Hello, and welcome to the Perion Network Q1 of 2022 Earnings Conference Call. Today's conference call 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 than 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 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, Kevin. Hi, everyone. I hope you can hear me well. I'm Doron Gerstel. I'm the CEO. Together with me is Maoz Sigron, he's our CFO. Thanks for joining our Q1 of 2022 Earnings Call. Let's get started. Earlier today, we reported that the Q1 of 2022 was a record quarter for us, both in terms of revenue and EBITDA. Revenue first. But I very much would like to emphasize on this call that even though it's a huge growth, it is definitely not a one-time event.
That's the reason I would like very much to share with you that in the last three years, and that's the reason I'm I highlighted here the Q1 of 2021, the Q1 of 2022, the Q1 of 2023, the 2021, and of course, the current quarter, where you're able to see that this is a sustained and predictable business model, which is very much the theme of my presentation today. I very much would like to take you what is behind it? What are the main drivers behind this sustained and predictable business model?
The most important thing, as I highlighted in left, is that we build all our strategy from the point of view of the chief digital officer of any given brand, where the chief digital officer main challenge is how to allocate its budget across the three main pillars of digital advertising, search advertising, social advertising, and display CTV advertising. While the challenge is how to allocate it, we see more than once, and it happened quite often, that the chief digital officer is allocating its budget differently, and it has to do with all kind of things that is happening around us and things which is being affected. Our strategy is that we are capitalizing on any changes, and this is something that not hurting the business as if we were only buying into a one pillar. That's the heart of our strategy.
Just to give you an example of the changes and how it applies to our business from a diversification standpoint, you're able to see the shift that happened in the company between last year and this year. While last year, search advertising was 58% of our business and display was only 42%, this quarter, this is definitely being changed, where display was going up to a 55% and search is only 45%. It allow us to focus on a high-growth category. The high-growth category in this business, which is in display advertising business, is definitely on the video side. We're able to grow our business from a 15%, video share out of the entire display advertising to 40%. CTV grew by almost double, from 3% to 5%.
Now the company is definitely looking here about another area where we are focusing. We define it as a high-growth category for us. It's really the beginning of the year, but we are very happy with the fact that we're working with some prominent brands on the retail side and offering a very, very interesting product to retail. Those are the area. It demonstrates our ability, how we're able to shift and able to focus on a high-growth category, which in overall drives a great growth. B efore going into the EBITDA, on the revenue side, I very much would like to look at it from above.
While the category of AdTech is growing by 23% on a CAGR between 2020 and 2022, as you're all familiar with, Perion is growing by 39% on a CAGR between 2020 and 2022. That's very much a point that allows us here to drive exceptional growth despite changes in the market dynamics. I will definitely elaborate more how we are able to take market share from our competitor, which is, as a result of, growing almost double of what the category is growing. Now, from an EBITDA perspective, the numbers are even more impressive. I use the same type of format, which we're not just talking about the 158% year-over-year growth between the Q1 of 2021 to the Q1 of 2022.
I would like to emphasize the point that this is a continuous growth of our EBITDA, and very much has to do with two main drivers that help us to increase our net margin. To get them to a point where we were on below 20% of EBITDA to revenue ex-TAC, to a number which we're so proud of, that our EBITDA percentage is 42%, EBITDA to revenue, excluding media cost, 42%. What is behind it? Why, what is behind it is very much our structure, and I explained it in previous call, and I would very much like to focus because it's a key differentiator for our company.
The ability very much to connect all assets, demand and supply, into a central intelligent hub, iHUB, that allows us to drive scalable operational efficiency and improve media margin, as Maoz will talk about it in his presentation. The two factors, the operational efficiency and improved media margin is definitely reflected on our EBITDA numbers here. Talking about our intelligent hub. I illustrated it in a way that you can able to see the demand assets that we have here that are connected to brand, agency, DSPs, to our partner, Microsoft Bing, and then the supply assets that we have on the right. First and foremost, from a diversification standpoint, the ability to generate revenue from both sides, the demand side and the supply side, which is very important.
Then the huge investment that we did on the technology to connect all possible data into a one single intelligent hub. The benefit of doing it is clear. Those are the three things. I touched the operational cost and I touched the media cost, but I would like to talk and very much elaborate on what we're really proud of, is to what extent this hub and spoke structure, which we are crunching so much data that is coming from all sides of the house, demand and supply, allows us to increase customer value. The first product that we launched with SORT, this is a cookieless solution. We saw that mid-October, and the results are astonishing.
This is the operation behind it, what we are doing on a 24/7, and then what we are doing on predictive analytics the moment we are getting an opportunity. What is more important, that we are keep working with the certification body of [Neutronian]. The reason that we are keep working with them is that every quarter, we are sending our performance and our results, the campaign performance that we did in the given quarter, and we ask them to certify it. Because every campaign, and this is something that we insist with our customer, and we have more than 110 since we launched the Source solution. Every campaign that we're doing, we insist that it will have a cookieless targeting alongside of using third-party cookie. That's done in every campaign.
That is really helping them to certify the fact, and coming with this point that SORT demonstrates the ability to outperform traditional third-party tactics and show the largest lift when paired with high impact format. As an example, I would like to talk about this campaign that we did, which is Colorado Tourism campaign, and very, very successful campaign. What is more important, what is really more important is these numbers. These numbers represent the fact that we're able to show a huge lift of click-through rate, that's 106%. A lso on all formats here, it's a huge lift. This is all about the fact that now advertisers, they have a choice. They have a choice to scale.
They have a choice, what is more important, to keep privacy of their consumer and yet not compromise on performance. Very important to note that our solution not require any integration whatsoever with publisher nor with the user. I wanna mention that there are other solution out there, like UID 2.0, that you're all familiar with, that require the user to provide his email. We were going into a different direction. Where there is no whatsoever required any interaction between the user nor with the publisher. Now, what you're able to see here, which is an interesting thing, that once you run in those ad units, you're able to see this symbol.
When you click on this symbol, you're able to see that this is our brand safe, and that's what it stands behind it, which is creating for us a perfect flywheel. A perfect flywheel is because we've seen more and more clicks. Actually, people would feel safe to click on this type of ad, where they identify that there is the source symbol, which is there. Those clicks drive more CTR for an obvious reason. Then it increase the return on ad spend, which drives more advertiser. At this point, we're really proud to say that since we launched the source solution, mid-October, we did 110 campaigns that is being exposed to 150 million impression delivered. If I translate it, we have 2 to 3 million people that click on those ads.
That's an amazing product, which is the result of the iHUB, which is a result of our ability to connect all aspects into a central piece. Able to deliver, I think, such a great product to our customers. From a display advertising standpoint, again, it's a huge growth. It's an 80% growth between the Q1 2021 and Q1 2020. This growth is continuing. I mentioned the fact that it allows us to focus on a key growth strategic areas in the market. From other things that we are hearing, everything that we are hearing, brand and agency is looking for a full funnel solution.
This is what's always the holy grail of the industry, where you're able to take the consumer from awareness stage all the way to a buy stage. I would like to demonstrate it with a campaign that we did with the vitamin [Centrum]. This campaign what very much allows us to take the user for different type of multiple format. If it's the mobile, if it's their CTV. What we were using here, we're using the connected cart, which is very interesting thing, because at the end of the day, for some of the CPG products, you know, those consumer would very much like, and we really don't know when they will be convinced, and they will be at the point where they wanna make the transaction.
From every point, we allow them to make this transaction, and this will give them the hope to go all the way to the shopping cart. In this case, that's the Walmart shopping cart. You all, by the way, invited to scan the QR code, and you're able to see how it's so effectively that you don't need to add any more clicks between the QR code all the way to the guest shopping cart, and you need to pay, and then you are out. The performance is huge for these customers. In a two-month period, we're able to add 112,000 products to the Walmart cart. That's worth $1 million plus of product value.
The most important thing is we all need to look at is the CTR. That's 2.5 x display CTR, higher than the Google benchmark, which is between 1.2 and 0.46. That's the point. This is the value that we are providing to our customer that's allowing us, you know, to ask for more business. That's translated into a 42% increase on average client spend. When we are talking about where the growth is coming from, and when I talk about increased market share, and we're taking market share from our rivals, it come from a point that we deliver value. The value is being translated only on this parameter. In digital advertising, everything is measurable. As you can see, this value is translated into a higher increased average client spend.
The point here from the innovation part is our ability to synchronize, you know, the different parts of the funnel. I think that the company, where the company is coming from the point of awareness to performing, that's what advertiser really wants to see and hear. From a search advertising standpoint, the numbers, we grow our business by 10% between the Q1 of 2021 to the Q1 of 2022. The most important KPI of this business has to do with the average daily monetized search. Those are the average daily monetized search. We are at 18.1 million daily monetized search. You're able to see that between 2019 and 2020 and 2021, the numbers increased significantly, which translated into the revenue as you can see it here. What is behind it?
What's behind it is the fact that we're able to increase our number of publisher, 95 publisher in the Q1 of 2021, and now we have 120 publisher. I can tell you that there is some sign for the fact that we are recovering from COVID, and we see the travel is back. Since we are monetizing carefully those searches and we see that there is a growing interest in travel way more than it was before. That gives us a huge optimism for 2022 and beyond. With that, I would like to pass it to Maoz to review our financials for Q1. Maoz.
Thank you, Doron. Hold on. Let me share my screen.
Yes.
Thank you, Doron. Good morning, everybody. Perion Q1 financial performance is a continuous demonstration of the company's strong execution and superior growth, while keeping all margins growing as well, and this momentum continues. Now, let me share with you three of the main achievements of the Q1 . Revenue of $125.3 million, a new record reflecting 40% year-over-year growth. The highest Q1 revenue growth since 2016. Adjusted EBITDA of $22.7 million, 18% from revenue compared to 10% last year. A new record with 158% year-over-year growth. The highest Q1 adjusted EBITDA ever. Non-GAAP diluted earnings per share of $0.44, a new record with 132% year-over-year growth.
This exceptional growth, increased profitability, and significant cash flow generation is the result of the diversity of our revenue stream and the scalability of Perion business model that translate into unprecedented profitability. We are disciplined in how we manage growth and deploy capital, and how we successfully integrate acquisitions, as we did with Vidazoo in October 2021. Overall, the Q1 show that we have a scalable operating model built for profitable growth and demonstrating sustainable earnings power. We have the financial strength to continue to execute our strategic plan of organic and inorganic growth, and are well-positioned for another success year in 2022. Turning now to the quarterly results. As I said before, revenue for the Q1 was $125.3 million, an increase of 40% and 30% on a pro forma basis.
We are consistently delivering strong double-digit revenue growth across both display and search advertising. Display advertising revenue was $68.6 million during the Q1 of 2022, up 80% and an increase of 52% on a pro forma basis. The 341% year-over-year growth in video and CTV served as the key driver to the overall display advertising growth, leading to an increase of average client spending by 42% and to an increase of client by 3%. Search advertising revenue was $66.7 million during the Q1 of 2022, an increase of 10% year-over-year. Growth was achieved primarily due to 18.1 million average daily commercial searches compared to 17.7 million in the Q1 of 2021, as well as the addition of 25 new publishers to our network.
In terms of revenue mix, display advertising revenue represented 65% of the Q1 revenue compared to 42% in 2021, with search advertising representing 45% of revenue compared to 58% in 2021. This change in revenue mix is aligned with our diversification strategy. Revenue ex-TAC was $64.3 million, or 43% of revenue, compared to $35 million in the Q1 of 2021, or 39% of revenue. The increase of 4% was primarily due to a favorable product mix of ad formats and our ability to connect the supply and demand side of the open web to our central AI and intelligent control system. OpEx and COGS expenses were 30% of revenue in the Q1 of 2022, compared to 35% of revenue in the Q1 of 2021.
We are achieving higher operating leverage, mainly due to the scalability embedded in our business model as well as the continued successful implementation of AI. Net income was $15.5 million, or $0.33 per diluted share, an increase of 368% compared to $3.3 million or $0.09 per diluted share in the Q1 of 2021. Non-GAAP net income was $20.7 million or $0.44 per diluted share, an increase of 196% compared to $7 million or $0.19 per diluted share in the Q1 of 2021. Adjusted EBITDA increased by 158% year-over-year to $22.7 million in the Q1 of 2022.
Representing 18% of revenue compared to $8.8 million, representing 10% of revenue in the Q1 of 2021. This significant improvement is again the result of the high scalability within our business model, as well as the successful implementation of AI. Adjusted EBITDA of revenue ex-TAC increased from 25% in the Q1 of 2021 to 42% during the Q1 of 2022. Our efforts to keep the media margin levels stable and to generate incremental revenue with low variable costs continue to improve current efficiency and profitability. Net cash provided by operating activities was $23.6 million, compared to $13.5 million in the Q1 of 2021, reflecting a 75% year-over-year growth.
As of March 31st, 2022, we had cash equivalent, and short-term bank deposits of $342 million, compared to $322 million as of December 1, 2021. For the Q1 of 2021, I will now turn the call back to Doron.
For an ending note, I would like to close the loop and re-emphasize the fact or what is really behind our sustained and predictable business model. We define it as a three-dimensional diversified business strategy.
The three-dimensional is the cross-channel, as I mentioned at the beginning, the ability to generate revenue both from the demand and supply of the open web, and our unique structure of a hub and spoke, where we're able to connect all assets into a central and demonstrate it with the first product that we launched to the market, that is SORT. With that, with the sustainability and predictability of the business, we have the confidence of improving the 2022 guidance. Guidance that has to do with the revenue. We put the new guidance on the range between $620 million to $640 million, which represents 32% year-over-year growth.
I think the most dramatic improvement of the guidance has to do with the profitability midpoint of $100 million this year, which represent 40% of EBITDA to ex-TAC. It was 36% last year, and it was 25% the year before. I can tell you that we are really feeling great about it because we start seeing that this whole structure that we bring into place is really kicking off, and we are able to turn it into a great process and leverage our expense. Last slide. We released earlier today the fact that Microsoft Advertising chose Perion, and its search advertising subsidiary, CodeFuel, as a Global Supply Partner of the Year. This is a huge achievement.
We just celebrate 10 years of partnership with Microsoft Advertising. We are in a four-year contract, which is going to end in 2024. What is more important for us is our ability now to leverage the great partnership that we had with Bing into other parts of Microsoft Advertising. With the Xandr acquisition and the fact that they're going all the way into retail, it fits very well some of the strategic efforts that we are doing. I have no doubt that we are able to leverage this success and take it into other important area. It's important to mention that it's a really hard work from all the team.
Besides CodeFuel, there are other almost 500 employees that worked really, really hard in this quarter and continue doing it quarter after quarter after quarter, and I'm really proud of it. It's important for me, and I feel I should mention the contribution of 32 Ukrainian employees that we have, and that despite of the war, they are working, and they are essential factor behind this quarter's success. I would like to thank them a lot and pray for their health. With that, I would like to turn and open the call for Q&A. Thank you so much.
Thank you. We'll now be conducting a question-and-answer session. If you'd like to ask a question, you're dialed in via phone, please press star one on your telephone keypad. Via Zoom, please use the Raise Your Hand function to ask a question at this time. One moment, please, while we poll for questions. Our first question today is coming from Jason Helfstein from Oppenheimer. Your line is now live.
Thanks. I'll ask you two questions. The first, we've seen really good improvement on the margin ex-TAC. Maybe talk about as you're thinking about acquisitions going forward, how do you think about growth versus being able to maintain the margin?
Secondly, perhaps talk about your outlook for CTV. You've been able to move the number nicely over the past year, but it's still a relatively small percent of the business. Maybe expand upon that a bit. Thank you.
Yeah. Thank you. First of all, you know, it's a rare occasion, but the two questions lead into one, and that has to do with acquisition and CTV. When we identify, the CTV is definitely a strategic area that, for us, in order to leverage the growing spend in this area, requires, you know, a different approach. We identify few companies and we narrow it, you know, into three. I do believe that, you know, by the end of the year, for sure, we will be able to have some significant strategic acquisition in this direction. When I'm talking about significant, don't take it into the size.
You all know how we are doing the acquisition and what is our philosophy in terms of the acquisition. What we are definitely crystal clear on this direction. Now, I think that when it comes to your first question that has to do with maintaining the profitability and even grow it more than what we think. I think we are very much enjoying the fact that we enjoy different parts of digital advertising.
While you connected them in a smart way, and I must say that, the huge technology investment that we did in order to optimize, the matching, we call it here the brain, and the match between impression and request, and the demand side and the supply side, give us a huge advantage in terms of optimizing our margin, which translating it later on to optimizing our media costs and translate it later on into a net margin. Any further question, Jason?
Our next question today is coming from Andrew Marok. Your line is now live.
Hi, Doron. Thank you for taking my questions and congrats on a great quarter. Wanted to talk a bit about the search business. With Google calling out strength in search and Microsoft posting a solid quarter, I know they're not directly comparable to your search business, but how should we think about how Perion search growth trends relative to them? With publishers growing to 120 from 95, how should we think about the publisher opportunity?
First and foremost, we are not competing with them, we are partnering with them. Basically, we are providing them search feed. In other words, we are working with our partners and we are using a lot of, in this case, as Bing as a partner, their tool how to increase the number of quality searches, and that's very much the idea. I think that what we've seen is that, you know, from, again, from the advertiser standpoint, that the attractiveness of search advertising is definitely there. Users express the highest possible intent that advertisers are so much looking for. We see that the RPM, which is the equivalent to a CPM, is going up.
We've seen that in some categories, and now we have a very, very good view of how much advertising is spent on what keywords, et cetera. Only the fact that we are exposed to a huge amount of searches every day. There are some categories that are growing, there are some that not. I mentioned the fact that travel is growing and growing very nicely, and it's only the beginning. It's not at the point that it was before, let me put it this way, but it's definitely in the right direction. I'm very optimistic as far as the search, as our search business.
One more, just kind of on a tactical perspective from margins. 1Q is typically kind of the low point EBITDA margins in the year from a seasonal perspective, but this year has 42% of revenue ex-TAC with guidance for the full year of 40% suggests that necessarily won't be the case this year. I guess how should we think about the scale and phasing of investments over the rest of the year?
Definitely there. I mean, we are continuing. I think that, you know, our engineering R&D investment is just growing. We see ourselves as a technology company. With all the impressive number and really the growing amount of technology and dollars that we investing on developing the predictive analytics, which is the heart of the iHUB, was there. I'm very happy. It just encourage us to do more. SORT is a huge investment from our end just to get to a point you can imagine that you can beat, you know, the third-party cookie CTR without having any kind of interaction with the publisher. That's a huge investment with people that most of them are data scientists, AI engineers that are very costly to get.
We are continuing it because we are able to get dividend on this type of investing. That's something that we see. We truly believe that there is a scale, and keep in mind that SORT is, you know, this is the first full quarter of SORT, let me put it this way. It's just being launched. We see more and more advertisers are looking for this type of solution. They're looking for a solution which does not require integration. That's clear. You know, I wish that from this point it will be a call-out. It's a bit provocative call-out, but I will use the stage and basically ask, you know, how come investors are not jumping on this wagon? At this point, we're not charging.
I'm not speaking about the future, but we're not charging for SORT. If it's performed better and you are providing a better citizenship but not stalking your consumer, why not using SORT? We are, after 100 campaigns, proved very much that we performed well. The conventional use of cookie, we start getting some great leads. As I mentioned before, it's the first KPI that I'm looking at is the average deal size or the average transaction, which is growing rapidly. The scalability is definitely there. As I mentioned for years, you know, my background as an enterprise software guy, I truly believe that technology makes a difference.
In our case, it made a difference, and it continues to be definitely something which is the torch of Perion.
Thank you. Our next question today is coming from Laura Martin from Needham & Company. Your line is now live.
Good morning. My first question is on SORT, just building on what you just said. I think people here would say that UID 2.0 is too frequent. It's really important to the industry because this industry needs a solution to cookies, the open internet industry. Therefore, an industry-wide solution is better than individual company solutions. It is more in keeping with the EU's requirement that every consumer opt in, and that feels like the U.S. is gonna follow, I think, the EU data privacy. Could you talk about why joining UID 2.0 isn't better for you as part of this open internet industry, and how your solution of SORT actually is consistent with the EU's real lockdown now on consumers must have choice to opt out of tracking?
Right. Thanks for the question. First and foremost, when you're looking about the UID, we are supporting UID because there are some publishers that basically said, you know, we already have UID, and if you wanna put your ad there, you know, you have to support UID. UID is an open source. Everyone is able to support it. In a way, even though driven by The Trade Desk, the Trade Desk, it's an open source and everyone can integrate with it. We were kind of from a design thinking standpoint, a project that started two years ago, let me put it this way. We put a constraint here, and our main constraint was that the user is not required to cooperate with that solution.
In other words, we're not asking the user to provide its email. That was the idea. I think it's still very much relevant. You are right in a way that we've seen a trend in Europe. I must tell you that we are very, very close to what's going on there, and there is some resistance from the audience, from the user and from the community about providing it. I think, Laura, it's too early to say. We are very happy with our technology. We are very happy with the performance that we provide. I wish others will join because at this point, I think the consumer drives it, and I think the consumer demands it.
I truly believe that it will be more than one solution in the market, and especially those solutions that we call non-intrusive solutions, that does not require any kind of handshake, not with the publisher nor with the user. We are all in this case.
Okay. My other question is just following up on Facebook's call last night. They made a call out about e-commerce advertising being much weaker, but retail advertising, which is with omni-channel, both, physical, brick-and-mortar as well as e-commerce coming back. Have you seen that kind of shift in the retail category in your revenue line as well?
We are seeing, you know, it's not a shift. I must say that from CPG standpoint, we definitely see that there is a growing interest. We're getting a lot of, I think, positive feedback from the fact that we're able to provide this connected cart, which is very much aimed to, you know, CPG type of clients, where, you know, the deal size is not that significant and consumer are able to do, you know, to complete the purchase with one click.
I must say that this is definitely a growing trend. At the same time, we combine the two into a shoppable marketing as well, and that's the retail part, where the whole personalized type of circular is going into a huge transformation in the market. We are investing a lot in order to personalize, you know, those circulars. We're working very, very closely with Albertsons in this regard. They are our design partner in offering a personalized shoppable marketing offering. That's going to be one of the key growth driver behind our display advertising in 2022 to 2023.
Then just following up on this, and this is my last question. You were thinking of taking inventory to help grow that business. Are you now doing that? Or what's the status of you taking on physical inventory to fill on that one-click product?
No, we're not taking an inventory. The whole idea was that, you know, from a Walmart standpoint, they are offering kind of a for guest. They don't need even to log in and everything. A very, very easy, nice way, for them to click and buy, which is happening in other e-com platform. Now we are developing something which is in the next generation as far as offering substitutes in case this product is not available in stock, not just to miss the opportunity where consumer did all the way, click on it, now it's on the cart, and you will end up with this product is not available. We are working closely on the next generation of this solution.
Thank you very much. Great numbers. Congratulations.
Thank you.
Thank you. Next question today is coming from Mark Kelley from Stifel. Your line is now live.
Hey, thank you very much. Two quick ones. The first one, I guess they're both on SORT, but the first one is, you know, you just mentioned that you started working on SORT two years ago, give or take, you know, which was before all of these Apple changes that were made. Have you had to make any adjustments along the way with anything that Apple has come out with, you know, with their more privacy-centric demands across the apps and iOS install base? And then number two, you know, if you do decide to explicitly charge for SORT, what might that look like? Not expecting a timeline here, but just, like, conceptually, how would that work?
Yeah. To your first question, from a design factor standpoint, SORT was not aimed to do any kind of an in-app to support an in-app simply because we're not doing an in-app advertising. Their modification of their iOS is targeting mainly apps and the ability to transfer, you know, knowledge or data from one app to another. SORT at this point does not require any kind of modification. That's the first question. As far as the pricing. First of all, keep in mind that if we provide twice the CTR, that's translated into return on ad spend. That's very much it. While everything is equal, we provide twice the value. We always like to price it, you know, based on value. It can be two things.
I mean, one thing can be, okay, you know what? With this performance, you have the choice either to pay or to double your spend. That's very much what we're doing. Currently, we're going in a way where customers see the value, and instead of charging, they increase their spend. For me, it's like we're being charged because that's what a key driver for us to turn, you know, SORT into a revenue and margin generator. We don't need to charge for SORT per se in order to impact our top line and bottom line. That's the current philosophy that we're getting. Aside from it, that has to do with what Laura was saying. It has to do with the UID 2.0.
Guys, there is a race out there, and the point here that is the first six months, we get 100 campaigns. I can tell you now that on every campaign we run SORT, it gets alongside of the cookies, and we wanna be in a point where we're reaching the number of 1,000 campaigns by the end of the year of using SORT. We are able to get way more advertisers that is being exposed to this number. More than that, every campaign that we're doing allows us to improve the model. That's the beauty of this kind of AI and machine learning.
Currently, the fact that we're not putting any constraints of putting a price or doing like this is just helping us, not just to proliferate the solution, but also to improve the prediction analytics of this, which is the key for us to drive 2x CTR and even more than that, because we are shooting for a way higher number.
That makes perfect sense. If I can maybe ask a quick follow-up to my first question about the Apple changes. I know you don't do any in-app advertising. But I'm just curious, you know, there's been some reports that Apple might be clamping down on fingerprinting. I don't know if that's. It looks like you're taking a lot of different signals from, you know, a handful of different places. Is there anything that you're doing that could be considered fingerprinting in the eyes of Apple?
No.
Okay.
Not to this point.
Perfect. Thank you very much.
Thank you.
Thank you. Our next question today is coming from Eric Martinuzzi from Lake Street. Your line is now live.
Yeah. I wanted to dive into the display advertising topic again. You talked about an increase of average client spend by 42% and a 3% increase in number of clients. I wanted to focus on that 3% number and ask what are you doing? It would seem like people would be beating a path to your door, but is this more of you need to get the word out, or is it just folks are slower to change old habits?
From a number perspective in Q1, the average client spend was $73,000, and now is $103,000. That's the average client spend, and that's the 42% increase year-over-year. Now, the point here is very simple. We are very much trying to be aligned with our customer that, you know, in a macro perspective, always trying to minimize the numbers of vendors. The main point here is that those kind of digital campaign, which is very much driven by analytics and reporting and return on ad spend and everything like this, they would like as much as possible to have a single point, not a single point from a service standpoint, but single point from a data standpoint.
Where there are some other pockets, and the pockets were there, we are very much trying, and that's what we're trying to do right now. The word that I'm using is awareness to performance because it requires some education, let me put it this way. It was two separate kind of pillars or budget for awareness campaign and then for the performance campaign. Once we were able to bridge the two, we are able to get more and more performance dollars because we as a company were very much on the awareness side of the house. That increased the spend because they truly understand that advertiser is able to leverage its spend on the awareness and translate it into a performance.
This type of continuous flow along the consumer funnel, where you are able to take the user from awareness to consideration to intent to buy, and you're doing it in a certain amount of products, you know. It's not happening on all products, and it has to do with the dollars. That's why I mentioned that CPG is a perfect example for it. You are able to take dollars that were not designed for us before, mainly on the performance side of the house. I must say that the connected cart is helping us very much in this sense. The fact that we increased dramatically our video offering, and in this regard, we are offering more and more video. Video solution is definitely helping us.
High impact CTV suite is there as well. All in all, you are touching more and more points where customer is looking at it as a holistic, you know, type of solution, which reflected on the average client spend.
Okay. More to the number of new clients, is there an expectation here that 3% number is going to rise throughout the year?
Yes, definitely.
Okay. All right. In the display advertising revenue, are you able to pinpoint the percentage of the display advertising revenue driven by SORT? What is that?
Yeah. Currently it's close to 30% of the display business.
Okay. How is that compared to last quarter?
Last quarter, we just started. I mean, that is definitely a huge factor. The majority of the 100 campaigns that we did was in this quarter, I think 80 of them. Even though we launched it mid-October, we did it in small steps, let me put it this way. We did it in a way that the majority of the campaign was still cookie-based, because we try as much as possible to convince our customer, and that's what the efforts that we're doing, that they will allocate more and more budget towards SORT, but we have to prove them that we are outperformed. That requires some education. There is a skepticism at the beginning. You're not doing third-party cookies.
Yes, you have a certification arm that you're using as a third party, but we wanna see it. We want to recognize. I think that, I think we issued the press release of Colorado Tourism. It speaks for itself. It's not just the safe or not using the cookies element. It very much has to do with scale as well. You are not minimizing the number of people that is being exposed. It's, I will send the link. I will ask Swami to send the link of this use case, and you're able to see, we are able to see it in action in all parameters. That speaks for itself.
Got it. Thanks, and congratulations on the numbers.
Thank you.
Thank you. I'll turn the floor back over.
Okay. There are no more questions, Kevin?
I think there may have been one that came over.
Yeah, yeah. Please.
One moment. The next question is coming from Jeff Van Rhee. Your line is now live.
Hi, Jeff.
I was able to make it back on the call. Hey, great. Thanks for taking my question. Wanted to get a sense for the key drivers of the average client spend. 42% is an impressive number. You know, so one, what are the key drivers? Two, is there potential to expand this from here?
Yes. Definitely. The main key driver is the fact that, as I think I answered it just now, the fact that we are able to shift to get more dollars on the performance side of the house. We were, up to this point, very much only doing on the awareness budget. The fact that we expanded into lower funnel, that's one. Expanded to other channels, in this regard, video. We were not known in our video solution, but as you can see from the number, 40% of display advertising is now video. That's a huge lift in spend. We are taking, you know, video dollars that was associated with other companies that were known for their video solution.
Now we not just close the gap, but with our high impact video suite, we're able to do way, way more. Additional format, additional areas on the funnel, CTV to some extent, all this has to do with drivers to increase average client spend.
Okay. One other, if I could. On the retail side, you gave the Walmart example. Seems like very encouraging results there. You know, how would you characterize the opportunity in retail, and is that one of the primary focuses strategically for Perion at this point?
Definitely. We found that this is very interesting. With retail, we are looking about two parts. One has to do with called digital circular. As I mentioned, that has to do with one area. Personalize those circular. Great opportunity that we have. I mentioned Albertsons as a key customer for us in this regard. We're further developing it. It's a transformation of this business that we very much would like to capitalize on. The other half is the retail and the connected cart.
That's very helpful. Thank you, and congrats on a great quarter.
Thank you.
Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing remarks.
Thank you. Thank you everyone for joining our call. See you on next one. Thank you. Bye.
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