Welcome to the Perion Network fourth quarter and full year 2020 earnings conference call. Today's conference is being recorded. The press release detailing the financial results is available on the company's website at perion.com. Before we begin, I'd like to read the following safe harbor statement. Today's discussion includes forward-looking statements. These statements reflect the company's current views with respect to future events. These forward-looking statements involve known and unknown risks, uncertainties, and other factors, including those discussed under the heading Risk Factors and elsewhere in the company's annual report on Form 20-F that may cause actual results, performance, or achievements to be materially different and any future results, performance, or achievements anticipated or implied by these forward-looking statements. The company does not undertake to update any forward-looking statements to reflect future events or circumstances.
As in prior quarters, the results reported today will be analyzed both on a GAAP and non-GAAP basis. While mentioning EBITDA, we will be referring to Adjusted EBITDA. We have provided a detailed reconciliation of non-GAAP measures to their comparable GAAP measures in our earnings release, which is available on our website and has also been filed on Form 6-K. Hosting the call today are Doron Gerstel, Perion's Chief Executive Officer, and Maoz Sigron, Perion's Chief Financial Officer. I would now like to turn the call over to Doron Gerstel. Please go ahead.
Thank you, and good morning, everyone. 2020 was a great year for Perion in so many ways. We exceeded our revised guidance for both revenue and Adjusted EBITDA. Despite COVID, 2020 revenue was 25% higher than 2019. More than anything else, Q4 2020 results demonstrate the huge momentum behind the company. We achieved record-breaking quarter revenue of $118.3 million, representing a 51% increase from Q4 2019, and highest quarter Adjusted EBITDA of $15.3 million in the last six years. From a capital position, we bolstered and deleveraged our balance sheet. We completed a successful and oversubscribed follow-on offering of $61 million three weeks ago, positioning Perion to continue to capitalize on the growth opportunities in front of us. Strong numbers, executional success, and a powerful balance sheet.
That's the trifecta headline here. We accomplished all of this in the face of a global pandemic marked by unparalleled volatility, disruption, and change across the evolving digital media industry and ad tech ecosystem. Let me further point out our strong growth numbers are in the face of a sudden decline of travel and hospitality industry, which accounted for 15% or more than $10 million of our 2019 revenue. What I've just shared is a testimony to the last and probably the most critical reason for our fourth quarter results and annual performance, our incredible team across all our business units. When the pandemic hit in the second quarter, they quickly adjusted to the new reality, working with collaboration and excellent agility. All of them work from home, and all of them work from their heart. You have my thanks and the thanks of all our shareholders.
I attribute our success in 2020 to three critical trends that will be Perion's growth catalyst in 2021 and beyond. Trend number one is the struggle for attention. Brands increasingly recognize they need our high-impact ad units to increase their brand equity with creativity and smash through the command attention across screens. Our ads are unignorable, which is why when delivered by our AI engine, they attract Fortune 500 enterprises like Mercedes, constantly deliver higher return on ad spend and engagement metrics than conventional standard formats. In fact, our ability to bring our clients this attention-grabbing advertising in interactive CTV is unequaled. Our intelligent high-impact ads and the technology behind it has enabled us to decommodify digital advertising with noticeable results. Trend number two is the struggle of publishers to generate revenue. In 2020, publishers continued to face growing monetization challenges, and this will continue.
Our rapidly growing content monetization engine brought brands and publishers a unique ability to engage users for minutes versus the second of commodified programmatic display standard advertising. This platform is working so well for our own and operated site, which brought first-tier publishers such as Newsweek, Entrepreneur magazine, and the Bonnier Group of clients. It's just the beginning as the growing number of publishers we can support via our content monetization platform allow us to establish our own strategically controlled walled garden. This is an efficient way and scalable way to generate first-party data and drive revenue in a cookie-less world. Trend number three, everyone's searching. The year of COVID-19 accelerated the growing trend of shopping online. It's obvious, bears a repetition.
The number of consumers who researched before buying significantly increased the number of searches. Perion average daily searches reached 15.7 million during the fourth quarter, and it is an increase of 32% year-over-year, an all-time record. These typed-in keywords are what online retailers are most interested in because they are consumer who express the highest possible intent to buy. These signals are more valuable than what is obtainable from any other media channel. This growing number of searches compensated for the short-term decline in RPM, allowing our search advertising business to provide steady income with healthy margins. The further good news behind the Microsoft Bing renewal announcement is that extension for additional four year wasn't just a continuation. We added geographies, a new collaborative feature, and even more favorable terms.
The renewal is a result of the strong and healthy partnership we have cultivated with Microsoft Advertising over the last 10 years. The continuing collaboration between our companies will enable to further grow its network of publishers, offering lucrative search technology solution, and sophisticated experience for monetizing their digital property. We estimate that the revenue contribution in the next four years under the new agreement with Bing will be $800 million. The macro context behind these trends is a massive shift in behavior as consumer are spending an increasing amount of time online, including, but not limited to shopping. They are turning to digital sources for sports and entertainment and news consumption, as well as in new platforms like CTV. This was before the pandemic, but it has dramatically accelerated as consumer are social distancing and spending more time at home.
Advertisers are responding to this, monitoring consumer behavior and adjusting their digital advertising budget allocation based on shifts in which platforms are winning the war for attention. As an example, just recently, Pinterest reported 76% growth in revenue after a long period where it disappointed analysts. Perion is perfectly poised to capitalize on any ad budget shift between the three main pillars of digital advertising, search, social, display and video. Our diversification strategy lets us pivot where the growth is, whether it's Pinterest or Facebook or Bing Ad Search, CTV, or whatever is next. Stepping back for just a moment, it's now been over three years since my first earnings call as Perion CEO. I've been consistent about our three phases transformation strategy to establish Perion as a unique player in the digital media ecosystem.
I quickly review that plan, not so much to pat ourselves on the back, but because our ability to carefully stick to what we said should give you confidence in our ability to realize the aggressive goals we have set for the future. In our first phase, we had strengthened our balance sheet and put in place a sustainable capital structure. We've done that. We've increased our net cash position from -$41 million when I joined, April 2017, to +$52 million at the end of the fourth quarter 2020. Growth in net cash is the result of our endless efforts during the last three years to leverage our expenses while grow our top line. In the fourth quarter of 2020, we decreased SG&A expenses from 18% from revenue in the last year to 13% in 2020.
On top of that, last month, we completed a follow-on offering, which was both upsized and oversubscribed, generating net proceeds of more than $61 million. This further solidified our balance sheet and provided optionality to capitalize on the growth opportunities in front of us. We've demonstrated throughout the acquisition of both Content IQ and Pub Ocean, our ability to develop a unique acquisition model, a model that assures long-term engagement with the leadership team of the acquired company, and most importantly, an accretive transaction which its majority payout is based on earn-out when meeting business goals with only 20%-30% paying up front. At the second phase, we've increased our investment in research and development from $23 million in 2019 to $31 million in 2020.
Ability to personalize our ad units on the fly, adding an interactive layer to CTV advertising, developing our own content management system, or building AI mediation platform for our publisher are some of the example how we are widening our technology moat. We are now deep in the third phase of our strategy, financial excellence. We've laid the foundation for sustainable and profitable revenue growth in 2021 and beyond. We are beyond highly confident in our ability to deliver. With that, I'd like to turn the call over to Maoz to review the financial results for the fourth quarter and full year. Maoz?
Thank you, Doron. Perion's strong financial performance during 2020, in unprecedented and volatile year for the digital advertising industry, is a testament to our disciplined financial management before, during, and after the onset of the pandemic. We expected to build upon these strong results and the systems we developed to drive predictable and profitable growth in 2021 and beyond. The successful follow-on offering we completed during January 2021, significantly strengthening our balance sheet and supports funding of potential growth opportunities in the future. Turning to the results. During the fourth quarter of 2020, revenues for Perion totaled $118.3 million, an increase of 51% from $78.3 million in the fourth quarter last year. These revenues are composed of $68.4 million from display and social advertising, representing 58% of 2020 full-quarter revenues, with search advertising and other revenues contributing $49.9 million and represent 42%.
This increase was primarily attributable to a 159% increase in display and social advertising revenues, primarily resulting from the acceleration of our connected TV advertising offering and the contribution of our content monetization offering. Search advertising and other revenues decreased by 4% as a result of lower RPMs, partially offset by a higher number of daily search queries we deliver to Microsoft Bing and others. During the fourth quarter, the number of search kept improving and achieved the highest level of the average search per day. The renewed contract with Microsoft Bing for additional four years will continue to help us to increase the activity with existing and new publishers. Customer acquisition costs and media buy in the fourth quarter of 2020 were $74.8 million, or 63% of revenues, compared to $41.1 million, or 53% of revenues in the fourth quarter of 2019.
The increase as a percentage of revenue is primarily due to the acquisition of Content IQ and Pub Ocean, with sharing higher customer acquisition costs, overall product mix change, as well as lower RPMs in search advertising. While total revenues increased significantly during the fourth quarter of 2020 compared to the fourth quarter of 2019, GAAP SG&A totaled $15.8 million, or 13% of revenues, compared to $14.1 million, or 18% of revenues during the fourth quarter of 2019. Perion net income for the fourth quarter of 2020 was $9 million, or $0.30 per diluted share, compared to $5.9 million, or $0.22 per diluted share in the fourth quarter of 2019. Non-GAAP net income in the fourth quarter of 2020 was $13.8 million, or $0.45 per diluted share, compared to $8.9 million, or $0.32 per diluted share in the fourth quarter of 2019.
Adjusted EBITDA increased to $15.3 million in the fourth quarter of 2020 from $12.2 million in the fourth quarter of 2019. Net cash provided by operating activities in the fourth quarter was $12.8 million compared to $11.2 million last year. As of December 31st, 2020, we had cash equivalents, and short-term bank deposits of $60.4 million, compared to $61.6 million as of December 31st, 2019. As of December 31st, 2020, total debt was $8.3 million, down from $22.9 million as of September 30, 2020, and $16.7 million as of December 31st, 2019. During the fourth quarter of 2020, the company returned $12.5 million loaned during the third quarter of 2020, out of its secured credit line and made scheduled pay down of $2.1 million of its credit facilities balance. Turning to our 2020 full year results.
Total revenue for 2020 was $328.1 million compared to $261.5 million in 2019, representing the increase of 25%. Search advertising and other revenues represented 55% of revenue for the full year 2020, with display and social advertising contributing 45%, compared to the full year 2019, when search advertising and other revenues contributed 66%, and display and social advertising contributed 34%. This increase was driven by 69% growth in display and social advertising, primarily resulting from the acceleration of our connected TV advertising offering and the contribution of our content monetization offering, which were acquired in 2020, offset by the overall COVID-19 impact on ad spend across the industry during the second quarter of 2020. This impressive growth was achieved despite a $10 million reduction in travel ad spend with us due to the COVID pandemic compared to 2019.
Search advertising and other revenues increased by 3% due to higher number of daily search, partially offset by lower RPMs impacted by COVID-19. Customer acquisition costs and media buy for 2020 were $197.6 million, or 60% of revenue, compared to $135.9 million, or 52% of revenue in 2019. The increase as a percentage of revenue is primarily due to the acquisition of Content IQ and Pub Ocean, which carry higher customer acquisition costs, overall product mix change, as well as lower RPMs in search advertising. On a GAAP basis, Perion's full-year net income was $10.2 million, or $0.36 per diluted share, compared to $12.9 million or $0.49 per diluted share in 2019. Non-GAAP net income for the full year 2020 was $26.6 million or $0.91 per diluted share, compared to $21.6 million or $0.83 per diluted share in 2019.
During 2020, adjusted EBITDA was $32.8 million or 10% of revenue, compared to $32.4 million or 12% of revenue in 2019. Net cash by operating activities for the full year 2020 was $22 million, compared to $44.7 million in 2019. The primary reason for the decrease compared to the prior year is mainly due to the one-time improvement in working capital during 2019 and approximately $10 million working capital needs in 2020 in connection with the acquisition of Content IQ and Pub Ocean. This concludes my financial overview for the fourth quarter and the full year 2020. I will now turn the call back to Doron for closing statements.
Thank you, Maoz. Despite the global pandemic and all the associated and unexpected challenges, 2020 was a monumental year for Perion Network. We successfully integrated two accretive acquisitions and achieved greater than expected synergies. We experienced strong demand in the fast-growing CTV and video market for our interactive CTV ad units. We expanded our technological moat and further diversified our offering. We locked in and expanded our strategic partnership with Microsoft Bing for an additional four years. We entered 2021 on an exceptionally strong footing that was further fortified by the closing of the upsized and oversubscribed offering that generated more than $61 million in gross proceeds. Looking forward, we remain laser-focused on achieving sustainable and highly profitable double-digit annual revenue growth, targeting $500 million in annual sales by 2023.
Our technology moat, established and advanced by our R&D Center of Excellence, enable all our business units to first capture the attention, imagination, and the interest of users, and then convince them with a proprietary combination ad units, content, and layout that are optimized in real-time. We're taking an important step by launching our new Capture and Convince brand narrative for Perion. For the first time, we're establishing powerful connective tissue that makes all our business units operating under the same narrative. The market fit and the marketing power of Capture and Convince bring us the perfect recipe of consistency and agility. It is the combination as delivered by our current business units and potential synergistic acquisitions that gives me the confidence to hold out a half a billion dollars as our revenue North Star.
For 2021, we are targeting revenue in $350 million-$370 million range and working to achieve adjusted EBITDA in the range of $35 million-$37 million. I would like to again thank the amazing Perion team to their resiliency and agility during the unprecedented year. I couldn't be prouder of our collective accomplishments and more appreciative of our collective efforts. With that said, operator, would you please open the call for questions. Operator?
Thank you if you would like to ask question please signal by pressing star one on your telephone keypad if you are using speaker phone make sure your mute function is turned off to allow your signal to reach our equipment. Again star one to ask question. We'll now take our first question from Jason Helfstein from Oppenheimer.
Hey, thanks, everybody. Three questions. Doron, first, you talked about the success of ContentIQ and Pub Ocean integration. Maybe just elaborate a bit more, talk about are you already cross-selling that? Just what are the synergistic benefits you're seeing from any metrics you can share as far as client count, client penetration, client cross-selling, et cetera. Question number two, maybe you can help us understand organic advertising growth in the fourth quarter. Adjusting for ContentIQ and Pub Ocean, what was organic advertising in the fourth quarter, and how are you thinking about organic advertising growth for 2021? Last question, you are targeting $500 million in 2023 revenue with $420 million organic, I think was the last presentation, and probably $80 million from future acquisitions. Maybe just talk about M&A plans for this year. Maybe help us understand timing.
Is it something that would be more first half, second half? You've quoted an increase in ad tech valuation, how is that playing into your thinking, and would that impact your ability to close acquisitions this year? Thanks.
Very good. Okay, one by one. First and foremost, I think that the Content IQ and the Pub Ocean contribution is not just on what they're able to generate, but also the synergy. I would like to focus on the synergy capability. Pub Ocean has its own owned and operated site, and then I basically stated they are extending and externalizing their content optimization platform to other first-tier publishers. I mentioned Newsweek, I mentioned Entrepreneur, and Bonnier is just the first one. Collectively, when you're looking about these first-tier sites, as well as the own-and-operate sites, that's created a great large supply that definitely can be a great opportunity for other business units that generate demand. At this point, this demand was very much targeted a network outside that we have to pay. For instance, take Undertone.
Undertone is working with brands and agencies to deliver their campaigns. We're getting an insertion order, and we can work with Undertone top network. When we have such a great internal publisher network that we control, the CAC that we are paying outside will go in-house, and that will be a huge synergy saving. That is, for instance, one example. That applies, of course, to the demand that can be generated from our partnership with Microsoft Bing. In a way, we are trying very much to develop here, as we said, our own walled garden, where at the same time we're increasing our demand capability, we are increasing our supply capability. That gives us a great opportunity to definitely reduce our CAC and this will improve our margin.
As far as our plan for M&A, I can tell you that we are looking at few areas that has to do with what we believe are the main key growth factors behind our success in 2020. In the creativity side, we are looking for ability to enhance our DCO, Dynamic Creative Optimization. In other words, in what extent we are able to personalize the ad units based on the data that we are getting. This was and will remain one of the major factor for advertisers. We are currently working with our own platform, Sparkflow, but we believe that there are great opportunity out there for that as well. Another area which is interest a lot, it has to do with blockchain.
Blockchain in a way, in our world of advertising, it's more on the search monetization world. We believe that while the number of searches is growing exponentially, our partner is looking to increase in the safety, and safety of the searchers and safety of the keywords and all of that. We believe that blockchain can be a very interesting way. Those are the two examples of what we're looking. As far as the last question that has to do with our goal for the next three years. The North Star is to get to $500 million. What we basically said during the follow-on meetings that we have, that we're looking about a minimum CAGR of a 10% in the next three years, which gets us into the $430 million.
I underline the word minimum, but no matter if it's 430 or above. We are shooting for, we believe that in the next three years, we are going to do an acquisition. That's why we did the follow-on transaction. This is why we're going to have at the end of Q1 something close to $140 million in cash. We set a very rigid framework of acquisition, as I mentioned in the call, which its majority of the proceeds is to earn out, and only 20%-30% is upfront cash. We are planning to continue with it because it was definitely something that we believe brings value not just to us, but also to the companies that we acquire and allow us to retain talent of the acquired company for a long period of time.
Just, I don't know, Maoz, do you want to just comment on organic growth in the fourth quarter for advertisers?
Yes, we can say that this is not something that we have on the public, but we can say that if we're looking on pro forma basis, it will be above 20% growth.
Thank you.
I will now move to our next question from Eric Martinuzzi from Lake Street. Please go ahead, your line is open.
Congratulations on the real strong year. It is just amazing how it finished out when we think back to the dark days of April. Kudos to you.
Thank you.
Thank your team for pulling it together.
Thank you.
I have a question regarding the connected TV business. First of all, I want to understand the difference between CTV and iCTV. Second of all, I want to ask about percentage of revenue. It looks like in Q4, we had around six and a half million in CTV of the $118 million, so a relatively small part of your overall revenue. Where do you think that can go percentagewise, either in 2021 or beyond?
The main difference between CTV and the iCTV, the interactive, is definitely, first and foremost from the advertiser standpoint, is the ability to gauge the interaction level between the viewer and the screen. As you already can understand, when the video is running, who knows what is there. It's like any other ad unit that you see on a conventional or linear TV, who knows where is your attention? Is it to your mobile or to anything that is around you other than the video itself? The interaction part of it ensures that we grab your attention, we capture your attention. Capture your attention that you need to react with an action. The action is that you need to click on your remote and basically run a video out of few options that we are promoting while the main video is running.
You need to choose between fewer options. Once you choose, the video that you choose starts running. The most important part is the interaction. If you are not interested on learning more, you must click on your remote. For advertiser, this factor of clicking the remote demonstrates engagement. Everything here is all about engagement that they know to very much appreciate the return on their ad spend. That's the layer of interaction above the conventional video that you basically see in CTV. Of course, not everyone is clicking on those small boxes with video. Those that click, they know that 100% are engaged with the ad or with the video, and they're willing to pay way more for it, and willing to pay more in terms of CPM because they can ensure that the engagement level is very high.
In terms of the percentage of CTV, this is something that we are going to keep reporting. The number is growing. I can tell you that we definitely, in our report, is all CTV from the entire display, $6.5 million out of our overall advertising is percentage-wise is 10%. If you're looking about the entire display in video, which is close to $200 billion, I don't think the CTV reaches $20 billion. It's way less. We are happy with the 10% when we're looking it about the overall display and video spend. Definitely, this is going to get more and more because we're now working on iCTV 2.0, the iCTV 2.0 is not just adding those boxes with additional information that you need to click. Once you will click on them, it will be personalized dynamically.
In other words, the video, the creative will change based on the data, based on gender, based on location, and so on and so forth, in order to very much increase your attention and ability to engage with these videos.
Understand. Then a follow-up, any signs of life in the travel, hospitality, and entertainment verticals?
Nope. At this point, definitely the market is very much on hold. We are looking forward to what's going to happen during the summer, but I must say that our forecast and guidance for 2021 is not taking any consideration at all of the recovery of this segment.
Understand. Thanks for taking my question.
Thank you.
We'll now move to our next question from Laura Martin from Needham. Please go ahead, your line is open.
Hi there, and thanks for taking the question. Great numbers, guys. Congratulations.
Thank you, Laura. Thank you.
I want to ask a question about guidance. You reported this really accelerating revenue growth of 50% in the fourth quarter and 25% revenue growth for the full year. What is accelerating so massively in 2021 that this guidance gets down to 10% for the full year. Building on that question, when an investor calls and every other competitor that you have in this space is projecting 30% or was projecting 30% revenue growth, what would you say to them that they should buy this stock, which is going to grow 10% at the top line, whereas most of its competitors are going to grow 30%? How would you answer that?
That's a very good question, and thanks for that. First and foremost, this is the third year that we are providing guidance, and company management is quite conservative with their estimate. Keep in mind that this is the first quarter, and keep in mind that there are some still unknowns. All our eyes are very much where we want to be two years from now. First and foremost, I think that we are one of the fewer, having listened to all of our competitors, one of the fewer that basically can even think about providing estimate where they want to be three years from now. This is one. The second thing, I think that we are in a very unique situation from our offering.
While most of our rivals are very much offering the point solution, we proved in the test, and I think that this is very important to say now, that we are offering the diversification strategy. The diversification strategy that allows us to very much deliver based on or capitalize on any changes that are happening among those three main pillars. With that, I basically said that we are preparing very much for growth, and that's the $500 million that are representing a 17% CAGR. As I said, we would very much like to start the year with a conservative number.
Okay. My second question is on cookies. I am interested in how you think this cookie drama plays out over the next five years. What do you think happens with cookies in the marketplace?
Yeah. First, we need to address how much the companies are very much dependent on cookies from a retargeting standpoint. This is definitely the critical question, how much of the business depends on third-party cookies. Our way of overcoming the cookie was very much on developing our own or controlled supply network, which turned to be our first-party cookie, instead of very much relying on outside or third-party cookie. In a way, it was a sudden move because usually an ad network relies on other publishers, but we believe that will give us a tremendous advantage as we are growing our supply, not just internally, but also the fact that we will find such agreement with a first-tier publisher. The idea is to continue with it. It gives us to become our own walled garden and less even dependent on the third-party cookies.
At the same time, the other part of the business, which has to do with search advertising or social advertising, are not part of this game because they're not affected for the cookies. That's something that needs to take into consideration. Because, again, if we were only on display and not having our own supply network, I think that would definitely get the concern to a way higher level.
Okay. Just staying on the marketplace. Do you think third-party cookies goes away? I mean, not your company, but just in the general ecosystem. Do you think third-party cookies actually go away and get replaced by a login solution? Do you think they actually don't go away because regulators are going to force Google to keep them out there? Just in the marketplace outside of your dependence on cookies as well.
From outside of Perion, I think that we definitely see that it's a trend. It started with all the regulation that is happening in Europe and then followed with what's happening with the CCPA in the West Coast and in other locations. Look what Apple just announced last week. I think it's part of an overall trend, which has to do with privacy. Overall trend. I don't think that the issue of cookieless will be behind. Definitely IAB and others that very much care about consumer privacy need to match. It's not even a question of if. In my opinion, it's just a question of when.
That's super helpful. My recommendation is you just go off of CTV, and then you can not have cookies at all. That solves a lot of problems. Anyway, thank you.
Yeah. Thank you.
We'll now move to our next question from Jeff Martin from Roth Capital Partners. Please go ahead, your line is open.
Thanks. Good day, everyone.
Thank you.
You've increased your R&D spend significantly over the years. I wanted to get a sense of what your focus is from an R&D standpoint in 2021, and then also draw us out to 2023. What does that roadmap look like?
Yeah. Thank you. First of all, I never mentioned it, but in my background, I'm coming from an enterprise software business. One of the main reasons for me joining Perion was the fact that I do believe that technology makes a difference. There is a reason we call it moat, and there is a reason we increase our spend to widen and make it deeper. I believe this is definitely something which gets us high return on investing on technology. That's why we're increasing it year-over-year. Keep in mind that what we are investing now, first and foremost, and I'm taking here our content monetization system. We reached a point that we understand through the acquisition of Content IQ, that the current content management system that they have, which was based on an open source content management system, is not enough for scale.
We had to develop our own content monetization system in order to take content optimization into a different level. A different level when it comes to optimization and keep the visitor in more than between six to eight minutes in our sites. Not just that, we build it, and the idea was how we able to externalize it to our partners, and that was a huge investment on our side. That's one example. The other example was very much the investment that we did on, I think it was two years ago, acquiring an AI center in Ukraine, that we are further invest more and more on it. That serve very much all being on AI modeling that now become on everything that we're doing has definitely an AI service or AI model that is very much generating there.
As I mentioned before, personalization and using the huge amount of data that we have that is coming from all different touch points, from the social, to the search, to, of course, to the display. It all come to a huge data lake that allows us to serve any parts of our business, and with the right data, the right signal, which is so essential in our business. This is a huge investment and I am very happy that we are very much able to grow our business based on this investment.
Okay, great.
Yeah
with RPM down in Q4 offset by a significant increase in searches, are you seeing that trend continue so far in Q1 and what's embedded in your guidance for the balance of the year in terms of those two metrics?
First of all, as far as January, to not even to our surprise, but the COVID hits us, started in March last year, and April and May was the worst. It's a good comparison to see January 2020 to January 2021, and I definitely can tell you that the trend continue in terms of number of searches, which is great. It compensate on the decrease on RPM, allow us to very much deliver sustained revenue from search advertising. Our assumption that this trend will continue even if we will able to very much overcome COVID, I think that most consumers very much enjoy about online shopping or doing things online, and this trend is definitely to continue. The other thing that we think is going to improve the RPM is the huge amount of online retailers.
We're able to see a new type of online retailer that they don't have their brick-and-mortar store, but in most cases, they don't have even an inventory. Their spend is only on ad search, looking for consumer with a very high intent. That's a very, very interesting, compelling moment for them. Overall, we definitely see that this trend will stay even if COVID will not be with us somewhere in later 2021.
Great. Final question, looking at your presentation that's up on the investor relations site here, it looks like CTV automatic deal size is up 60% from the third quarter and customers grew in the 45% range. I'm wondering if you could comment on that and are you seeing increased interest continuing so far this year in CTV?
Yeah, definitely. We grow two things between the third quarter when we just launched it and the fourth quarter of 2020. Both in absolute numbers of revenue, the number of customer, but more importantly, on the average deal size. The average deal size grows significantly, which for us, is one of the major KPI because customers see, and evaluate the return on ad spend on CTV, especially with the factor of interactive CTV and global spend. This trend is continuing. Definitely what started as an experiment in the third quarter, they increased the spend on the fourth quarter and they further increased it so far in the first few weeks of the year. We believe they will continue and do so when we are going to launch, as we said, the iCTV 2.0, which has a personalization level on top of what we're doing right now with iCTV.
There is a nice slide, if you refer to our prior presentation, that we definitely demonstrate how DCO, Dynamic Creative Optimization, plays so well in the CTV space.
Thank you for that. Congratulations on a strong year.
Thank you.
We will now take our final question from Chris McGinnis from Sidoti & Company. Please go ahead, your line is open.
Yeah, good morning. Thanks for taking the questions this quarter. I was just wondering, Doron, if you could just maybe expand a little bit on the Microsoft and Perion relationship and how far some more collaboration is coming through. Can you just highlight how that's changed in the last contract for the new one you just signed at the end of June? Thanks.
Yeah. Thanks for the question. I was honored to do the last one, but also the previous one. We did the previous one on October 2017 for three years. We did this one, announced it in November 2nd, 2020, and it's quite a difference. Quite a difference much of in duration. The last one was for three years, this is four years. For those who know Microsoft, doing the four years agreement, we are a part of a very few vendors that being able to engage for such a long period of time. That's why it really require for us not just to renew or extend the agreement in terms of amendment, but definitely writing the new agreement from scratch. It's not just about four years or more years in terms of contract. I think the main important factor has to do with better rev share.
That's one. We have the higher tiers that represent where we are right now. We are going to get more margin for Microsoft, one. Second, expanded to new geography. In the previous agreement, we were limited to six countries, currently to 34 countries, which is part of Microsoft Advertising overall geography expansion strategy. The third is that we are now able to offer or market new products, new products that we were not able to do on the previous agreement. All in all, this is why we basically share that our estimate that in the course of the next four years, we will be able to generate $800 million from this agreement, $200 million in average on annual revenue. Currently, we're in the level of $172 million. That's definitely a significant increase.
What I'm more happy with is the fact that it's a sustainable, predictable stream of revenue that has to do with this pillar, search advertising, that based on any KPI that we're looking, and I shared one of them, which is the average daily traffic, it's definitely moving in the right direction, and it's generating for us substantial revenue.
Great. Thanks for taking the question, and good luck in Q1.
Thank you.
That concludes today's question- and- answer session. I'd like to hand back to Doron Gerstel for any closing remarks.
Yes. Thank you very much for your participation. Stay well. Bye-bye.
Ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect.