All righty.
Sorry, everyone. Next time, know your address. How are you?
All good. I am fine. How are you, Adam?
I'm great.
All right. Well, we're gonna go ahead and get started with this lightning round edition of Fireside Chat. Adam, welcome to, welcome to the KeyBanc Conference. Glad you could make it.
Thanks for having me. Always good to be here.
Of course, always great to see you.
What LEGO are you building right now?
What LEGO am I building right now? Actually, that was the Valentine's present, the orchid.
Good-
Yeah
... stuff.
Yeah, good family project there. Matches the real orchid and confuses the toddler at home. What's real, what's fake? Good matrix-
Good stuff
- type of thing.
That's what you want to do.
Exactly, exactly. Start them young. What about you?
I'm doing the Spider-Man 3D. It was, like, when they have the new, art project when it's coming out, so I'm doing that. It allows us to speak about superheroes, which obviously, you know I care about a lot. So we have to start young. So that's, that's us now.
Indeed. That actually fits in nicely with just how you kicked off your vision with Taboola for 2024. Level up. Loved the Mario suit trending on LinkedIn.
That's our, that's our theme for the year.
Yeah.
We're leveling up.
Exactly.
It's like Zelda, when you take the sword, you know, the master sword, and now you're invincible, so that's kind of like Taboola in 2024. All of... There's a lot just coming together after kind of the years of building that we're, we just had our salespeople in New York, and just announcing it was a lot of fun.
Yeah, and that's kind of a good segue to Taboola as a whole right there. Whether it's Legos or building the Triforce, you're building a bigger platform on the open internet right now.
Yeah.
Yahoo's obviously been a very big piece of the big focal point for you over the past year or so. You're starting to see some early signs of success. I believe $100 million in revenue, more than $100 million is the goal to start the year.
Mm-hmm.
Yep. So, you know, talk about just the learnings of onboarding a big player like Yahoo right now.
Yeah, it's been really an awesome ride so far. From a cultural perspective, you know, we're spending a lot of quality time with the Yahoo leadership and just, you know, the teams we're working with, and that's going really well. We've had access to... You know, last year, we finished kind of like migrating the integration to the supply side, so that means we could reach Yahoo Finance, Yahoo News, Mail. And now our biggest focus is migrating the Yahoo advertisers. So think of Yahoo like this big bucket that we have access to, and now we're filling it with our own advertisers as well as Yahoo's.
What's great in that process is, it's kind of like a nice surprise to me too, 'cause I didn't really realize that when we signed the deal with Yahoo, is that 'cause I thought, you know, they have great advertisers and a lot of performance advertisers, but what they have is both. They have great performance advertisers, which means they have this, like, you know, Hulu and Verizon and many banks as well, and they're spending on Yahoo buying performance, and now they've migrated to Taboola. We've never had them. We've never had those types of clients. And what's fun is that, so they used to buy Yahoo through Yahoo's technology. Now they're buying only Yahoo.
We have yet to open them to the Taboola network, which is one of the synergies, but they're buying it through Taboola technology, and we just announced Max Conversion only six months ago, right? So they're migrating, and they're turning on Max Conversion, which is, like, our AI. We can talk about that too. Suddenly, it's just like, it's Disneyland. It's amazing. We're. They're getting the same. It's the same user base, only now they're getting either more clients, more conversions, or the conversions they get cost them less. So they love Taboola. We love them back. To us, it kind of opened up the idea that we can really expand this type of new clients, and we're learning a lot from Yahoo too. The way they serve those ads, the native advertising ads on the homepage, it's beautiful.
These are big impact ads. They're isolated. So I think there's a lot for us to learn also as it relates to the rest of our supply network. How could we render that type of ad on Disney, that type of ad on NBC News or CNBC or all of our great partners? So this has been a great learning experience, and I hope it will become a much bigger dream than it, you know, it was.
To paraphrase Jaws, you're gonna need a bigger bucket within there. So-
I love many big buckets, you know, and that, you know, we've announced... I mean, Steve announced Apple, really. I mean, who knew-
Steve did
... a CFO could be so exciting on earnings and share the news, but, I did give him a hard time about that afterwards. But, you know, there is a question of who's the next, you know, Apple is obviously, getting- and investors are spending a lot of time with us now and Apple asking questions, which is understood 'cause it's, it's exciting. And there is that, who's next?
Right. But it's based on a big theme across internet. There's lots of these big publishers, big brands out there. They're all trying to just generate some incremental revenue from those assets you have, and you've got a very proven portfolio from Taboola News, the core product of doing this at this point in time.
'Cause you know what, what I, what I think is happening, really over the last year in the industry is that the advertising industry will get to a trillion-dollar market, right? It's, it's heading there, and it will become a trillion-dollar business. And I think what happens these days, what's, what's happening is you're having Fortune 500 CEOs having their board asking them: What is your advertising strategy? Because Netflix is doing Microsoft, and Pinterest and Amazon are doing business. Meta and Amazon are doing business. Uber launched it. Amazon said it's the second line of EBITDA they have. So I, I think everyone that is reaching consumers is being asked to present an advertising strategy because it's too good to miss, and I think it's gonna become a huge part of people's business.
In that vein, if you subscribe to that strategy, many of these companies will probably try to sell to the top of the market, but they're unlikely to sell to 20, 30, 50 thousand performance advertisers, which we can. And this is, I think, why Yahoo chose us, and this is the thing why Apple chose us... and I hope we'll have next time you invite me, we'll have more to share. But, but I love where it's going, and I think, oh, the Open Web and Taboola can play a big, big part of it.
For sure, right? I thought on your last call, your last earnings call, you made a really good point about the reach of the platform and the monetization. So when you're just looking at Taboola today, how do you think about that earning potential over time versus some of the other internet benchmarks that are out there?
Yeah, I'm trying to kind of like, you know, also simplify the story for our investor community and, and just, you know, just to explain how we think as management about the business. So I try to make this analogy to say, you know, Taboola reaches 600 million people a day, and we have with this year, we're approaching about $2 billion, so call it $3.50 a user. And if you compare that to and then how can we grow revenue? How can Taboola become $4 billion in revenue from $2 billion? Two ways: either we get more users, we reach more people with Taboola News or with Apple News type partnerships or more publishers, or we can expand, we can grow the ARPU, the yield of the business.
Should Taboola be at $7 from, you know, go from $3.5 to $7? Should we be at $10? Snap is at $33. Meta is at $200. Why is Taboola at $3.5? Right, so I think there's a lot of for us to improve, and the main way to do that is get more advertisers, like the Verizon we, we get from Yahoo!, which is awesome. Continue to have everyone adopt AI. Max Conversions at 50%, and get more quality data, and this is also where size matters. You know, you want to get a lot of clicks in the system, contextual segments, all those things. So that's and I believe that's the number one opportunity for Taboola as a company.
I imagine our yield being doubled and tripled within line of sight, and that should have a linear effect across all of our metrics.
Yep.
So, I think this is. That's the biggest one, and we're having an off-site actually in April, about from $2 billion-$5 billion, so we'll be talking a lot about the yield.
Very cool. I can't wait to hear about the insights from that. So talking about that product side within there, you're, you're very much a product-first culture within there. R&D has always been one of the backbones of Taboola. Max Conversion off to a great start. What do you think about the next pieces of just iterating upon that? Because you're never done fine-tuning, optimizing.
Right. I mean, even Max Conversion, which is the fastest adopted product since I started Taboola. I mean, in 6 months, more than 50% of our revenue is using AI now. Just to level set and remind people what that is, and what's the Achilles heel of ad tech, like, if you may. When businesses advertise, they know what is their business objective, right? But I always use flower shops because my wife has a flower business. But if you're a flower shop, you know how much flowers cost you, and you know how much a client is worth to you, and that's it.
There are zero flower shops in the world that if you enter the store and ask them, "What is your CPM?" The owner would say, "Well, it's actually $7." Like, they have no idea what you're talking about. So if they advertise on Google and Facebook, never will they ask them, "What is your CPC or CPM?" If I ask my wife, "Honey, what is your CPC for your flowers?" She would think I'm smoking something. She would say, "I have no idea what you're talking about." So Google and Facebook, it's easy because they talk to you, it's a business language. But in ad tech, many companies you cover, they optimize for CPCs and CPMs, and that's how they ask the clients what they want, and, you know, we ask them, "Is your CPCs getting better? Is it, is it not...
This entire language has nothing to do with what, what businesses want to achieve. So I'm so proud of Taboola for working very hard on this, and, and, you know, as you know, about almost two years ago, I've kind of shifted our R&D so that half of it works on AI and, and advertiser success because I saw how much this can be done differently, and now it's advertisers love it. I think, the next iteration, which is your question, is gonna be Max Revenue, so optimizing for ROAS. This is where clients have multiple products, and they say, "Well, if I sell this table, I have 20% margin, but if I sell this glass, I have 30% margin." They will tell Taboola about those margin opportunities, and we will realize that into our AI and drive revenue to them.
Between Max Conversion and Max Revenue, by the end of the year, I suspect we'll have a minuscule amount of business that is choosing CPC and CPM, and we'll be very unique and special in the ad tech space. We'll be a $2+ billion-dollar revenue company next year with a lot of AI attached to it, and this is the future. That's before Gen AI, which just can even drive revolution on the creative side.
So outcomes over acronyms, I like that. So talk about just AI as a business. You've been using AI for quite some time within there. What gets you excited about generative AI going forward?
I think Gen AI will make a bigger impact on the advertiser community and less on the publisher community. I get asked a lot about it from investors. I don't think writers will be replaced by machines.
Mm-hmm.
I don't think that's happening. I think it's the very purpose of editorial teams to give us something that TikTok doesn't give us. Like, we trust CNBC for a reason. It's. There's a person there, and we trust less TikTok and Instagram and so forth. So I don't think that's happening. They'll be more productive, but I don't think they'll be replaced by any means. So I... This is, I mean, not a revolution. On the advertiser side, there is a revolution because today, advertisers fail for many, many reasons to advertise their business, even if they have a good business. One of it is the creative. They don't know how to come up with good titles, they don't know how to come up with good thumbnails, and they do not know how to come up with landing pages.
So that's a big opportunity there. Second thing, which actually, I did not mention this on earnings, but I did mention it a bunch of times recently. What we're seeing with Gen AI, which again, I did not expect this to be a benefit, so this is always delightful surprise, is that advertisers a lot of times get rejected by our moderation team, and we have a policy that says you cannot do certain things. As an example, you can't say, "If you buy these flowers, you will be happier," because you can't promise me I'll be. I mean, maybe I'm not gonna be happy. You can't make promises you can't keep back. Or if it's a medical product, you can't say, "If you buy this, this..." You can't.
So there's a lot of times investors get rejected, and it's a huge source of frustration for them because they don't necessarily know why. They're not doing something wrong in their mind. When they use GenAI to create creative, it's perfect, or GenAI knows our policy perfectly. So when it creates titles, we create thumbnails, it's always adhering our policy. That's a new thing we're seeing, and then I'm asking myself: Wow, what if a bigger chunk of our business went through this GenAI pipe to improve creatives, get potentially better results, and also make their life easier? So I do think there's and then there's a landing page, which would take more time, but you've seen with the video recent announcement, that's big. I mean, the video creation can really unlock a lot of video advertisers for small advertisers.
Oh, for sure.
So I think that and then, if you think about CTV, I don't know. I'm seeing some CTV self-service video opportunities over time. Remember today I said that, so I think there's something there.
All right, definitely something to come back to in the future. I know we're running tight on time. I'll pause, see if there's any questions from the audience, and if not, I can keep going.
Cool. Are we speaking too fast, or is that okay?
I think they're just waiting to catch up to us, Adam, but yeah, let's keep it rolling. So cookie deprecation, I thought you were actually gonna say that is the ad tech Achilles heel right there, just targeting identity. You, you're in an advantageous place. You do not have cookies as part of your targeting algorithm within there. So when you just look at the challenge the publisher faces today around Google deprecating cookies, how are you feeling about that as a potential tailwind of the business?
So, one, I do think it will, it will make an impact because I think a lot of companies rely on cookies one way or another. There's gonna be an attribution challenge for many companies who don't have direct to the client. So again, the companies who are not exposed here are companies who have most of their business direct to the client, and they have a pixel on the client page because then they can prove that when they sent the user to the client's page, it was them who drove the conversion. It's called last-c lick Attribution. So if that's your business, which is Google's business, most of it, click, conversion, click, conversion. It's most of our business, clicks, conversion, clicks, conversion.
We send you from our site to the advertiser site, and we have Taboola on the other side as well, so it's a closed loop. It's 90% of our revenue. So because of that, we believe we're gonna be okay. We've also seen that when Apple deprecated cookies, it was a source of actually strength for us because we've seen budget coming in. So I don't wanna, you know, be negative on other, you know, people's business. I do think that there's an opportunity for Taboola to capture budgets that are not as successful as they are today on other channels.
So again, I'm not betting on it, but I do think that we have an opportunity to capture, to be resilient, but perhaps even get more as advertisers are not able to spend dollars in the Open Web the way they like.
Got it. So I know we're coming up on time here. Maybe a quick teaser to the future ahead of that offsite. You alluded to the $5 billion Taboola target in the future. What do you really think you need to get right on the product side to achieve that vision?
So first, I think, you know, I think we can get a lot of growth just by doing what we're doing now. So 2024 will be a record year across every possible metric. And I suspect 2025 might be a great year for us as well, just based on things we're already doing. However, you know, I'm thinking about the next few $ billion that we want to add on top of that. I do think there are some things that we can do better. Again, I think yield on its own can double the company or triple the company. But there are other creative ideas that people are thinking about, the team, and we're preparing all those sessions, and we'll discuss it. I wanna, you know, create some suspense here.
I don't wanna give you all the goods just, you know, just yet. But I do think the Open Web deserves a company that is as big, or bigger than Snap, Twitter, Pinterest, and the likes, that can create a gateway for advertisers to reach high-quality editorial environment in a sustainable, predictable, consistent way. And I hope we can be that one.
Great to hear. You certainly have scale and product in your favor, so look forward to watching this evolve. With that, we are out of time.
Thank you.
Adam, thank you so much for the lightning round.
Great. Thanks, everyone.