You guys in on our conversation here. Welcome to the continuation of day one here. I'm Matt Swanson, I'm a tech analyst at RBC. Sorry, I almost skipped right over it. Adam Singolda, CEO and founder of Taboola-
I feel like who am I talking to right now? What's going on? Who am I?
Well, we were like mid-conversation. I was like, "And we're going straight into the first question.
Yeah.
We hadn't started going on the mics yet. So, for starters, this is kind of what we were just talking about, you know, you've been public for 2.5 years now. What do you think is the most either, like, misunderstood or under-appreciated aspect of Taboola by investors?
Yeah, I know, we're talking about it a bunch of times. I think, first of all, I have to give investors, you know, some credit. You know, we're still a new public company. We're still, you know... We need to build that trust with investors that we do what we say we'll do, and get people just to say, you know, "It's the right place to be." So that, I think for us, as a company, and as a team, it's about spending time with investors, with, you know, with analysts and good firms, and building that trust, so people know that when we think something's gonna happen, it's gonna... You know, we have a chance of meeting and beating that. That, I think that's a big portion of it. It needs some patience-
Mm-hmm.
... but that's part of it. The second thing is that, you know, I think just opportunity around the Open Web, which is the market we operate in. It's a fairly complicated space. You know, you should know. I mean, you know, it's easy to buy Google, it's easy to buy Facebook, but the Open Web, the $75 billion market that's growing 8%-12% is kind of... You know, it includes dozens, if not hundreds, of ad tech companies, each with its own flavor, its own style, and I think it's complicated. For us, you know, the opportunity we have, which we're spending time with investors kind of walking through, is how Taboola can become the first must-buy, large-scale...
We're already the biggest, I think, but to truly become the, you know, at a scale that you're a must-buy to advertisers. Hopefully, you're a must-buy to investors, because, you know, you can be kind of like the Google of the open web. So I think that's where, that's when we're talking to investors around our growth strategy and how we're doing well with expanding yield, and how do we get in front of consumers in a predictable, consistent way. That's the work we're doing.
Yeah.
I think, you know, it's the reason I'm here is because I think there is an opportunity, and we can do it, to build that first large-scale in revenue and hopefully in market cap as well, company in the open web. And that's the journey we're walking through.
And when you're on that journey and you're trying to explain the strategic vision to investors, and the macro has made it more challenging the last couple of years, 'cause there's a lot of different things you can't control coming into that. One thing, question I kind of like to ask people is, you know, a lot of strategic gains can get masked by the macro, so if things get a lot better in 2024, what are some of the advancements you've made over the past couple of years that you think are gonna become more apparent?
What I tell people at Taboola-
Yeah
... is assume the world is flat forever. Assume the world will never recover, it will never go to what it used to be. In many ways, you know, this free money economy companies have been enjoying for years-
Mm-hmm
... into the cleansing exercise of 2022, just showed us, and I think showed investors, who has something that's real-real, and who has a chance of getting more of that real-real, and who might never will. So my expectation, assumption going into the future is the world is flat forever. How do we still grow it? How do we accelerate faster than the, than the market? And so the biggest thing that we've been investing, you know, over the last few years, but definitely in 2022, which is a big shift I've done, was basically moving our R&D investment. We have about 400 engineers, and now about half of them work on just AI initiatives that help advertisers succeed, which is magic.
You know, like, about 90% of Taboola's revenue, which again, is very special, if you look at our overall revenue, 90% of it is driven by clients who buy from us directly, not agencies, not exchanges, not SSPs, DSPs, three letters, it's, like, so complicated. Clients, Taboola, that's it. So 90% of our business is direct to us, and we've, we've moved half of our R&D to make sure that they can churn less and spend more. And as of recent, the biggest, you know, I think we talked about in Q- in the last quarter was Max Conversion, which really is mimicking what Google and Facebook is doing. When, as a client, you're trying to sell this chair, you go to Google, you say, "My chair costs $30, my margin needs to be 25%, or I'm willing to spend up until that.
Go sell to people who want to buy chairs." Up until recently, at Taboola, you had to put a CPC and tell Taboola, "The chair is $50, but I'll pay you $0.50," which is counterintuitive to how clients think. So now with our recent AI investment, you can truly work with Taboola like you do with Google and Facebook. And we've seen the fastest adoption of that AI, called Max Conversion, since I started Taboola 15 years ago.
Mm-hmm.
And we're seeing higher NDRs for those who use it. We're seeing lower churn, and I believe next year will be... Most of our business will be using these AI initiatives that can make clients successful. That is a significant step apart from anyone in the Open Web today that I look around. Today, it's still fairly complicated to buy from the Open Web, and I'm excited about this, you know, 2024 being the year of most of our revenue is using this AI, and that's probably the biggest lesson from 2022.
You know, you mentioned some big walled gardens there, and we've been talking about the open internet. Competition's always a complicated word when it comes to the advertising space, because it's not like you rip out somebody to put someone in-
Right
... every time necessarily. But when you think about where net new dollars are coming to Taboola from, now, where do you think about that, whether it be format, companies, or, you know, product areas?
So first of all, you know, taking a step back, Taboola is a two-sided marketplace, which is unique to us. Or in the ad tech in general, you see some companies that are supply-side-oriented, some that are demand-side-oriented. We're both, 'cause we're trying to... Again, we're trying to mimic the dynamics of the walled garden. You know, Twitter has 400 million people coming to Twitter every day. That's their reach. Facebook has 2 billion, that is their reach. We have publishers' relationship that are exclusive and long-term, and this is our reach. We have about 600 million people a day that we reach, consistently, exclusively for a long time. By the way, on that front, we do take it from someone else.
So when we just announced winning Nexstar, which is a big broadcaster in the U.S., we took it from someone, right? So on the supply side, it's competitive, and our go-to-market strategy there is we empower the entire organization, the editorial team, the commerce team, the audience team, everybody. When I started Taboola, I would have a meeting with a publisher, and one person would come to the meeting, and they would talk about CPMs and things. And now I go to a meeting, and 10 people come, the chief editor, and the subscription person, and the commerce person, they all love Taboola, and it's not a fair fight. The only way you win a publisher from Taboola is you have to lose money, which I love that business.
I'm okay with you losing money to win a business from me because you can't lose money forever. So that's, that's the supply side of things. So here we do take it from someone else, and we take more than we lose. On the demand side, you're right. Advertisers buy from anyone, so long that they get value. So, for us, we're not taking money from Google or Facebook or someone else. In many ways, our clients have a limited budget, so long, so long that we can do what they expect to happen. And in that space, our competition is us. We just need to be better than Taboola to keep getting more and more budgets from advertisers. And about a 1/3 of our revenue comes from self-service, which is...
There we have another opportunity to make it easier and easier to work with us. This is where we include Gen AI, so they come to Taboola, and they don't even need to create titles or thumbnails, and now with Max Conversion, they don't even have CPC. They literally come in, and it's like it's very little. They have to just say what's the objective and the title, the thumbnail, soon maybe the landing page, and no CPC, so it's almost completely autonomous car experience for self-service, which I love. So that's kind of a lot of our energy and where we think there's a lot of growth.
And speaking of areas where there's a lot of growth, your e-commerce business has really taken off. It's 20% of xTAC revenue?
Yeah.
Can you kind of talk about both the traction you're seeing in that right now, but maybe what you see this business as in three to five years? Kind of how much of Taboola is going to be represented by e-commerce over time.
First, I really, really like that business. What an amazing acquisition that I think Taboola made, given the, you know, I joke around internally that this is like LVMH buying Louis Vuitton. It's like, given what it became over time, in the sense that e-commerce is such a lucrative business-
Mm-hmm.
Such a huge demand from retailers to get more channels that are sustainable and can drive leads to them. And on the publisher side, in open web front, you're looking at New York Times and Wirecutter, now TIME.com with us, with Stamped, USA TODAY and Review.com. All these publishers that are making money from general news, they want to verticalize. They want to say: "Well, we should make more higher yields and more revenue from healthcare. We should be in the e-commerce business. We should be in travel. We should be in all these verticalized kind of-" because people already trust us. If you're going to USA TODAY because you appreciate their editorial clout, why wouldn't you buy a coffee machine from them?
Mm.
If you go to TIME.com because you trust them, because they've been around for 100 years, why shouldn't you get a mortgage from them? So this is something that many, many publishers want, but many publishers yet to do. And with us, with, with, our Connexity and Skimlinks, which is the acquisition we've made, that's growing really fast. It keeps beating our expectation internally. So I love, you know, I love those meeting towards the end that we get new guidance for them, and it's always better than I think, you know. And I'm an optimistic person, Matthew, you know. So, so it's hard to make me feel like it's even better than I think. So I really like that business, and I think we're not even scratching the surface because, there's more demand than supply.
Like, advertisers want it a lot, and publishers want it, and we're trying to build as fast as we can, but we're trying to not make too many mistakes, but it's still fairly new to us. If you go to TIME.com, it's probably the most beautiful example of a publisher that has opened up e-commerce and opened up financial services with Taboola e-commerce business, and this is growing very fast. To your question about where is it going, I think, in two to three years, this might be about a third of our xTAC.
I think the pace in which it's growing, so if I look at TIME.com as a proxy, so it doesn't have to be that one specifically, but look at group of recent publishers that have launched it with us, it's growing so fast, it might be bigger than Taboola native. So our core business, which is growing, and now with Yahoo growing it even faster, e-commerce might become as big as that in, you know, in three years or so. So I really like it, and I think also from a competitive landscape, if you're competing with Taboola, but you don't have an e-commerce offering, the publishers expect it.
Mm-hmm
... then what is your future? So I also, as I think about competitive landscape a lot, I think it's going to become harder and harder to compete with Taboola, not only because of our, you know, yields being higher and our engagement offerings to publishers, but also, if you don't have an e-commerce business to offer them, I think you might be in a difficult spot.
And you mentioned Yahoo! We'll get there in a second. But in recent conference calls, you mentioned some of the risks to the advertising ecosystem from generative AI, and I think specifically you were talking about a changing environment around search traffic. Could you maybe build on that a little bit and talk about, you know, the Gen AI impact on the advertising ecosystem, and then also maybe the benefits of some of the investments you've made at Taboola?
Yeah. First of all, I'm taking a step back. I still think, and I said all the time that Deep Learning and Machine Learning, which is the core AI-
Mm-hmm.
It has the biggest upside for companies and for investors. From a point of view of companies that can do Deep Learning, well, can probably improve their yields and grow the company revenue and profitability significantly. So I still think that from a, you know, if I look at companies around, and if I look at investment opportunities, Deep Learning, not yet Gen AI, is this the meat. There's a huge difference between, you know, kind of like Deep Learning, DL, Machine Learning, ML, and bullshit, BS. And it's really hard to do Deep Learning. So this is our... It's a huge source of investment for us, and I think that has the biggest upside. Gen AI is a great productivity opportunity-
Mm-hmm.
- for companies and a great, you know, creative things that you can do. However, I think because search engines, and specifically Google, might decide to include more results that are automatically generated versus sending traffic out, this could have an impact on publisher site, and I wrote about that, recently. So the publisher, that might mean less search traffic. That's what Gen AI can do if search includes Gen AI on their search page. On the flip side, I think there's an opportunity for publishers to get more people to the homepage-
Mm.
subscription, newsletters, notification. So I spoke a lot about, recently about what can publishers do to navigate that, if it ever happens, and how they can build more direct-to-consumer relationship. So I think a lot of publishers are thinking about it and spending time on it, but this potentially could be impacting them.
And I said we'd get to Yahoo! So I mean, you're in the early stages of a 30-year partnership. Can you maybe talk about the progress you've made, you know, what we can expect in 2024? But I mean, given again, like, you don't see a lot of 30-year partnerships. Like, what you expect the progression to be in the relationship, not the year 28, but like, you know, as we go along-
Yeah
... in the process?
I did ask Apollo for a 50-year relationship, just to be fair, but I was always, you know, only able to negotiate 30. But I wanted 50. One, I think Yahoo! is one of the most, you know, exciting private companies in the world right now. Apollo's doing a lot of good things, and Jim Lanzone and the team, these are very, very sophisticated people. They're winners. So I do think, by the way, you know, I don't know if they'll, what they'll do and what's their future, but I mean, I think it's a very exciting private company and exciting for us to be, you know, part of that story as well. What we've done to date, and just to remind people, Yahoo! and Taboola, we have, there are three pillars to that relationship. The first one...
These are the three most important things also to grow yield. But the first one is the data. So Taboola has a lot of reach, Yahoo has a lot of reach, and we're kind of, like, merging our contextual signals so that we can improve our predictability of what you might want to do next. Data is a very big deal, so there's a flywheel, you know, the bigger you get, the more data you have, it becomes harder to compete with you. So that's one thing that we've started doing. We haven't finished, but we're making good progress. The second thing is the supply. So Yahoo Finance, Yahoo News, Mail, yahoo.com, what we see in front of us when we go to Yahoo, that is now 100% available.
So if you come to Taboola and you buy on Taboola, you might land on Yahoo.com. So that's the supply piece, and that is exclusive, the native piece is exclusive to Taboola for the next 30 years. And the third part is the advertiser base, which we're now starting to migrate.
Mm-hmm.
That means Yahoo! has a DSP, and they have a native direct business. The native direct will migrate to become Taboola clients, so many, many clients will just become Taboola's clients. And the DSP, which they operate, already, if you go to the DSP, Taboola is inside of it. So if you choose Display, CTV, Native, Taboola pops in, pops up. So Taboola is your native channel to buy Yahoo! through the DSP. Overall, what I've said in the last letter is that about $20 million or so in Q4 will come from Yahoo!, using mainly our advertisers, and this will grow to maturity in Q3 of next year. So the run rate of Q3 of next year should be ramped up fully, and that's exciting because what I'm seeing already right now is Yahoo! is experiencing already growth in yield, which means Taboola's technology works.
Mm.
The thesis in which why we did the deal works. We're seeing the yield is higher, and we're seeing that advertisers who buy from us seeing good results. So now the question is just getting $20 million to $1 billion, but we're off to a good start.
Looking at a couple recent product launches, Target CPA has been successful, and then the new bidding strategy, Maximize Conversions. Can you maybe talk about both these and just the appeal to advertisers and what, you know, pain points they're solving?
Yeah, I mean, you know, we spoke about it a little bit earlier, about, we've, in general, before Max Conversion, Target CPA, we've had our previous version of AI was called Smart Bid, which was adopted by 80% of our clients, so that was great, but it still required them to choose a CPC, which only exists in ad tech. So if you're a client, any client, Nike, Wayfair, Walmart, anyone, the only place where you buy banners and the only place you have to put a CPC is in the open web. When you buy billions of dollars on Google, Facebook, and Amazon, you've never seen a banner on search engines. Did you ever search on Google and see a cube in the middle of the search page? No.
Did you ever go to Instagram and saw this cube in the middle of your feed? No. On Amazon, did you ever buy a product and saw a banner? No. The only place where banners exist is on the open web. So that's a weird format already, and the only place that advertisers are required to put a bid is in the open web, because on Google, Facebook, and Amazon, it's automatic. They just say, "Here's our objective." So I think this is a spread between open web and Google, Facebook. You have the platforms that generate such high ARPU because they're so awesome. It's all native and beautiful, and it's automatic and driven by AI, and then you have the open web....
No one in this room has clicked on a banner purposely. No one here remembers. No one in this room can tell me what was the last banner they clicked on purpose. It just never happens. Not in 2023, probably not... Our children will be shocked. We had this discussion, and we talked about banners. Much like I'm shocked my parents used to fly, and people used to smoke cigarettes in planes. That's how shocking banners will be for my children in 10 years. Taboola is a revolution that will take us there, right? Because we're gonna replace banners with beautiful, relevant, native ads, with no CPC and simplicity of doing business in the Open Web, so we can support journalism and all those good things.
So Max Conversion and Target CPA is one step forward towards advertising buying the open web, which is important, 'cause we want the open web to succeed, because otherwise, our children will make decisions based on TikTok, which is horrible. Like, we need the open web to stay strong. We want journalism to succeed, and that's the gap we can fill.
Sorry, I just got sidetracked in my mind of thinking of TikTok being the only place for journalism, and just what...
It's, no, it's the end of humanity.
It won't be that far away.
No, no, it's, look, and we're seeing it already these days, you know-
Yeah
... with everything that's happening in the world. Social networks are very dangerous. It's the nicotine of our era, you know? And we need a strong journalistic, Open Web environment, where people have a chance of making decisions about science and healthcare and news that are driven by humans, with editorial values. So I'm concerned about the social element, and I see Taboola as a company that can save the world.
There you have it. So both these products use similar strategies, you mentioned to Meta and Google. And right away, when I was hearing you talk about that on the last conference call, it got me thinking about how software companies who are on consumption models all kind of refigure their SaaS models to be more like public cloud consumption. It just makes sense for the buying centers. So, I mean, mirroring some of the best practices of Meta and Google, like, how does that ease your go-to-market when you're going to talk to someone who has spending budgets to make it apples to apples?
I think it's. Again, my going-in assumption is that advertisers prefer not to buy Open Web in general, because it's small and complicated.
Mm.
So why spend time with it, right? So, so I think that's my going-in assumption. So it has to be, what, what they need is a big enough channel so it's worth their time. I think they want the creatives to be similar. So if I'm buying from Instagram, and I'm buying a thumbnail or a carousel of thumbnails and a title, which is a native ad, I think ideally you want to be able to mimic that experience, so I don't have to recreate anything for you.
Mm.
I just give you my Facebook creatives. And the third one is that I think the bidding strategy have to be the same or at least close enough. So that ideally, you wanna be... In business, you wanna be almost boring, so it's easy. I don't have to do anything new. I think The Trade Desk did such a good job simplifying agencies buying through The Trade Desk as an independent kind of partner, and I think that was on the agency side. They've done a good job becoming a must-buy to say, "Look, some of your money has to be here." And indeed, it happened, right? Like, if you were seven years ago, and you saw that vision, that became a good upside for The Trade Desk and investors.
Now, I think in the Open Web, there's a similar kind of, like, upside opportunity, because it's fairly complicated, but eventually, I think most advertisers or more advertisers will have an Open Web strategy, and more publishers will look like Instagram versus what they look like now, which is a page with interrupting ads-
Mm-hmm
... that none of us clicks on. So I think, mimicking what the platforms look like will be good for publishers and advertisers, and I think there's an upside here.
Maybe one more on product. Could you talk about... You mentioned briefly your bidder. Can you talk about the strategy around that?
Yeah.
And then maybe kinda like your long-term goals for the product, and why you think you're positioned to achieve them.
Specifically on the bidder or-
Yeah.
Yep.
You-
So the bidder was developed a year ago with Microsoft as a design partner, and we launched it in April of last year. We've always had this audience extension idea. We've said, "Well, if 90% of your revenue comes from advertisers who buy from you directly, and they buy it on your own publishers, could you do more with those advertisers?
Mm.
So if you have such great data, and you monetize well on your own publishers, and these are your clients, these are not agencies' clients, these are not SSPs' clients, these are not DSP clients, these are your clients, could you give them more value?" And by the way, we've seen this before. You know, Google, when they have advertisers who buy a search, they take those advertisers outside of search onto Ads and maybe 360. Amazon take their advertisers who buy from Amazon, and then take them out through their DSP. So we've seen these examples before, where companies who have a lot of direct-to-advertiser relationship kind of extend that reach out. So we've always kind of played with that idea to do that, too. And we were lucky to have Microsoft as a partner, so we can do it with them.
and so the idea, the vision behind the bidder is to say, "Could we build another multi-billion dollar business, where we take our own advertisers who buy from us, use our data that's unique to us, but buy it beyond our core publishers, on other publishers we don't have, on CTV, which we don't do yet, on apps, which we don't do yet, on, you know, connected devices in the house, which we don't do yet?" So there's an opportunity for us to kind of reach other places-
Mm-hmm
... that are not our exclusive long-term publishers and generate $1 billion or $2 billion. And what we said publicly is we think we have a chance of getting 5%-10% of the auction. And just on our own publisher base, which is we have about 9,000 publishers, we estimate they generate about $20 billion -$25 billion in display revenue.
Mm-hmm.
Once we, if you can get 5%-10% of that, this is another $1 billion -$2 billion revenue opportunity for us, which we like. This is kind of like where it's going.
One question that I think has become more challenging than typically the last few quarters that everyone's asking me is, are macros getting better? And just, I mean, kind of what are you seeing right now out there in the environment?
I don't know. I think you're emotional if you're waiting for the world to get better. I mean, in my opinion, I mean, I think if you're spending your time analyzing the macro and the industry, you've already lost. You know, it's, you've already, you're already behind. Because I think it's, it's, it's emotional and hopeful, and hope is great, but not in business.
Yeah.
So I think, I think in business you want to control your destiny. Again, my working assumption is that what happened leading to 2022 was too good to be true, especially 2021, right?
Mm-hmm.
I don't know if it's any portion of it ever comes back. So the question is, can you make the world better by your own... Do you have what it takes to make it better? It's really hard because you have to be very big to have a lot of data and a lot of advertisers and great technology. It's hard. There's a reason why Google and Facebook are so good. It's not by chance. They did not wait for the world to be better. And by the way, they did okay even when the world was not okay. So to me, it was just a cleansing exercise of winners and losers, and I don't think that gap is gonna come back to what it used to be.
So, I think if anything, we're gonna see consolidation and maybe deprecation of companies who just can't do it anymore because it's too difficult to make clients successful.
Mm-hmm.
It's really, really hard, you know? But those who can, I think the upside could be bigger, and I hope we can be in that camp.
Yeah. I mean, to your point, 2021 was certainly an anomaly in terms of ad spend trending with GDP, and then there's this mountain that shoots up-
Yeah
... before it comes right back down. I guess, thinking forward, what do you think are the biggest decisions you and your management team need to make over the next three years to kind of get Taboola to where you would like to be in 2026?
You know, to oversimplify the way we think as management, and there are really two things that are on our mind. The first one is, how can we get in front of consumers and build engaging experiences in front of them so that they would like to interact with us for years? In our core business, that mainly means for the next two years, Yahoo and publishers. Like I said, we've had record years winning publishers, which is so much fun to see. So that's one element. Beyond that, Taboola News, which is our OEM business, which is like our version of Apple News, is growing almost 2x this year versus last year. That is how we... When we work with Samsung and Xiaomi and Oppo, and soon there'll be other types of carriers.
When they pre-install Taboola, we create a news experience with ads inside of it, and that's another opportunity for us to reach consumers. So one venue is how can we be in front of consumers? And we have, you know, ambition to be integrated into automobiles at some point, and, you know, speakers in your kitchen and like, you know, everybody needs news. Like, on my Alexa, I do see news. Taboola could do it better. You know, we have more news than they do. So I do think Taboola eventually can be in many, many other places. And so that's one venue. So the next one to two years, in our core, Yahoo!, which is an important partnership, we want to make it work, and then other publishers.
Over time, Taboola News can be a big business, and even beyond that. The second thing is yield expansion. Yield expansion on its own can get Taboola to grow over 20% for years. So I think it's really critical. It's probably the most important thing Taboola is doing. And here, we talked about Max Conversion and technology. E-commerce can grow yield, video, and I think over time we might want to get into gaming, app download, and other things that can help us grow the auction so it's more dense and yield can go even up. So those are two things: yield and reach to consumers.
Then we've only got about 30 seconds left. I mean, if there was maybe one more thought that, that you'd like to... If you wanted to sum up this half hour into, into now 15 seconds, what, what would that be?
What would you do?
I'm still so interested in this idea, which I thought you had a great answer to, was this kind of masking that's happened during a bad macro of who's really winning, what's happening with market share, and kind of seeing how that unravels once the market gets better. So I mean, to your point, you just gotta keep building through the down macros, 'cause that's the one thing you can't control.
There you have it. Thanks for having me.