All right, so why don't we go ahead and get started. Thanks, everyone, for joining us this year at the Raymond James TMT and Consumer Conference. And we're thrilled to close out Tuesday with Perion Network and its CEO, Tal Jacobson. Tal, thanks for joining us today.
Thanks for having me.
I always like to start, you know, kind of with the 30,000-foot view, because we do get a lot of people who are maybe newer to certain stories at these types of events. How would you position Perion within the digital ad ecosystem for somebody who's maybe a little bit more unfamiliar with the story?
Yeah, absolutely. So historically, we were heavily on the inventory side. So think of us like kind of an SSP. We're probably the biggest SSP for search engines, which was a good growth engine for us. And we were also on open web publishers. And this coming year, we've realized that, you know, inventory is a commodity. And everybody's driving either performance or not, but only through the commercials in relationship with advertisers. So we're actually shifting our entire ship towards advertiser solutions and really focusing on that. Now, I know, you know, like Magnite are doing an amazing job going from inventory to actually being closer to advertisers. You know, The Trade Desk is working on both sides. And we're just focusing on how can we make the life of advertisers better. Now, it's a $700 billion almost a year through digital pipes.
Currently, no one can make sense out of that. Like every single platform makes sense on its own. When you need to go and buy through The Trade Desk and Google and Meta and TikTok and out-of-home and CTV, it's a mess. We're trying to solve that. We're trying to connect the dots, you know, connect the creative, connect the attribution, connect the activation. Through that, makes a lot more sense and reduces waste to the advertiser.
Great. And then, you know, if somebody's just looking maybe to kind of tie into your commentary there, looking at your financial statements. So you had a search line, a digital advertising line. And there's been some kind of movement and reallocation of focus between the two. So as we get into kind of 2025 and what should be a more normalized year, maybe what areas of the business are you most excited about?
So, you know, retail media is very big for us. So we realized, well, retail media as a whole is going to grow over 20% next year. So off the top of my head, over $160 billion next year. Now, part of it is going to be owed to online. So Amazon is basically the biggest winner there. And part of it is going to go into offline. So how do we push people back into Target, into Walmart, to actual physical stores? And that's the area where, you know, we're making a lot of progress in. We're working with all those big retailers, connecting their data, connecting their promotional data with our super advanced out-of-home. We have an out-of-home DSP and SSP. We're connecting that with our CTV servers and open web servers.
Then we can do an omnichannel that can actually measure how many people we actually drive into physical stores. Our retail media is, I think, the biggest part that we're excited about. Connecting that omnichannel story into actual performance is what drives us forward.
Great. And then we definitely want to kind of dive into the retail media topic a little bit more later on. But just while we're on the topic here with search, we can just kind of close the book on it. There's still some revenue being driven by search. I guess, how should investors think about the trajectory of that business kind of longer term now that we get into the rationalization of 2025?
Yeah. So absolutely. So at the search part, we're, again, kind of an SSP for Yahoo, Microsoft. We're not going to renew the Microsoft agreement, even though we're going to make money out of that next year. As in, as long as we can keep pushing that activity forward and continue to make EBITDA out of that, that's great. But we're not investing in that. So none of the new technologies are going to that. Basically, zero investment. We're just going to extract as much value as we can get out of that. But we're going to invest in our core business, which is getting more value to advertisers.
All right. So we can maybe talk about some of the exciting things here, like CTV. So CTV, obviously a hot topic around the industry and a nice contributor to Perion's financials recently and a nice grower. So where are you finding success in that space now, and what are some of the big opportunities you can look forward to?
Yeah. So we've just launched a new product we call Anyplace TV, where, you know, when we get CTV budgets, we can now extend that into out-of-home. So we're going to take the same video ad on CTV. Sometimes we are also going to run that on social. But we're going to take that from CTV and also run that on video screens out-of-home. So that might be here in New York on the subways, right? Video screens. Might be at airports. Might be inside the malls and might be inside stores. So we're actually extending the budgets of CTV budgets into out-of-home budgets.
That's one thing that's really interesting. You know, we'll touch on digital out-of-home, I think, a little bit more deeply in a second. Digital out-of-home has been a channel that is attracting more attention, but has been very resistant to going programmatically transacted. When you're extending those CTV budgets, does that maybe familiarize advertisers with digital out-of-home? I don't know if you would then maybe buy it as a standalone, but at least give the awareness that this is a channel that you should be paying attention to.
Yeah, I think that's absolutely a good point. What we found is traditionally, you know, out-of-home exists for almost 200 years. 1830 still had out-of-home here in the U.S. So it's very traditional. Now, what we found is there are agencies that are experts at out-of-home, and they would continue to buy the way they buy. But we now get a lot more interest from holding companies or advertisers that says, can I now add out-of-home to my entire strategy? And that's where we extend that CTV budget. We extend that, you know, retail media budget. How do we start on your CTV at home, but then as you go into the mall, you actually see those screens and getting into the store and buy it, right? So you're absolutely right. Out-of-home into programmatic, that's quite a challenge.
But when we combine this into an omnichannel experience with actual attribution, we now see the traction that, you know, we've expected.
That's great that you can push that along kind of through your own awareness building and investment and things like that. But is there anything that maybe needs to happen from an industry perspective or from a very high level that needs to happen to be able to push along the digital out-of-home maturity, especially the programmatic side of it?
Yeah. Well, I think, you know, programmatic always comes with measurement. So we're investing quite a lot in measurement. People tend to still buy out-of-home a lot of time direct and pre-purchase six months ahead, which is not programmatic. Imagine you would go to Meta and buy an ad for six months in the future. That doesn't work, right?
Sure.
So we kind of need to change their mindset. That would come with measurement. Like if you go online now and you buy an ad, we can tell you if it works or doesn't work. If that person actually goes through your store, it doesn't go through your store. And that's where our measurement and algorithms are coming into play.
And maybe moving on to retail media a bit, you know, you spoke at the top of your remarks about some of the exciting things that you're seeing there. But I guess, again, kind of how would you characterize the maturity of the format and awareness among buyers? And how can we think about Perion really capitalizing on increased spend volumes going into retail media?
Right. Again, you know, our strength in the past few years was how do we get budgets that are attached to getting people back to physical stores, not just online, right? There are a lot of companies who can push sales online, right? You have Criteo, and you have Amazon, and you have Walmart, which are great. But it seems like not a lot of companies actually specialize in driving people into physical stores. And people like to go into physical stores. And especially now when we see that because we bought Hivestack, Asia is even bigger. Like people constantly stay outside of the house more than inside the house. A lot of countries don't actually have kitchens. They're small enough, right?
So, you know, when we look at retail media, we're now trying to figure out how do we combine online and offline to push sales to both parts, right? And that's the new journey we're taking now. Again, with measurement and attribution, how do we go into the Targets, Walmarts of the world and say, if we're going to get the whole budget, we can actually drive more performance for you guys online and offline?
And I remember at one of our prior events, you had an interesting slide that showed all the different touch points of a person who could engage with Perion delivered ads over the course of a day. You know, you're in your car and hear a digital audio ad. You see a digital out-of-home billboard. You go home at the end of the day and watch a CTV program. That kind of holistic advertising philosophy must throw up some measurement challenges, right? So how do you deal with that kind of cross-channel sort of nature of these things?
Yeah. Well, I think, you know, as we add more and more channels to our stack, you know, we're getting more and more data. You're right. The attribution between them, we can count the attribution in between them. I think it's always challenging, not only for us, but for the industry to close the loop. So we would know that the person, not a specific person, but an audience. So an ad on TV, so our ad out-of-home because we know the area heard something on Spotify with our ad. And we would know that there's an uplift in sales. But it's always harder to make that match to say that that person saw that ad and bought those bananas.
And that's something we're actually working on with a few other companies now to try to how do we get that data and match it, again, while trying to preserve privacy, but having a better attribution. So again, that's one of the challenges we're trying to solve now. I think it's an unsolvable thing in the industry as a whole.
Is that something, you know, you got to ask the obligatory AI question? And we do have a couple of more specific AI products that you've talked about that we'll ask about. But is this an AI problem that can be really kind of tailor-made for it?
Yeah. Well, so we have, you know, again, an Israeli company. Most of our tech is Israeli. We have an AI lab. And in the past year, we've developed quite a lot of products. And that's one of the things our AI team are concentrating on. How do we fix more attribution issues? How do we? And we're meeting more and more of, you know, the Amazon partners, the Walmart partners. So trying to figure out, what are you guys missing? How do you guys extract more conversions? And that's what our AI teams are working on.
Great. And then maybe specifically on some of those AI products. You know, you had talked in the past about an alternative identity solution, SORT, before Google had really kind of determined what they were actually going to do with cookie deprecation. So now that that's more set, what is the future of SORT or identity issues maybe more broadly impacting Perion and some of its businesses?
Yeah. So as you said, we've invented SORT as a predictive analytic to get away from cookies. What it turned out to be a pretty powerful deep learning algorithm that can understand behavior between channels. So now we've adopted it into CTV. So we know if a person sees that specific show on Netflix, he's probably going to be less price sensitive and more towards, I don't know, sports cars, right? So we are now combining those signals, the TV signals with the web signals. And we're now going to add more and more channels into that. And SORT is now evolving into that to be that whole connecting tissue in between channels.
Interesting. So it shows kind of like the broader applicability of some of the AI investments that you made, where it's not just necessarily one specific product. It's more of a philosophy.
Absolutely.
Interesting. Interesting. So kind of along those lines, the digital audio product that you had spoken about over the course of the last couple quarters, Wave. You know, we've done the demos. It sounds exactly like a real human-read ad. How has that reception been from potential advertisers? And just kind of, again, back to the maturity question, how are you thinking about digital audio as a space?
Right. You know, I think we all saw that The Trade Desk is partnering up with Spotify because everybody's understanding that audio ads is $8 billion a year in the U.S. And to be frank, it's kind of dumb. I mean, you need to put somebody in a studio to record a version, take that MP3 file, send it to somewhere, upload it. It's not scalable. So, you know, we've developed Wave less than a year from now, which is generative AI to create audio ads based on data from retailers at scale. So we can create millions of ads a day, which sounds very much human. But we also have the attribution to know if people skip them, if people actually interacted with them, if sales went up because of that. So, you know, we see a lot of potential in that.
We've developed a Spanish version for that so we can get into more countries.
Very interesting. You know, before maybe we get into some of the more financially oriented questions, I just want to take a quick pause to see if anybody in the audience has anything. Seeing none. Okay. So as we contemplate kind of all the moving pieces that we've spoken about over the course of the product section of the conversation, how should investors look at that margin trajectory and investment prioritization for the company over the course of 2025?
Right. So currently, you know, we're working on, you know, improving our margins. And I'm not going to go into numbers since we didn't release the guidance yet.
Sure.
But in terms of resource allocation, you know, we're going to invest more in technology to be able to scale faster, not with humans, but with actual technology. But we're also looking at acquiring more companies. Now, acquiring more companies, you know, our methodology on how do we look at that is EBITDA positive, super synergistic. We're not going to open new type of businesses, right? It needs to make our organic part move way faster with that acquisition versus without it. And it has to serve the same type of client. So synergistic, right? So how do we go to our client and say, you know us for this, now we also have this. So we want a bigger cut of the pie, right? So that's how we look at it.
Again, we're going to be very focused on optimizing, you know, our cost, but also investing in technology going forward and buying more growth engines.
And that's great. That leads right into my next question on M&A. So the pace has maybe slowed a little bit in terms of the quantity, but the size of the deal has gone up. And I think they've both made sense strategically. You have Vidazoo plugging into your video side. You have Hivestack as the digital out-of-home as the extension of the CTV, as we talked about earlier. But how do we think about, you know, is there anything on your shopping list in terms of capabilities that you think Perion doesn't have or could turbocharge through inorganic means?
Yeah. So I think the entire ecosystem of advertising is going through a shift towards performance. I mean, advertisers want to see that their budget is getting them more value than it used to do before. So that goes back to algorithms, AI, data, attribution, you know, all those stuff that supercharge your ability to show and prove the ROI on media spend. And that's where, you know, our mind's at.
Very interesting. One more opportunity for anyone in the crowd. All right. My last one that I like to ask everybody before we wrap up our presentations is if you're choosing one thing from the business to be really excited about or that you feel that investors should kind of key in on in 2025 to judge the progress or the success of the company, what would you call out?
Right. It's a huge industry, $700 billion a year. It's totally broken. It's totally broken. I've been doing this since 1997, and we're going to invest a lot in algorithms and optimization and reducing waste. Now, we haven't released our guidance for next year and KPIs for next year, but we should definitely focus on how do we attract more advertisers, how do we gain more budgets. With the plans for next year, you're going to see this. You're going to see how do you measure that.
Awesome. All right. Very interesting. Tal, thanks for joining us.
Thank you.
Thanks to everyone in the audience for joining us at the Raymond James TMT and Consumer Conference.
Thank you.
All right.