or the other. What we want to do is to make sure that the Opera browser is the best place for them to natively use whichever tools they want. I think that can be quite unique because in the browser space, most browsers are more strongly affiliated with one platform than another. But the Opera browser is kind of open to everyone.
One last question on the browser product side and on AI specifically. I think OpenAI has decided not to release their browser, AI labeled browser. Chrome has talked about a new AI capability, but I do not think we have quite seen it yet. How does that change the market? Does that change the market? You all have the only sort of AI based browser. That is question one. Then question two is, I think engagement rates on Opera Neon are higher. So bigger picture, how do we take that and put that into Opera One or the other browsers?
Yeah.
One is competition, and two-
I understand. So on the first part of it, I think everyone can appreciate to have a browser with a native link to whatever AI tool they like the most.
Yeah.
But before you get to that, the browser itself, like the core browser functionality that everyone is used to and have been using for decades, that has to be good. If you have a mediocre browser with an excellent AI native link, it does not really work because you are going to use it for everything. Most likely, people are not going to want to have one browser for ChatGPT, one for Gemini, and one for whichever other tool they want. So, on the Atlas browser from ChatGPT, it was probably quite similar to them as Opera Neon is to us, that it is a good tech development, it is a good learning path, but it is not really a product for the masses.
Right. Okay.
Opera Neon, at least, is a fully-fledged browser at its core, adding the integrations, and still it attracts a certain segment. I think that's why we think it's very important that you create the product that the user can use with any service. You don't need to have different browsers for different things, because the whole idea is, since it's the web, you can have one layer and you can work with whatever tool you want to help you in that.
Yeah.
That was the first part of the question.
Yeah. Second part-
The second part was on engagement.
Yeah.
Yeah, what we see is that the users who use these features to use Opera's own built-in AI assistant or connect their existing subscriptions to the browser, they are the most engaged user base. They spend more time, they even search more than the average. So, when we do this and let the user benefit from whatever subscription they already have, what we want to build over time is the position as the best open orchestration layer. But along the way, we are attracting exactly the kind of highest ARPU users into the growth of our products.
Yeah.
Yeah.
Got it. So we will be monitoring the progression of not only Opera Neon users, but then the capabilities that go into the other browsers within Opera.
Yeah
As Opera Neon continues to grow, I think that product strategy is pretty interesting and as you launch newer browsers. So let us talk about who is using these browsers. And one of the things that we focus on quite a bit is on the Western MAUs and the Western users, and we have seen consistent growth here. So specifically, I wanted to understand a little bit more, or talk to us a little bit more about the focus and the strategy on driving Western users. And then ultimately, what is driving that, I guess?
Yeah.
Focus strategy and the driver.
The core of the strategy is we want to grow in the highest ARPU populations. Western is a very good indicator because relative to users in other regions of the world, the monetization potential is much higher. The gaming browser is there because, as a group, gamers monetize much better than average, et cetera. Of course, the AI enthusiasts we talked about, but also very high monetization potential. The way we do it is we tailor the products to be the best for the most demanding users. That is these groups. Then we direct our brand building and our marketing dollars in the same direction. The reason we do it, marketing in the U.S. will cost probably, relative to how many people you reach, it is probably 20, 30 times more expensive than an emerging market. But the revenue is also that much higher.
What we see is that the best ROI on our marketing and growth-
Yeah
...is in the highest ARPU segments. We go after that, and we keep over-indexing on that. We spend a greater share of our marketing budget on higher ARPU segments-
Yep
...relative to what they represent as a revenue, and we've been growing that over many years.
This past quarter, we saw some success with certain mobile, with Android and iOS MAUs specifically. Was there anything specific that the team did to drive, I think the comment was 40% from Android and iOS MAU growth, I think is what it was, in the U.S. last quarter, 66% in London. Just talk to us about, understood why you want to go to Western markets. The question is, how do we grow that penetration?
We've always been strongest, I would say, on the PC side as our legacy-
Got it.
...in Western markets. What we see is that our Opera One for Android and iOS is picking up momentum. There are benefits of using both for the same person. An extra tailwind that happened is, up until quite recently, we could really only compete on Android. Because iOS, we had Opera on the Apple App Store.
Of course.
But Apple didn't allow the user to set any other browser as the default browser than Safari.
Even if the user want to use Opera, if every time they click a link in an email or something like that, it opens up Safari, it's like constant uphill. We didn't spend any effort on the platform. There's been a lot of regulatory attention to this in terms of leveling the playing field, both here in the U.S. and in Europe. Those things have led to, for example, that now an iOS user can choose their browser.
Yes.
And with that, suddenly it became interesting, right? Because then that's half the market and a very high ARPU potential user. So then we spent much more attention on creating the iOS product to be beautiful and to be very functional. We direct the marketing activities in that direction. And we've grown the iOS base to represent about 10% of our smartphone base, up from zero point something percent, right? But it's still not 50%.
Right.
But it's got a very good trajectory, so essentially, in a way you could say that our market and Western markets kind of market potential doubled, right? Suddenly we can address both ecosystems.
And further to that 10% mobile user base that came from 0%, when was 0%?
It was 2023, 2024. It wasn't 0%, but it was maybe 1%.
Few years ago.
Or something like that. Yeah.
That's great. That's super helpful because here in the U.S., at least iOS has a good share of the mobile.
Big following, yeah.
big market. Yeah, for sure. Speaking of large companies, let's talk about search.
Specifically, I think Opera has a partnership with Google or a longstanding relationship with Google, I would say. Before we get into the Google partnership, AI mode on Google has, I believe, led to greater time spent across Opera's browsers. AI mode, AI overviews. What I wanted to understand is whether this is impacting any monetization opportunities within Opera.
Yeah. Now that Google talked about this summer how they are now opening up their monetization on the AI mode search-
Yeah
...on Gemini, and then our relationship with Google is revenue share based.
Okay.
We made sure that we are completely aligned incentive-wise, whether an Opera user that we send them to Google search or they go into AI mode. So long as Google can monetize that traffic, we can collect the revenue share. Yes, it is a very long long-term relationship. I think this is year 2025 or 2026 of continuous partnership.
That's wild. But back to AI mode, we're now seeing monetization in AI mode-
Yeah
...on Google?
Yes.
Do you know, or do we know if this monetization, is it higher converting, higher click-through rates because these are now conversations as opposed to the 10 blue links?
That is probably best for Google to comment on themselves, right?
Good. Okay.
The important thing to us is that just convey that because search is a part of our query revenue stream. In the past, the query revenue stream, it was 100% search, right? There was one to one. The user was looking for something, they would start typing what they were looking for, and we would send it to a search partner, mostly Google, and then we had Yandex in Eastern Europe.
Yeah.
We still do. Now it is a broader set of outcomes, right? Search is evolving.
Yeah.
It's not just serving up websites, it's also giving the user context information and has the potential to give great recommendations that are much more tailored, right? Because you have the dialogue with the user. Also on the browser end, we use our own Opera Ads platform, which is essentially excellent targeting capability. If we understand that the user is looking for something specific, then we can promote the partner that delivers that, right? To take away for the user journey to be even faster. Then we collect revenue beyond the search relationship. We can also collect revenue directly from retailers, and the category is very open to a broader partnership landscape over time as more of the new AI players start to monetize traffic, and there could be some interesting economics.
Okay. Interesting. Something to watch out for.
That's query monetization. Let's talk about advertising revenue specifically. I was surprised to hear this past quarter, I think we added about 200-ish million users on the Opera Ads platform, up to 700 million from the 500 million prior. Would love to understand just this expanded reach. What do you do with this expanded reach? How are you able to get there? Could we get even more? That's a good amount of users.
Yeah. The Opera Ads platform, it was over the first half, added 200 million o ver the reach.
Yep.
What it means is that these are people who, of course, it includes everyone who uses an Opera browser. That is kind of half or a bit below half of the reach. The other half is either apps that we are in the SDK of the app or-
Okay
...we monetize an app for another publisher. Of course an advertising company can probably reach every person on the planet.
Yeah.
What we count is just, these are people who have our software on their device that we can track, we can develop a profile, and we can optimize ad targeting on a user that we can reach directly. That is the count of the 700 million.
When we think about these 700 million, you can reach them directly, e-commerce has been a pretty big driver of growth here, I believe. I would love to hear more, just what leads to Opera's continued success in e-commerce? The ability to really track what users are doing, the 700 million. Talk to us about that.
Well, if we go some years back, we always knew that e-commerce would be a huge opportunity for us because the browser is the most important, let's say, framework for online e-commerce to happen.
Yeah.
People sit in a browser, and they look around, and they shop, and they make purchases. Still, it was about 20% of our advertising revenue. We knew that, okay, this one has potential.
Yeah.
The unlock happened when we had grown our Western market user base so much that we became relevant to the big e-commerce platforms because we could drive a sizable enough amount of traffic to them that it became worthwhile to spend the time to integrate with us. We would have APIs where we could pull product prices, descriptions, pictures, et cetera, so we could natively present it to the user base. One example is an e-commerce player in Europe who we have 5% browser market share, and we represented then 10% of their traffic. So very effective channel. We scaled that from about 20% of our advertising revenue to over 50%, which is $40 million to $240 million run rate, I think was the most recent quarter. So 6x over 2.5 years. Oh, yeah.
2.5 years e-commerce from $40 million to $240 million. Still a huge opportunity because that space is massive. Even if you just look at our browser market share and think, okay, if Opera can deliver 5% of this maybe $100 billion opportunity, it's many times over opportunity. It also shows the importance of scale. We've grown a lot over these years. When Song and I came in as executives, we had $107 million revenue in the first year, and now it's $738 million at the midpoint. Everything we do, we optimize to grow as fast as possible.
Yep.
The $1 billion milestone. We passed the $200 million, the $500 million, and that's the next. It is not so far out, right?
Yeah.
It's not just for the milestone in itself, it's also that we understand that the scale brings more partnership opportunities. The scale itself is important to drive growth from that point.
When you think about, this quarter we talked. I can't not talk about agentic commerce when we're talking about e-commerce. Does that change anything here with agentic commerce where agents can buy on behalf of others or agents to agents are shopping on their own?
It's probably a whole separate discussion in itself.
Yeah, it is.
Our philosophy for now, because that is going to evolve a lot. And there are many interests to keep in mind. You have the user preference, which for some things can be just fix this for me, and other things you actually enjoy, or you want to make the decision yourself. It's very different to order new socks or shop for a car or even a sound system or a computer. That will evolve. The key thing for us is if we are the preferred browser for users to access whatever service they want, that's a good position to be in.
Yep.
Also when monetization of agentic traffic scales up.
Yeah.
And exactly the balance and how the human and the various also essentially e-com players on the other end who I'm sure they don't want to be catalogs that AIs look up to find-
Yeah, exactly.
...lowest price of the 100 available suppliers. So, finding that balance in a good way. But our whole business is built on partnerships, so I think we'll do pretty okay on that front.
Got it. Yep. That's helpful. It's something this holiday season might be the first holiday season where agentic is something, but probably not quite obviously what it's getting to, so we're years away.
Yeah.
Maybe the last 5 minutes or so, if there's questions in the audience, let me know, of course. I'll stop and see if there's any questions. Okay. Sure. We have a mic coming.
Hi, Frode. Could you elaborate on why the browser is truly the right interface for agentic interactions when there are other models, OpenAI's Atlas and other platforms that have tried to experiment with agentic browsing? And specifically, how do you think about the difference between more professional use cases versus, call it more casual use cases like a Opera GX?
The benefit of the browser is that it's the common denominator for almost everything we use our computers to do these days. And that's where you are logged in to all your subscriptions, and that is where you can email from, where you do your work from. So if you have an agent at the level of the browser, it can act on your behalf across everything you do. So it's much more powerful than existing within a separate app ecosystem. The second part of the question in terms of professional, I think one thing that's going to be increasingly important is the user to have control over their privacy.
Because as soon as you enable an agentic feature and allow an AI platform to essentially follow you across all your browsing. Combining that with the right user control of when do I want my agent to support me? When do I want to shut it off? If you've gone through some of these, if you've tried some of them and you sign up to like, "Can see your screen, can do this," yes. And you can give people pause. Who is looking at this? So I think the control of the external platform that the user wants to use and also the ability to run an LLM locally on your machine, so in 100% privacy, are both important and probably even more important for corporations to think about how their workforce are going to use these tools.
That you have trusted partners and you have a level of control of what you transmit and what you don't.
I wanted to maybe, as we have about a minute and a half, 2 minutes left, Frode, I wanted to ask about the visibility of revenue and the durability of the business. We started out the conversation talking about consistent 20% growth. Maybe guidance for Q4 was a little bit below that or Q3. I just wanted to ask about, talk to us about the visibility and durability of the revenue base. Obviously with Western MAUs, we see some improving ARPU. We just talked about $700 million in the Ad platform or that Opera has access to e-commerce, Google. Help us understand or talk to about the visibility and durability of revenue.
The drivers of the revenue growth, there's a very broad set of drivers.
Yeah.
It's the user mix, it's the high ARPU growth, it's the engagement, it's the adoption of AI tools, it's the broadening of the advertising reach and audience. It's the scale itself that enables new partnerships and sort of the success of those to deepen them. One good thing about our business is it's ultimately driven by hundreds of millions of people making billions and billions and billions of clicks and purchases and transactions. Law of big numbers, of course, allows us to, as we look a quarter ahead at the current year, then we have pretty decent idea of how we're trending. For the longer term, it becomes very academic to say this is the relative ratio between these drivers in a 3-year term.
But what we know is that what's driving them, and that trend we continue to invest in. If it will be the, but the precise sort of how things evolve, it's evolving so rapidly.
Yeah
That that becomes maybe a bit too academic. But at the same time, given the way the revenue is generated, there's no end of quarter need to sign this deal. It's every day in the quarter based on activity.
Because of all the inputs that the company has.
Yeah.
And that gives you the confidence and maybe one last one as we go to overtime here, but just on the margin structure of the company. I think gross margins have been coming down somewhat. But EBITDA margins this year have been flattish to improving. So how do we think, just talk to us about maybe the margin structure of the business going forward.
I would say compare us, look at our margin at the EBITDA level.
Okay
We have two parts of the business. One is owned and operated inventory. It is in our browsers. It carries OpEx, carries marketing costs, but it has no cost of revenue really.
Okay.
The other part has very low OpEx base, no marketing, but has cost of revenue. So the profitability of these two is comparable only at the adjusted EBITDA level, and that is what we optimize for. Then at that level, it is always a choice. How much do we invest in growth? It can be marketing on the browser side. It can be scaling new verticals like we did with e-commerce, which the margin, as you build something new, you start off with a lower margin, and then it scales as you get more data and targeting experience. So we have kind of said that approximately this profitability level we think is healthy, and it allows us to do all the capital returns to the shareholders, and we want to have good cash conversion on that. Then within that profitability, we will maximize growth.
Yep.
Allocate to these types of things. So it is a choice. We could have 5 points higher EBITDA margin if we wanted to, but then we would not grow as fast. So we have just established that as, if you look at our history, it is a relatively stable EBITDA level, and then of course, in dollars, given the revenue growth is much higher.
Yeah. This is great. Frode, thank you very much for coming today.
Yeah. Thanks for having us.
A lot to go through, a lot on agentic browsing, but then also on just users and e-commerce, and we didn't even get to talk about travel. So a lot to
Yeah
unpack here. Thank you very much.
Thank you.