Let's get started. I am Laura Martin. I'm the Senior Media and Internet Analyst here at Needham & Company, and I'm here with Tal Jacobson, who's the CEO of Perion. Welcome, Tal.
Thank you for having me.
Thank you very much. And we were at CES together, and he's one of my favorite people, so you'll notice that from the talk. I'm going to start with a personal question, which is, what hidden skill do you possess that doesn't go on a resume that you think has been mission-critical to your professional success?
Right. Well, I think, you know, being a CEO, I see that the hidden skill for a CEO, that having that creativity of thinking, you know, big dream, but also have your feet on the ground to validate that this dream is not an illusion. So how do you dream big? How do you break it down into first-principle elements? How do you validate that? And how do you build an actionable plan to execute? So a lot of time, you would see people that dream big, and you see other people that execute. I think CEOs should have those two parts, those creative parts and those very logic parts. I think that's a hidden skill.
Okay, great. And let's turn to CES, where you and I had an hour conversation in a bar, which was one of my favorite venues for a conversation. So tell me what I sent you: a list of provocative statements that I took away from CES. Give me one that you agreed with or disagreed with.
I think, you know, and I have to read this, you know, websites are the. It's not there yet, but it's going to be the thing of the past. I think websites are not the future. I think Open Web is not the future. I think Chat AI is going to transform the way we interact with information, so we wouldn't necessarily go through a search engine to ask questions, and we would get the answers within the Chat AI, so we wouldn't go to websites. And if user behavior changes, not going to websites, so where do people want to spend their time? Not on websites. They're going to spend time more on social, on their TVs or CTV for us, out of home, outside, so I think, especially for ad tech, Open Web is great, but that's not the growing part.
I think for ad tech, you know, TV, phones, out of home, social, those are the growing parts, so.
Okay, which explains why you did an out-of-home acquisition, right? If you think out-of-home is going to be Okay. So do you think the app world is dead, too? Or you just think websites won't have the visitation because they're not going through search, which provides links, and so is the app world, in your view, also going to be shrinking?
It depends which apps, right? I think, you know, I've spoken with pretty much all the executives at big, major publishers' websites, and they're counting a lot on organic traffic from websites, from search engines. If that goes down, then there's, if they have a very loyal user base on their app, like The Information or, you know, Vox has different apps, then that's going to stay. But they can't continue to count on those organic searches, right? So apps for a specific, very loyal consumer base, that's going to stay. Anything else, I think that's going to drop in the next couple of years.
Okay, great. What were your key takeaways from CES, from all your meetings? Because you were doing as many meetings as me. What else did you think was interesting about CES this year?
So I saw a few things. Obviously, I was, you know, I was impressed with the Universal Ads that Comcast announced at CES. I think that was a great announcement. I think that shows how, you know, major media channels are now becoming more available for the small media markets, the mid markets. I think everything goes towards performance, which Universal Ads also answer. And we just discussed this. You know, so many companies now going through releasing their own glasses, like Ray-Ban with Meta and Amazon. And that's going to be an interesting year to see how that, you know, goes into play into the mass market.
Yeah. Universal Ads is actually launched by Universal Studios, not a product name, but it is confusing.
It is.
Comcast, which owns Universal and NBC, they also own, has launched a platform called Universal Ads, as in Universal Studios Ads. It is a self-service platform that allows small and medium enterprise or small and medium business, SMBs, to actually, for the first time, buy NBC inventory as a small and medium business. Usually, television inventory has been really only available to the top 200 advertisers. Now, on a smart TV, a small and medium business can put money to work probably in the thousands of dollars instead of the tens of thousands of dollars. It is not $20 like Facebook. But in the thousands of dollars, you can now run an ad as long as you have an ad. That is the piece that is missing. A lot of small and medium businesses do not have a video ad that they could run.
But in theory, this platform allows a small and medium business to create a 15- or 30-second high-quality video ad and then buy it on NBC content. And so, and one of the things that I heard from three CEOs is that connected television advertising in 2025 will come from small and medium businesses. And Comcast saw this and therefore has launched this platform because they want to get some of that money into NBC on a smart TV. So that's what he's talking about, that that was really intriguing this year. And I agree 100%. I hope that's right.
Yeah, and you know, to your point, you know, we saw a lot of success throughout the years because we have a pretty robust DCO, which is.
DCO.
Dynamic Creative Optimization . So our algorithm builds the creative. And a lot of times, especially for local businesses, they do not have that creative for CTV.
That's true.
Yeah, but our technology does that. So we're going to ask them, Okay, so give me your logo, give me a statement, give me your whatever, images. And our algorithm actually builds in the creative that can run on TV ads, right, on video ads, on display ads. A lot of times, agencies are using us. They're going to say, my advertiser wants to run a campaign now, and we don't have time to build a creative for that. Can you help us? And we're going to say, absolutely. Just send us whatever you guys have. We're going to let the algorithm decide on the layout, and we're going to show you how that's going to look like, and we're going to run it. So within a few hours, they have a creative, and they have the attribution, and they have the ability to activate without having that robust production.
Is that an AI-generated?
It is.
Okay. And can you also tell the audience how, in what other ways, you're using generative AI to, like, either lower costs or drive revenue upside through new business acquisition?
Yeah, yeah, absolutely. So we have two points. We have a pretty strong AI lab. Most of them are based in Israel. And the way we use it, we use it for two different ways. One, the efficiency of our company. How do we become more efficient? How do we drive faster results for our clients without adding more people, right? So generating reports, generating decisions how to move budgets from one channel to another. That's one part. The other part is generative AI for creative. So we've launched almost a year ago a product called WAVE, generative AI for audio ads. So audio ads in the U.S. is roughly $8 billion a year. Almost all of it is being generated in a studio with a person. I think I haven't seen another company that does that, but we're generating that through data.
So we're getting from retailers like Kroger a database of hundreds of thousands of promotions locally. The GenAI, the WAVE product, is actually generating audio ads and then getting distributed into Spotify, iHeart, being very specific, using very specific targeting for each ad. And then we're getting a feedback loop from the retailers saying, Okay, so I actually saw an uplift in sales because of that. So we're using AI a lot for creative. I think I've told you this. We had a great campaign for Uber and for Estée Lauder in Hong Kong. They're using GenAI to generate different versions of creative based on environmental conditions, based on specific targeting, based on the channel, and then seeing how that performs. And since it's generative AI and works on deep learning algorithms, it gets better and better the more you actually use it.
Okay. Are you using it for cost savings in any way? Are you cutting costs in any way with using generative AI?
Absolutely, absolutely. So a lot of the work that we have for account managers and analysts is now being shifted towards AI, generative AI. So we're connecting our databases of all our data so they can just run queries just asking in natural language the database. So that actually removes a lot of time-consuming tasks, which means we do not need just to add more and more people to scale up.
Okay. And how much money, as a percent of the cost structure, do you think generative AI will be able to save you? 10%, 20%, 2%?
I think it all depends on what do we do first. This year, last year, we focused on a lot of optimizing time-consuming tasks. This year, since we're unifying our infrastructure, so we used to have different products, and now we're unifying everything to a single product. I think that would run faster. And I think the more we're going to use that, especially in the upcoming years, the more we're going to be more efficient and save more money on our operation.
So you think 10% of, you know, you think you could not increase costs?
I don't know. If you go here, if it's in numbers, it's my watchdog.
Yeah. Okay. I mean, it's hard because it's like you won't lay people off, but you just won't have to grow. You can grow the revenue without having to grow people as fast because automation is going to do some of this. So it's probably hard to say, like, how much you're saving because you're just not going to, your costs won't go up as fast. They won't scale with revenue. They'll be able to stay flatter while revenue goes up. Yeah, I get how it's hard. Okay, great. So when you think about upside value drivers, and let's define that as revenue, upside revenue drivers in 2025, what are you most excited about?
You know, going back to the acquisition of Hivestack, we've bought this as the center of the universe. We're very excited about bringing all the products we have into that single product and introducing this in 2025 into the major retailers in the US, the major retailers in Asia. You know, we're introducing out-of-home as a more holistic solution, not just out-of-home as a separate channel. We just launched, I think, a month and a half or two months ago, a new product called Anyplace TV, which is us taking CTV budgets and now asking our advertiser, do you want to extend this? You already have the video asset. Do you want to extend this into video screens outside of the house? Maybe within malls, maybe within subways, maybe within Ubers. Obviously, we're doing this in a very transparent way.
So they would know exactly where it runs. They would know, does it have audio or doesn't have audio? And obviously, ratings are based on what they get. But they now have the ability to use the same asset, the same video asset, on a lot more channels in a very location-based manner to push more performance towards specific locations. So I think that's, as we go into 2025, I think location-based is going to be key. I think, you know, to do a lot more focused campaigns in specific locations to see the actual uplift for retailers and advertisers, that's going to be key. We also announced a month ago a partnership with Experian to have that identity graph being fed directly into our technology.
So we now have the ability to understand that your phone, your laptop, and your TV is probably the same person that is, you know, looking to buy a new car or looking to buy a cruise vacation, right? So all of those pieces are such as add so much more power to our platform in 2025. That's what we're excited about.
Okayay. One of the questions I have about out-of-home, because I know that's a big bet you're making, and I like the idea of extending in-the-home connected television assets, take the same ad and put it out of home. I like that idea a lot. Is measurement and attribution? It's really hard for out-of-home to tell how effective it was. So I get that it's free because they don't have to create a new asset. But how do you solve the measurement and attribution problem of billboards and out-of-home screens?
Yeah, well, I think it's a great question. So two parts to that answer. One is, you know, out-of-home has been around since 1830, so 200 years, right? Coca-Cola. 200 years back, U.S. had out-of-home ads. The issue with out-of-home, all advertisers on the planet know out-of-home is a great channel. But you're right, it's very hard to measure, right? With digital out-of-home, programmatic out-of-home, we're now adding so many different layers. And that's why we're connecting this into retail media, because we're asking, you know, companies like Kroger, give me all the promotions locally, right? So might be Hoboken, New Jersey, a promotion for steaks at 7:00 P.M. So we're going to run this locally on out-of-home. And then we're going to get the feedback back from Kroger saying, we actually saw an uplift in sales, right? And that's how we prove that this actually works, right?
We've done the same with Pep Boys. We took audio ads in gas stations around the stores. Again, location-based, even audio ads, we got the report back from them, which stores actually saw an uplift. That's why they came back and said, Okay, so let's do this again within those stores, right, so we're using the online methodology of measurement in out-of-home, but actually connecting the retail data into us. Another thing on out-of-home, you probably saw this. T-Mobile just bought Vistar, $600 million, right? For us, this is great news. It means that, you know, the industry now realizes that out-of-home is the next big thing. It is the next big thing. It's you have impression multiplier, which means that one ad can get to 50,000 people in Times Square, not one ad, one person, right?
It's becoming programmatic, and it drives off sales. The fact that, you know, we looked at Vistar at the same time we looked at Hivestack, and we chose, you know, what we thought was a better fit. But the fact that T-Mobile spent $600 million on probably the same product that we have, for us, that's a great validation point that this is very valuable and the market needs that, right? So we're extremely happy about this move. It just shows that we've made the right move.
It sounds to me like you just got a much bigger competitor that's going to be not as focused on profitability, and T-Mobile is a telephone company, hardly smart money. You know, if you told me a private equity guy bought it, like Apollo, I'd be like, oh, shit, like, this must be a great place, but T-Mobile, seriously? I don't know. Feels like they might be putting money to work. I'm not sure any of that's good for you, but if you think it is, Okay.
I think, you know, out-of-home. I've been doing ad tech for almost 30 years. I've never saw anything like the out-of-home space. Such a they have their own dynamics, out-of-home. Agencies, own agencies, it's different. The fact that out-of-home is getting so much focus, it just means that within the holding companies, it's going to get more focus. It's going to get more budgets.
That's true. I get that.
We're going to ride that wave.
Right.
If T-Mobile is going to convince everybody that out-of-home is the next big thing, that's great.
Okay.
There are only two products on the planet for that, us and now T-Mobile. There's only two products. I would be happy for T-Mobile to spend as much money as possible convincing people that programmatic out-of-home is the next big thing. For us, good news.
Okay. That makes sense to me. Okay. Let's stay on that thing you just said, which is the first statement right before that, you said, you're going to convince people to take money from their CTV budget and put it in out-of-home. What you just said is these are really separate budgets. They're completely different buyers. And we have had a big problem in ad agencies even getting television people to move money into Facebook or search, because it's social or digital is a totally different silo. So how do you overcome the inertia at the ad agencies or the siloing at the ad agencies? How do you actually get a CTV buyer to say, oh, by the way, let me have some of your money over here in out-of-home? How do you actually do that?
I think that's a great question. I think, you know, when you look at the agencies now, they're, you know, condensing the teams. It used to be, you know, social, search, TV, and now they're starting to combine those teams, right? I guess efficiency for agencies, but you know, since the out-of-home teams, they didn't have a lot of budget, we're trying to get the CTV budgets extended into more screens, right? Those are different teams, and we have different pitch for each team, right? We also have an extended offer saying, you know what, you're running CTV, let us do the exact same thing on YouTube. We're doing YouTube CTV, but let's do YouTube Web as well, right? So all of a sudden, we're now getting the social budget from that TV team, right?
Because each team would just love to extend the offer they have and not send that and not send the client to another team, and so far, it works great.
Okay. Okay. I see what you're saying. So you're basically even so I guess where I got wrong is a connected television guy has $1 million to spend, and you're saying, look, just take your money and put it across more screens. You're convincing him he doesn't have to give the money to a different guy over in out-of-home. You're saying just extend your CTV buy into more screens, and he's happy to do that because probably lower cost. He's lowering his average cost of reach because out-of-home is cheaper than connected television, which is $20 CPMs. Can you give us a sense? Do they sell on CPMs in out-of-home?
They are, but they have impression multiplier. So we would know, on average, how many people are looking at that screen on average, right? So we don't know the specific person, but we would know that at any given time in the specific building, in an elevator, you have two people, while in Times Square, you have 50,000 people, right? And that's how the impression multiplier works. And it became standard. So Google is using the same thing.
Why is it called a multiplier? Isn't it just impressions? One's two and one's 50,000. What's the multiplier part?
The multiplier means one impression is one time the ad showed, but you need to multiply that by the amount of people that actually look at it, right? Everywhere else, put out-of-home aside, everywhere else, one impression is usually one person, right?
Yes. Yes.
Out-of-home is different because one impression in Times Square is not one impression in an elevator, right? Or in an Uber.
Right. It's true.
So that's.
That's why it's two in an elevator, and the multiplier is 50,000 in Times Square. That's what you mean by impression multiplier.
Yeah.
Okay.
So it's, again, it's cheaper by the impression, but the multiplier is higher. So you're actually getting more money on that specific.
Okay. Okay.
But you're paying less per person.
Okay. Yep. Got it.
You have a bigger reach, which is cheaper.
Okay. Is it viewed as a reach? Is it viewed as a reach medium? Is it top of funnel? Must be, because it doesn't have performance.
Yeah.
Okay.
Yeah. We add QR codes to make it more performance. That actually works.
Okay.
But it does top of funnel.
When you add a QR code, so one of the things I learned at CES is that QR codes on a television, where it requires you to put up a phone, the only 0.001% of people who saw that QR code actually put up their phone. Now, we had Flowcode on stage, which is a QR company, and he said he can get 5%-6% on sports, because those are fandoms. And he has a specific product that lets him put the logo in it. So if the, you know, LA is playing New York, they'll put the logo of LA in the QR code. They'll get very high that gets them higher interaction, because they'll put the New York guys for 15 minutes, and then they'll go to the LA guys. And so they get much higher.
But is that what you kind of, like, percentages of people put up in front of an outdoor screen, their phone and actually read the QR code? What are your percentages?
Out-of-home, I don't have a specific percentage, but out-of-home, usually, advertisers would want us to use QR codes. It's pretty common. On CTV, we also use QR codes. That gets way less when you're watching TV. You're not in a very active mode. You're not looking for your phone. You're not.
But that's true of out-of-home, too. You're walking by, right?
Yeah, but if you look outside, most people go outside with their phone in their hands.
Yeah, that's true.
It's already there.
Yeah, it's in their hands already.
Yeah.
Yeah.
So it doesn't take a lot of effort.
So are you getting 1% click-through rates on your QR codes outside?
I don't have that data, but I know a lot of advertisers actually ask for QR codes within that.
Yeah, but I'm just wondering if they're effective or not.
I don't know. I can ask.
Okay. All right. Okay, so when you think about Hivestack this year, you had the lovely benefit of owning it and had a bunch of quarters of non-same-store comp. You reported really robust growth, in part because you had Hivestack in this year and you didn't have it in the prior year. As we go, as we anniversary the Hivestack acquisition, what's your best guess on what sort of fundamental growth is at Perion now that, you know, once you've owned Hivestack for a whole year?
What's our growth?
Like your growth rate of revenue.
Listen, this year, specific year, is a bit skewed. Because everything that happened with search, so everything's a bit skewed.
Because of the Microsoft thing.
Yeah.
Okay.
But, you know, in two or three weeks, three weeks, we're going to have earnings. We're going to.
Okay, but for the whole year, do you have, like, a normalized growth trajectory for the business over a three-year frame, like just normally?
We're expecting to do double-digit growth.
Okay, that's the normalized growth rate of the enterprise's double-digit growth. It sounds high to me, but Okay. Great. One of the things that Wall Street is madly in love with right now is advertising tied to purchase. And that's being driven by Amazon taking 100% of their ad inventory exactly a year ago on January 24 and turning all of their Prime Video subscribers into ad-driven units. So they're now matching ads to actual purchases on Amazon. Fast forward, Walmart was finally able to close its Vizio deal. And next steps are, when you show an ad on Vizio, Walmart will tie that to an actual purchase in store and online to that ad. So let's call that a retail media network with closed-loop attribution, right? My question is, and Wall Street's madly in love with this idea.
So my question is, do you have any play in this? Is there anywhere where you actually tie your ad units to an actual purchase?
Yes, so I think two months ago, we've released our product, our retail media network product for publishers.
Okay.
Which is for publishers. We've done this with A360 Media and a lot of websites. And for them to use our technology to run their own retail media network. Now, Amazon is doing that with retailers on the AWS. We're doing that. So Amazon, their biggest strength is data. Our biggest strength is how do you run omnichannel and creative dynamically? And we're now in the process of figuring out, also, how do we combine this? How do we because I think the Amazon solution is great. That's absolutely great. But they do not have that piece that we have, which is the creative part, which is convincing, you know, Macy's to run on websites, but also have run that on an omnichannel base, not just one website after another. So I think we can provide a more robust solution than what's available now.
Okayay. And I do show that you reported that your retail media revenue grew 62% to $21 million in the third quarter, just in the quarter alone. So is that being driven by the creative optimization tools? What's driving the growth there?
Yeah, so one of the things is creative measurement and the fact that it's omnichannel, that's not only Open Web, I think, and the fact that we added Out-of-Home into the mix under one planning tool, that really helps.
Okay. Let's turn to Microsoft. So, search revenue decline of 76% in the third quarter. So what I'm wondering is, is the worst behind you? And by the end of 2025, do you expect that segment of your business to start growing again?
So the worst is behind us. Behind you.
You can never say that.
Yeah, that's so true. It can always get worse.
Sweet and garlic. But yeah, but the run rate that we have now is a normalized run rate. So we feel comfortable with this.
Okay.
Again, I think search is not a very strategic piece for our company. Our strategic part is, you know, our platform, our advertising focus, getting budgets. As long as we can continue to extract cash from search, we're going to continue that.
Okay, and that's mostly Yahoo now, right? Microsoft is gone.
Yes. Well, it's not gone, but it's not.
It's normal. It's stable. Okay, great. And what did Microsoft like, what happened? What did Microsoft do? It affected everybody. It wasn't just you guys. What did Microsoft do that changed, like, the world for you guys and for everybody else? What decision did they make on their own?
I can give you my two cents. I do not want to speak on behalf of Microsoft. They have their own. That's my own thinking and thoughts. You know, after COVID, everybody had budgets going around. Everybody just wanted more inventory, right? The more inventory, the better. Everybody had enough budgets. Now, in the past year, there are less and less budgets, and everybody's focusing on ROI. If it's less budgets, then they do not need extra inventory.
Okay.
Obviously, the inventory that came from us came with a rev share.
Yes.
You know, this is just, you know, me making one plus one in my head saying, if I don't have enough budgets, why would I need that extra inventory? I would rather use my own organic inventory and not pay so much on it.
Yeah.
So that's what I think happened.
Okay.
That's not a statement that we got from them, but that's how I think it came about.
Okay. Cool. When you look at, let's turn to your connected television. Connected television up 19%. And about 9%. And so when you think about the connected television growth rate, is that driven by this out-of-home idea where you're extending to out-of-home? Or what's the connected television?
So now, Q3, the CTV that we reported, it's only TV.
Okay, just on TVs, not out-of-home.
Anyplace TV we released December, I think.
Okay.
It's not in the numbers yet.
Okay. I gotcha. Okay.
Everything going forward, the out-of-home part is going to be out-of-home. The TV part is going to be TV part. It's just our way of extending the ability to get more budgets.
Gotcha. Okay. So it won't sit in CTV, even if the CTV guys.
No.
It will sit in out-of-home.
Yeah.
Okay, that makes sense. Okay, good. So Open Web video fell by 63% year-over-year. So what's going on there?
Two parts. One, as I said, Open Web is not a growing part of the world and not a growing part within the U.S.
Okay.
If you look at Google reports, I think that was a quarter or two quarters ago, they reported that the Open Web ads actually were minus 1%. But their CTV, their YouTube is up 12%.
Yeah.
So a lot of video budgets are actually going to walled gardens.
Yeah, walled gardens.
Obviously, Google is huge. So for them, 1% is a lot. For us, it's a lot bigger.
Okay.
But that's a whole industry trend. And for us, video two years ago was a bigger thing on Open Web. Since we're focusing more on budgets and tech right now, if we're getting $1 million from Nike, we don't care. We don't necessarily care to put that on Open Web or something else as long as they get results and come back with more money, right? So we're not pushing Open Web video.
Okay, got it. That's not out of focus. Okay. Questions from the audience? Any questions? Okay. Let's move now to your outlook for 2025 display and social advertising. How does TikTok I mean, in four days, in theory, TikTok is banned. How does that affect you?
Do you think that would happen?
I do.
Yeah.
I mean, they're saying Elon Musk might buy it. But I don't know who buys a company in four days. I don't know what board of directors if it's public would, you know. Elon Musk could, because he's the guy writing the check.
If anyone can.
It would be him. But four days. They have four days. Feels fast to me. So.
Listen, at the end of the day, you know, us in ad tech think that we control the world, and it's not us. It's user behavior. Users love TikTok.
They do. That's true.
If that's going to be banned, they would figure out a different experience that mimics TikTok. Might be Instagram.
Like Reels, like Amazon, you know, Meta Reels or YouTube Shorts. Yeah.
Yeah. So it would just switch into a similar experience.
Okay.
For advertisers, that's fine. I mean, they have enough inventory to get whatever they need. People, the audiences are not disappearing. It's a different media. So that's fine.
Okay, so it doesn't really affect you. You don't think.
No.
Whether TikTok goes away.
No. No, and we are in the process of getting deeper in Asia. We started with out-of-home, which is pretty big for us in Asia, but in 2025, we're going to go with more products into Asia, and there, TikTok is huge.
Okay. And yeah, TikTok's not going away there. Okay. Any questions? No? Okay. So let's see how we're doing on time. We have actually, Okay, we have time for one more question. So if you think about what you want this audience to take away from that you're most optimistic about in 2025, what would that be? That's your closing comment.
So in 2025, we're going to be very focused on advertising needs, on CMOs. There's a huge gap between the fact that $700 billion is going through those pipes.
Yeah.
The ability of CMOs, the people that actually control that money, their ability to execute. There's a huge gap there. That's the gap we're trying to fill. We're in a journey to actually not only grow our company, but change our industry. It's a big journey. You know, we've spent a lot of time and a lot of efforts this 2024, getting all the pieces in place and getting the top CMOs in the U.S. in front of what we do. I think 2025 is a pivotal year for us.
Okay.
Getting more clients, introducing our new solutions.