All right, so probably the most important topic for you as a company right now. About a year ago, you signed a 30-year deal with Yahoo. So can you give us a recap of what this means for Taboola, what this means for advertisers? And, you know, where are you in the implementation process? Because there was a timeline that you had laid out at the Investor Day.
Right.
Interested in catching up with you in terms of where you are in that process.
You know, I think overall, the main reason we're excited about the partnership with Yahoo, which is, you know, just taking a step back, it's strategic on multiple levels. The first one is. It has three legs to it. The first one is the data piece, which will combine our contextual signals, which is very important for, you know, to advertisers, especially its privacy and all those things.
Yeah.
We can talk about that later. But the data advantage that will help both companies on the other side of it, combining our, you know, kind of reach, which is massive is important. Two, the advertiser migration, which I'll get to that as well. And the third one is just access to the publisher.
Yeah.
Yahoo Finance, Yahoo News and Mail, and all those things. The reason it's important to us and why I'm excited the most about it is mainly about what I think is missing the most in this industry, specifically the open web, right? You have Google for search, Facebook for social, and those are massively must-buy categories.
Yes.
You know, advertisers, nine to 10 million advertisers work with both Facebook and, or Meta and, and Google, and Amazon is growing fast, as we know, on the retail front. So those are all must-buy categories. And then you have the open web, many of which companies you cover and, and others review. And in the open web, even though it's a $75 billion market, growing 8%-12% a year, there is no must-buy.
Yeah.
There's no one company that advertisers can say: "We'll do search with Google, Meta for social, Amazon for commerce, and open web, this will be our chosen one".
Yep.
There is no chosen one for the open web, and that's a problem because advertisers can rely on 30 small ad tech companies.
Yeah.
Size matters. With Yahoo, we've mentioned that if we were live in 2022 with Yahoo, we would have been about $2.5 billion in run rate. We expect that, you know, by Q3 of 2024, we'll capture the run rate, the mature, the entirety of the maturity of this partnership on a run rate basis. That gets us to be bigger than X in revenue. Not bad. Almost, you know, about around Pinterest, almost as big, almost as the size of Snap. This is the, this is the better neighborhood for Taboola as the first kind of like, must-buy open web. So that's what excites me the most. We've done a great job to date with the team, the culture between the companies and the management, and the people doing the work. It's fantastic.
Yep.
Jim was texting me this morning, you know? So we're very excited, both of us, about how big this can be and how important it is to both of us. And then, supply is accessible to 100% of Yahoo. So now if you work with Taboola, you can get to any one of Yahoo's properties somewhere around the world, and the biggest focus we have right now is migrating advertisers.
Yeah.
Migrating Yahoo's DSP, as an omni-channel mixed into the native of Taboola and the native-only clients, that's the main focus we have right now.
Okay, gotcha. I think you previously mentioned that, I think you expected revenue contributions from Yahoo to start ramping in the fourth quarter. All right, so we're now two-thirds through the quarter, right? So just, wondering what you can share with us in terms of the, the advertiser behavior as you're migrating.
Yep.
Yeah.
One thing that I think de-risked the deal for investors and for us as management is, we did share that in Q4, we expect to be in the low $10s of millions in revenue from Yahoo. And it's the reason. While still small, right, out of the bigger number we talked about, the reason it's great is because we're seeing advertiser success as they spend dollars through Taboola, so our technology on Yahoo. And both Yahoo and Taboola can now compare. They can say, if the same advertiser spends on before Taboola, what was the performance and how does it look now? And also Taboola can do the same. Taboola can say, when we look at the Taboola network, which is huge, and we look at Yahoo as a source of supply, what's the conversion index?
Like, what's, what works?
We're seeing that it's awesome. Like, it's very, very strong. And now it's strong at, you know, it's... Again, it's not $1 billion, but it's $10-$20 million. That's enough for us to say we can drive yield growth on Yahoo as compared to what it was before, we believe, and we can drive better performance for advertisers, which, like I said, is our key initiative as a company. So, the revenue size, I mentioned, is $10-$20 million. The indication from advertisers that it's doing better, and we even have this case study of this travel advertiser that said, intense integration with Taboola they're now spending on us more than they spend on Meta. It's a quite significant travel advertiser.
Yeah.
So we're seeing good, kind of good results, and that excites us.
Without putting words in your mouth, though, if you're talking about better results, higher conversion rates, theoretically higher ROI versus what they would have been doing before if the companies were separate, you know, should we assume that these are the more performance-oriented advertisers, or is there a specific type of vertical, you mentioned travel, or, you know, specific type, you know, in terms of campaign goals that we should be thinking about?
It's mostly mid-funnel performance advertisers, which is most of our revenue right now. You know, if you recall, about 90% of Taboola's revenue is driven by our advertisers.
Yeah.
About 10% is programmatic. So Taboola is very much like a walled garden, like a platform, in the sense that most of our revenue, we have full control over that revenue. It's our clients, our paper, our technology, our account manager. So, and then most of that 90% is performance advertising.
Yeah.
You know, about 5%-10% tends to be brand advertising, video... But the rest is performance advertising. So the same flows to Yahoo!
Yeah.
In general, I expect that performance advertising will, as I think about the industry, will always be the vast majority of the industry.
Yeah.
If you look at Meta, obviously Amazon, which is commerce, it's the most performance.
Absolutely.
But Google, it's 80%-90% performance advertising. Even YouTube, which is the TV play for Google, became mostly performance advertising company-
Yeah
because the value of advertising, advertisers ramping when things are working is so lucrative-
Absolutely
To companies like us and Google and Facebook. So, yes, the short of that is, yes, it's performance advertising, and I suspect that over time, even though we may work with bigger brands they'll spend mostly performance advertising with us.
Great to hear. Yeah. Now, since this Yahoo deal was announced, right? If I'm a publisher who's currently not with Taboola, I have to be thinking about, well, like, you know, something's going on over there. There's gonna be greater amount of traffic, liquidity, it's gonna be a better place for advertisers. So I would imagine, they're taking notice of the deal. But, you know, how is the current environment right now for new publisher deals? Is it getting easier? I just noticed that you guys renewed with NBCUniversal-
This morning.
Yeah, this morning.
Yeah.
You know, are the churn rates down? Are deals getting easier? Yeah.
Yeah. You know, we, we never really got into specific, you know, on that front. I would say, what we feel over the last many, many years, remember, we've been doing this for quite some time.
Yeah.
So we love competition, we appreciate competition, and we like winning. So what we're seeing now is that our strategy with publishers of being more than just money, you know, that they can rely on us for editorial tools. They can rely on us to personalize their homepage with Homepage for You, especially with generative AI, and ChatGPT, and Bard.
Yeah.
They're saying our homepage has to be better.
Yeah.
Who's gonna help us personalize the homepage, so it feels like TikTok, but with editorial values? To all those initiatives, Taboola News, publishers are now saying, "Well, if we sign with someone for three or five years, most companies in the space, good companies, they offer money." That's why the industry that we're still part of which I hope to break out of is called Ad Tech.
Yeah.
Right? Because it's an advertising-driven industry. However, our strategy for the last seven years has been to provide, to invest more in technology. So our R&D investment is higher, but the ROI on that is much higher as well. So we give publishers a whole slew of technologies that they want to work with us. In exchange, by the way, not only do we get three, four, five , 10-year relationships, we're also able to capture margin that is attractive for us as a company, and I think for investors who are following us.
Yeah.
This is a technology-driven success, and with Yahoo, a lot of goodness comes on top of what I just said.
Yes.
Because you should expect yields to go up, right? I always said that 60% revenue share from Taboola equates to a lot of times more than 100% of revenue share from someone else, and this is before Yahoo is ramping up.
Yeah.
When Taboola gets to $2.5 billion-$3 billion in revenue, we'll be so much bigger than anyone else in our space. We'll have so much more diversity of advertisers that yields should be even higher, and publishers will make more money with us. And then there's traffic opportunities- and, you know, engagement opportunities. So I love that. You know, we dedicated our life to publishers, and journalism, and the open web, and what a better time to be working at Taboola than now- when the world needs, you know, trusted information curated by, by people. So, I think we have a lot of momentum already but the Yahoo thing will get us even stronger.
It'll be an accelerator to the virtuous cycle that you are already seeing?
I believe so. I mean, I think it's gonna be irresponsible at some point to compete with us.
Yeah.
I mean, it's already, I think for large deals, because we lose from time to time, but when we lose, it's uniquely expensive
to someone else to take it. That's okay from my perspective. I'm okay with you losing a lot of money to take a publisher from us because it's not a sustainable strategy.
Yeah.
It doesn't happen a lot, but when it happens, that's the only reason. Then with Yahoo, it's gonna become even harder and harder, especially for those large enterprise, you know, partnerships that are worth a lot more.
Yeah. Understood. In the third quarter, you released Max Conversions for general availability, and I think you guys shared that it's about 30% of revenue is from adopters of the technology.
Yeah.
Right? So, you know, turning into 2024, I think you guys mentioned that you expect the majority of your revenue will be driven by Max Conversions. So, you know, can you talk about what this product does, and who are these early adopters? And you know, what does this product do in terms of I mean, if there's this much adoption, it has to be solving some sort of a key, you know, pain point for everybody.
Yeah.
Can you walk through what this product does and what, you know, problems it solves?
The topic you're raising, first of all, it all sits under advertiser success and yield expansion. From my perspective, and it's important to know and to align even with how we see our company's future, advertiser success and yield expansion on their own can double and triple Taboola. As in, I believe we can get Taboola to $5 billion and $7 billion in revenue by just doing that really well. That alone is huge. I mean, it's. There's so much meat around, you know, the bone here for us to tap into. So to execute on that journey, first of all, what we're doing is we're investing half of our R&D investment. Like, about 200 engineers are working on that. That's huge. The second thing is that we're focusing on two leading indicators: churn rates and NDRs.
That means we want people to be able to churn less and see conversions as fast as possible. Put yourself in the shoes of an advertiser.
Yeah.
You're trying a platform. Could be Taboola, could be someone else, could be Google. It's very emotional for advertisers to see that it works, even if the acquisition cost is higher than they expect.
Yeah.
So if I want to sell this cup, and my acquisition cost that I can afford is $0.20, and I don't get any conversion within the first two weeks, I'm just gonna churn.
Yeah.
Even if you got me some cups at good margin, but not enough, I'm not gonna stick around. I need to see scale. So AI initiatives such as Max Conversion and others coming up, basically what they do is they create this notion to advertisers that's very fast. They see Taboola as a successful channel.
Yeah.
So that's the churn in leading indicator. The second one is NDRs. We want you that once you cross the bridge into the Taboola system and you're now spending, we want to see your spend going up over time. Max Conversions, and that's within my letter, we saw double-digit improvement percentages of NDRs. For the same advertisers who spent on Max Conversions versus not-
Yeah.
That's great. Double-digit is always good.
Yeah.
I just talked to my team yesterday, we're focusing more and more on Max Conversion and Max ROAS, and other things of that nature. So our focus became even higher-
Yeah
To make sure that advertisers churn less and increase their budget. Eventually, you know, our CFO is here in the audience, we have yield expansion goals for 2024. I don't want to say ignore the macro, because obviously the world matters.
Yeah.
We've seen 2022. However, we believe we have what we need to execute.
Yeah.
We have our engineers be part of the budgeting process, where they say: "Well, we're going to improve yield by that amount." And, you know, it's conservative because we always want to be conservative, but I would say, as opposed to historic, the last few years, when yield went down-
Yeah
We expect it to go up. So I, that's the most important initiative, yield expansion and advertiser success, because this can double Taboola, and then once Yahoo is launching, it can maybe double Yahoo.
Yeah.
So, we like what we see, and I hope to continue to update people with such good news.
Understood. Sticking with the AI theme, I think your Gen AI offering launched in July, and I think you said that it makes up for about 2% of revenue from ads and, b ut a higher percentage, I think 25% of the ad new ad creatives, right?
For self-service.
Yeah, yeah. So, the technology, so once again, who are these early adopters? And, you know, this has gone from zero to 25, you know, fairly quickly, right? So somebody's seeing benefits, right?
Yeah.
So, you know, I guess there's a higher click-through rate or there's some benefit that they're seeing. So can you talk about, you know, the positive benefits that they're seeing?
Yeah, it's first of all, you know, what's great about- the Gen AI has been such a—it's a good title for any PR.
Yeah.
However, Taboola, the Taboola way, we mobilize these opportunities into action the way we always do. We're a very data-driven company, we're a very technology-driven company, and we ask ourselves very quickly, how can our clients benefit from this in a way that will drive the metrics we measure the company beyond just speaking about Gen AI and AI in general?
Yeah.
So, one, let me just break it into two things. AI, the biggest impact I see for Taboola will come from deep learning, which is actually more relevant to the previous topic we had, max conversion-
Yeah
and Max ROAS. This is the core AI deep learning. This is the superpower of truly companies like Google and Facebook. Gen AI, which is around generation of creative, has an impact, but the biggest impact will come from the hardest thing to do, which is deep learning. Then now Gen AI can create value to both advertisers and publishers.
Yeah.
With advertisers, what we've done, we've put it to work and said, "Well, if you're a small advertiser and you don't have a creative agency on your side, you probably would benefit from having titles automatically created for you, thumbnails, maybe A/B test different things automatically for you.
Yeah.
We've seen great adoption for that. Right, look, 1 in 4 ad creative is using Gen AI.
Yeah.
That's good. And then it's 2% of our revenue, 2+% of our revenue, which is also great, and we're seeing that people keep using that. Another benefit that is worth bringing up as it relates to Gen AI is that a lot of advertisers, they don't know... We have a very strict policy, what is allowed to say-
Right
and visualize as you create a campaign. So if you're an advertiser and you don't know what's allowed and what's not, 'cause we work with, you know, with amazing publishers like Disney and NBC and CBS and all around the world, The Independent. And so there's a very strict policy about what's allowed. Gen AI already has our policy embedded in it.
Yeah.
So it's... You're enjoying not only the process of quickly launching creative, you're also enjoying the benefit of Gen AI being educated.
Yeah.
It's our best student, you know, to know what works and what's not, and what's allowed and what's not.
Yeah.
So the whole interaction with the policy team is automatic.
Yeah.
So you don't have this, you try something and it doesn't work. So we're seeing productivity, we're seeing good performance. And I think specifically for self-service, which is an important pillar of our business, but a third of our revenue came from self-service-
Yeah
is enjoying Gen AI, Gen AI.
Got it. I mean, interesting you bring that up in self-service because, you know, I think other companies have mentioned this as well, the use of AI and helping along the ad creation process, as well as, I guess, the management, you know, part of the campaign process. You do all that heavy lifting on behalf of the advertisers, and you've talked about 10 million advertisers on the other platform. So I mean, it sounds like to me that this could be the catalyst for you to be able to tap into the longer tail of advertisers, and someday get to
Hopefully, millions of advertisers.
Gen AI on its own, I don't think will unlock that-
Right
because the biggest gap to get into the long tail, which companies like Google and Facebook did such a good job is the deep learning piece.
Yeah.
When you have someone that's saying, "I only have $500" – which is a small spend-
Right.
Find me leads, it's magic.
Yeah.
It's alien work, which Google and Meta did, and that's the level I want Taboola to get to.
Yeah.
I want to get to the point that if Taboola doesn't work for you as an advertiser, you have a bad business.
Yeah.
I wanna get to the point that if you give us your money and we can't find you clients, you have no clients.
Yeah.
To get to that level, it's mainly a deep learning investment, which is the 200 engineers I mentioned earlier. Gen AI will make it easier, assuming the rest works to get it going. So even though we're seeing this Gen AI adoption, it's still similar mid-funnel advertisers who are able to spend $5,000, $10,000. It's yet to be the small, you know, $500, $100 advertisers.
Understood. We talked about AI-driven efforts for the advertiser, but there's another stakeholder in this equation, right? And that's the consumer. So is there anything you can share in terms of-
Yeah
consumer-facing AI-driven products as well?
I mean, you know, we don't interact with consumers directly.
Yeah.
We do it through our publishers. So with publishers, we're imagining a bunch of opportunities, this could be helpful. First of all, on the e-commerce front, with Turnkey, where we create content for the publisher, this is very helpful. We'll never replace a human being with Gen AI, because the level of clout and trust that is needed is very high. However, we can use it to be more productive and save time and do more with the same resources we have. So this is an opportunity to be more productive. So if you go to time.com, Stamped, which is an e-commerce and financial services website that we're working with Time, and we're powering, we're using Gen AI to do a better job creating high-quality content and more and faster. That is already in place.
We've talked about, we haven't done it yet, perhaps creating an opportunity for publishers to offer newsletters.
Yeah
that are driven by Gen AI. So today, newsletter is a very heavy lifting process for publishers. Many don't even have that. So imagine you can do that automatically.
Yeah.
You can have maybe, you know, a newsletter that's just for me and based on catering to my things I like.
Yeah.
There's an opportunity to perhaps create a deeper relationship with consumers by notifications that are relevant and personalized newsletters. I think this whole dynamic of search engines, kind of like, threatening traffic to the Open Web or having this dynamic, publishers are looking for more direct-to-consumer relationships.
Sure.
I think this might happen. We talked about it, we haven't done it yet, but this, this is an interesting opportunity, I think, in the future.
Got it. Now, speaking of bringing more traffic to your publisher partners, I think, Taboola News grew double digits last quarter. I think two years ago, I think you said you were serving 5% of the traffic, you know, any given publisher's traffic, right? So, you know, how has this number changed since then? I assume it's up significantly as part of the overall mix. And how much of the overall advertiser, you know, traffic, you know, in terms of their buying or now originates with news? And, you know, how has News helped in terms of accelerating the yield that you're unlocking for your publisher partners?
So the Taboola News is such an amazing business. You know, we work with OEMs that, you know, of the likes of Samsung and Xiaomi and Oppo and others. So it's a different type of partnerships, deeper partnerships, perhaps because of the nature of these companies.
Yeah.
You know, the handset is such a sensitive and important part of their business, and we are pre-installed as the news provider for those devices. We're seeing two growth engines that made Taboola double its revenue this year, and I hope it will continue to grow fast over the next many years. I did say I think this business could become hundreds of billions, of hundreds of millions of dollars in business, and I asked the team with presenting me a billion-dollar revenue a year plan. So I definitely think it could be big. So today we've seen two growth engines to Taboola News. The first one is just ARPU. So there are many ways we can generate revenue per user.
Yeah.
Different touch points, lock screen, wake screen, minus one, notifications, browser, a native app. There are many ways, and many of these OEM partnerships, they're so early. They tend to test first, and then they do more. So there's the ARPU expansion. There's more to do, but that was a significant improvement to the revenue for that business. And the second one was more consumers, which does affect the traffic we can send-
Yeah
to publishers. So, you know, I wouldn't want to be too specific about how much traffic we send to each publisher. It varies by region, and e ven though it's almost a $100 million business, for us, it's a, it's a tiny startup.
Yeah.
You know, we want this to be much bigger. I do think that when this gets to hundreds of millions and perhaps to 1 billion, this will completely change our core business in the sense that if we get to be 10%+ of most of our publishers' traffic, I'm not sure there's any money someone can pay to take a publisher from Taboola at that stage.
Yeah.
Because traffic is so... it's the oxygen. To get to send users to a publisher in a repeated way is essentially search. It's essentially Google.
Yeah.
You just defined what made Google, Google. So I like that synergy between those businesses, but it has to be much bigger to really benefit from that most.
Yeah.
However, this is where it's going. In some markets, we've already seen that, those benefits. In Asia Pacific, in some markets we've seen that. Not yet in other markets where I want to see it. So there's a lot of growth here, and it's very strategic to Taboola.
Got it. Now, heading into 2024, Chrome cookie deprecation has been on everybody's mind. So, how will Taboola be impacted, if at all?
Look, first of all, you know, if Karl Marx was right, and history tends to repeat itself, then in 2017, when Apple deprecated cookies, it was a source of strength for Taboola because of our first-party cookie, which will never go away.
You know, because the way we work with publishers, which is very different than SSPs and DSPs, we are part of, we are the publisher. We're rendered alongside the page, so we're not bidding, we're not doing an IB placement. We are first party. We have about 600 million daily active users across our network of sites before Yahoo.
Yeah.
So because of that, for us, we have a good relationship, knowing that if you come to ESPN tomorrow, we know you're you.
Yeah.
We don't know your name and gender, but we know what you read, what you click on, and that is very important data signal that we have, we can continue to use with advertisers trying to perform at Taboola.
Yeah.
That is not going away. So, again, I don't want to be-- I want to be conservative and tell you, I don't know that it will go again up like it did on Safari.
Yeah.
But I think we feel good about the downside protection-
Yeah
from that perspective. And there's an opportunity for advertisers who fail to buy SSPs and DSPs to say, "How do we get those budgets to work on publisher sites if they don't work on banners-
Yeah
and they don't work through the programmatic pipes? Should we just go to Taboola and sustain those budgets?" Which I hope we'll see.
Yeah.
Remember, with e-commerce becoming such a bigger, bigger portion of our business, this is a super, it's the most contextual business you can have.
Yeah.
Right? So... And that's about 20% of our ex-TAC. I love that business so much.
Yeah.
And so between our core first-party to the e-commerce business, we feel good about the transition of the industry to a more privacy-safe place for consumers.
Got it. Now, we're almost out of time, so let's hop in a time machine once again. I think I asked you this question last year, too. But here we are, 2024 once again. We're at the UBS Global Technology Conference, and, you know, you're up in-- on stage once again with me and, you know, what do you think we'll be talking about in terms of what you've accomplished in the trailing twelve months?
I do think we'll talk about AI. AI will probably continue to be relevant. But from my perspective, the biggest topic is: Were we able to liberate the Open Web to be a place where advertisers can spend money on and turn that into a search-type category, a blue-chip category?
Yeah.
This is, to me, the only trophy that matters. Otherwise, we're just all working hard on neutral, you know?
Yeah.
So to me, this is where it's going. Did we discover the Robinhood of the Open Web? Is there one company that can truly transform this Ad Tech industry into what's the next, the next The Trade Desk, but for the Open Web?
Yeah.
Like, The Trade Desk, 7 years ago, probably was on stage with someone and said, "We're going to be the DSP, but everyone is going to work with us. We're going to have everyone will give some of their money to us." And this was the time when DSP didn't have a great reputation. This is us now. We're not. Taboola is almost there. The Open Web has this Ad Tech reputation, but someone will become the next The Trade Desk for the Open Web, or bigger, and, and that's, that's to me, the topic.
Awesome. All right, Adam, thank you so much for joining us once again.
Thanks for having me.
All right.