Good morning. I'm James Kopelman, analyst on the internet team here at TD Cowen. We're excited to have Adam Singolda, founder and CEO of Taboola, and Jessica Carrasco, head of Investor Relations, for joining us today to discuss trends at Taboola, as well as the growing Open Web, in which Taboola is taking a leading role in partnering with publishers to deliver tens of billions of clicks per year, with 600 million daily active users and 1 trillion monthly recommendations. For investors who may be new to Taboola, your guides for the year comprises revenue growth of 33% at the midpoint, $200 million+ EBITDA, which is more than double 2023 levels, and $100 million+ in free cash flow, also roughly double 2023 levels.
What are the key near-term catalysts driving this strong growth, and how would you characterize your progress against strategic initiatives so far in 2024?
Yeah. Thanks, thanks for having us. It's always great to be here. So quickly, just, you know, in a word or two, just to level set, kind of like, what is Taboola all about? We're operating in what's called as the open web, which is everything, all advertising industry outside of Google, Facebook, outside of search and social. It's a very exciting space, especially these days, when you see companies like Amazon saying their number one EBITDA is advertising, and Netflix is partnering with Magnite and others, and Uber will make more than $1 billion in advertising revenue this year. You're seeing this whole new wave of great companies that advertising is a top priority for them, and they all sit outside of the walled garden, and they all need a friend.
In that market, you can divide it to, you know, agencies and top funnel, which I think The Trade Desk has done a great job, kind of like becoming a must-buy for the open web for agencies, and then the rest, which is performance advertising, small advertisers to very large advertisers. That's the market we're going after, which is open web, performance advertising, and building that bridge for marketers of all sides to reach, you know, Disney or, or Apple or any one of the great kind of like publication in the open web. In 2024, by far, the top two priorities for us, which, you know, help us grow fast and, and grow profitably, which is important to Taboola. One of them is Yahoo!, which, we signed a 30-year strategic partnership with Yahoo!, which is owned by Apollo. We're very proud of that.
We, you know, we're learning a lot. We're doing a lot of good things, and it's a big migration, primarily at this point, of advertisers coming on board. So there's still a lot of work ahead of us, of big brands that are used to spend on Yahoo! via different, their previous technology, and now are going to spend on Yahoo! via Taboola. So that's the main thing, and there's a lot of growth coming from that. And the second thing is really advertiser success. I always kinda try to simplify the story, which is, we have so much reach. We reach—you mentioned that 600 million people every day see Taboola. I mean, in this room, I promise you, many of us see Taboola two or three times a day.
Huge number.
On CNBC, on Yahoo! Finance, on your iPhone. Like, wherever you go, Taboola is there saying, "You may like..." So we have a lot of reach to consumers. We generate, you know, we're guiding for almost $2 billion, so you can call it roughly $3.5 a person. At 600 million people, almost $2 billion in revenue. Facebook makes $200 a year in the US. Snap makes $33. Can we make $33 soon? Not easily, but can we make $7 or $10 a person? I think we can. So our biggest energy, focus, investment is, how do we grow yield, the $3.5, kind of like ARPU, via making advertisers more successful? That's by far our biggest momentum, and our biggest investment.
And a couple more stats. You've characterized the open web as greater than $80 billion addressable market, and another stat from the quarterly presentation deck, 66% of mobile time spent, but only 30% of digital advertising. Can you discuss why it's important for consumers to have a choice between walled gardens versus open web recommendations? And one more thing I thought was interesting that you mentioned recently was sort of this historical open web, bad user experience, bad advertiser experience, inferior ad performance, your efforts to try to take us through that historical phase.
I mean, I'm so proud of, you know, I started Taboola 17 years ago. I'm so proud of Taboola's kind of efforts in making the open web and journalism thrive and go up. I mean, I'm a father of three kids. God forbid, my children make decisions based on TikTok when they grow up. You know, and I think this is a very important kind of hope. We, as, you know, civilians, as participants in this, in this world, hope, you know, that when your kids and your family make decisions as relates to healthcare, technology, entertainment, where should I travel? Whatever that may be, news, they go to a place where it's trusted, driven by humans, and, you know, with a lot of creativity around it. And that's the open web.
It's this place where curiosity sparks, you know, because you discover something, you read something, you get educated. And I think today, more than ever, you know, we need a world that we can lean into and learn something that is trustworthy, that is written by someone that has some editorial clout, that cares about what happens if you make a mistake, as opposed to, you know, social networks that you see it all the time. You know, people truly believe that what they see there is reality. And you have all these really sad examples of children who stopped using sunscreen because they said, "If you do it, you're gonna get cancer," or, you know, really weird examples. And so I, I think that it's really important the open web goes up and right, and it's important to, you know, our future.
What's incredible from a business point of view is that the way the open web, the $80 billion dollars—the way it's been monetized today is mainly using banners. Banners are those things that no one in this audience or those who see us on the stream really clicks on unless it's a mistake. Like, I, I don't know if you remember the last time you clicked on a banner, and you're like, "Well, that was a great banner. I mean, I, I'm gonna tell someone about that banner." That never happened. But you remember, you know, ads on Google, they're pretty good. The search ads are pretty good. I love Instagram ads, they're pretty good, and I like Taboola ads. I mean, I buy from them, and, and, you know, I review... I bought a trampoline for my house using a TIME.com article that reviewed trampolines.
That was valuable to me, and I clicked, and I bought it. So I think the ARPU of the open web should evolve from banners to something that is relevant and is quality and is great for consumers, like we see on Instagram or search pages or recently on TikTok. I mean, they're doing such a better job at monetizing versus the open web. So I think the $80 billion should really be $200 billion if we do a better job monetizing the open web, which is what we're trying to do.
You mentioned a minute ago your number one focus for the year, making advertisers successful, growing yield year-over-year. Two areas you highlighted are Taboola Select for premium advertisers and max conversions, which is helping retention rates, and I think almost 60% of revenue. Can you talk about each one of these initiatives and how they're progressing?
Yeah. So it's two really good things that are happening. The Taboola Select is really a way to allow bigger brands who are looking for performance, think Hulu, Verizon, you know, of the world. So they wanna get performance, they wanna get someone to download the Hulu app perhaps, or maybe buy a phone, but they care a lot about what is the surrounding around them. So as an example, one thing we've learned is that they really wanna be kind of on their own. They don't wanna be next to any other advertisers. Even if they're on a great publisher, that's not enough. They wanna be on a great publisher, they wanna get performance, plus they wanna be in a standalone environment. And that is a newer thing than a lot of other performance advertisers just want performance.
Because of that, we kind of created this environment where if you go to Yahoo, you buy Taboola on Yahoo on their homepage, you're on your own. If you have an iPhone and you swipe right, you'll see Taboola, and you'll see Apple News with Taboola advertising inside of it, you're on your own. No one gets fired for advertising on iPhones. You're. It's, it's the highest of highest, it's the most premium of premium. So, and we've also created this index across the entire network of Taboola, NBC News, ESPN, CBS, like just the best of the best, kind of like the top 15% when you can buy a standalone unit. So now through Taboola Select, you can get performance, you can get a very premium environment, and you can scale with us. So that's Taboola Select, and we're very excited about it.
I do suspect a lot of our future growth will come from bigger brands who buy from The Trade Desk, top-of-funnel video, and buy from Taboola performance. That's like the complementary kind of bucket the way I see it, and all as an alternative to Google and Facebook in the Open Web. So I suspect a lot of growth will come from that. Max conversion is the technology that enables all of this magic to happen. One of the funniest thing that I always kind of share in these opportunities is that still today, if you're an advertiser and you wanna buy, and you wanna promote your business, on Facebook and Google, it's that they've done a really good job simplifying and oversimplifying that experience. You just have to give them a budget, and they'll find your clients.
So I always give, you know, my, my wife has a flower shop, and if she buys on Google and Facebook, she just have to give them $5,000 to get some flower clients, and they're gonna try to get some clients. If she was to try to go to a DSP or an SSP or, or if she was to go to a native SSP, DSP, or ad tech company, she would have to come up with what is the CPM or CPC of her business. And I don't know if anyone here can help her figure that out. What's a good CPM? $10. What a good CPC is, $0.30, high, low, I don't know. So that's a really complicated process which prevents clients from succeeding. Maximize Conversions is essentially bringing the simplicity of the walled garden to the open web.
It says, "Just give us your budget, and we'll find your clients." It was one of the most fastest adopted products since we started Taboola. In about six months, approximately 60% of our revenue is using that AI to essentially just have us find clients for those advertisers, and we're seeing double-digit NDR, as in budgets are going up when they're switching to that new technology.
And I wanna shift to, or continue with AI, but shift to generative AI for a minute. It remains one of the most dynamic areas in tech. Where is Taboola with regards to implementing gen AI tools for advertiser clients, compared to, say, a year ago when we saw demos at the Yahoo Investor Day? I know you guys have come a long way in the last few months, and maybe frame that versus where you see things headed in another 12, 18 months or so.
So over the last 12 months, and still, you know, our kind of current focus is to help advertisers use GenAI for the titles and thumbnails of their creatives. So that's still what's available in our product. If you go to Taboola now as a self-service advertiser or a big advertiser, a lot of times they don't know how to create a campaign using the same flower shop, you know, example. Should I say 10 great flowers for the holiday? Like, I don't know what to say. Should I take a picture of my flowers? Should I buy a picture? What should I do? So you click a button, and we'll do it for you. We're gonna look at previous flower shops who worked with us and say, recreate creatives that we know have a chance of succeeding in the Open Web.
So that's very valuable and, you know, increased productivity for clients, for advertisers. Where I think it's going, and I suspect we'll see Google, Facebook, and Taboola and many other companies getting into that kind of world, is that advertisers will create their landing page to promote their business, but they will have perhaps hundreds or thousands of landing pages and, variants created automatically by GenAI. So they'll say, "Here is my landing page to sell this flower." Check, GenAI, fork into many, many pages like a dragon with many heads. And when I go to click on an ad to land on a page, I will see a different page, and you will see a different page.
You might see videos, and I will see a gallery of images, and you will see a big button that says, "Buy the flowers," and I will see, "Sign up to my newsletter." So the whole page will be dynamic, and that will be awesome because I think today, if you think about it, there are about 100 million businesses in the world, but only 10 of them or 11 advertise on Google, Facebook, and open web. The rest should advertise, but they don't. So I think there's an opportunity to help every business in the world advertise and promote their business if it's easy enough. So I think GenAI will be just the ultimate oversimplification of a complicated world.
Any call outs on ways you think GenAI could become better over time as a tool for advertiser clients, and how important is scale in being able to leverage GenAI solutions? Is that a point of differentiation for Taboola relative to other native ad peers?
Yeah, I mean, look, LLM models are a commodity. I mean, anyone can ask a question on ChatGPT now. It's - in fact, it's free. You can do it. Anyone can do it. You can pay Azure to get subscript, you know, to get a service to do it more for your business, but anyone can do it. The actual model is available to anyone. The only thing that makes it special is, what do I know that you don't? 'Cause if both of us can pay the same company to get, LLM to use services that's good for our clients, what makes me better than you? And the only advantage is, well, if I've seen a thousand clients and you haven't, and I can prompt that into the engine, I have a significant advantage over you.
So I think this is gonna be, in general, the future kind of moat will be data. And that's why, you know, big, big gets bigger. It's much harder to fight with, with a bigger company that has more data because the flywheel comes into play, where, you know, they see more consumers, more interaction, the engine gets better, and they can just do more things faster, better than other companies. And it's funny, when I started Taboola, I remember, I told investors, "You know, one day we'll get to $100 million. It's gonna be great." 'Cause at the time, $100 million in revenue was great. And now I think $1 billion is what used to be $100 million, as in it's just a proof of concept. $1 billion in revenue is a proof of concept.
You know, you're okay, but you really need to be at $3 billion, $4 billion, $5 billion, $10 billion in revenue to justify being relevant in today's world. Advertisers and publishers and OEMs and businesses wanna have less partners and deeper partnerships. It's just the way it is. And that's why big gets bigger, data matters, and I think especially when, you know, ChatGPT and LLM and Gemini and others are just becoming more and more available, the only point of differentiation is, what do I know that you don't?
I heard you say a couple of times that big gets bigger, and great segue with the Apple deal because Taboola is getting significantly bigger. You mentioned the concept of a must-buy platform, Google, Meta, Amazon. How does Yahoo integration help Taboola with regards to becoming a must-buy?
I think, you know, the partnership with Apple recently, and before that, the partnership with Yahoo, before that, the partnership with Microsoft, and, you know, it helps us in a few ways. One, we're just bigger, and that means that more and more it becomes worthy for advertisers to say, "Taboola should be in our, in our strategy." If you think about it, you know, Google, Facebook are huge, and then really after that, you have the Snap, Pinterest, Twitter, kind of in the $2-$5.6 billion. The Trade Desk, kind of in $2-$5.6 billion. Those are like second in command, must buy, and then you have the rest. It's very hard to convince an advertiser to get educated on the rest. You wouldn't do it if you had to promote this event.
It would be hard for you to imagine getting to know 20 ad tech companies when you can just give somebody to Snap, somebody to Twitter, somebody to Pinterest, Google, Facebook; you're done. So big is a big deal. So Taboola, this year, we're getting to almost two, which means we're in the second layer now, and I think we'll be bigger than Twitter next year, probably, or at least we have a good chance, which means we're in a good place. So that's size-wise. The second thing is, you know, we talked about efficacy of the engine and, you know, being just better at creating value for the data and the size really helps. And the third one is just the premium-ness of working with you.
Like I said earlier, it's interesting to see how the bigger you get, you need to also show that, you know, it's great to work with you, it works, but it's also safe and it's easy. And that's why company, you know, partnerships like Yahoo, you know, Apple, you know, working with amazing publishers that I mentioned earlier, makes it easy to say yes.
Let's talk about the Apple partnership for a minute there, because I think it is... It's a new one. It's obviously much newer-
Yeah
... than Yahoo. It is a step towards making Taboola, in my opinion, more ubiquitous, on, devices everywhere. Maybe explain what that is, where, because it's different apps, it's not just one area of Apple devices. Maybe help us size it over time. How should we think about the timing of the ramp of the Apple supply?
I mean, we, you can imagine, we can't say too much about the relationship there, but what I can tell you is that, one, if you know, if you have an iPhone in the U.S., we've expanded from three months ago from Canada, Australia, to now U.K. and the U.S., so these are the four markets Apple News and Apple Stocks operates in. If you have an iPhone and you swipe right, and you scroll down the feed or you read an article, you see ads in between, and that's powered by Taboola. So that's the experience.
It's great, mainly, by the way, for me, because not beyond just the revenue opportunity, just the, you know, having the stamp of approval from a such an amazing company like Apple to say, "Taboola is a good partner for us, and we're gonna do it together," means so much to me, you know, and means so much to our employees and our ecosystem. More than money. You know, so it's one of those, you know, just another step forward towards our vision to becoming the must-buy that I hope we can build. So we know, that, that's what I can tell about Apple. I do think that in general, there's an opportunity for Taboola to be on every device, beyond just websites.
Over time, you know, especially with Taboola News, but also just in general, I think Taboola can help make many great companies, OEMs, automobile companies, audio speakers, all of those folks need content to engage consumers, and all of those will have an advertising business. I'm convinced of it, and that's where I think we can play a good, a good role.
Let me go back to Yahoo for a minute. You're on track to complete the migration around mid-year. I'm just curious. You mentioned still work left to do, so what are your key priorities over the next few months? Maybe talk about, you know, why you call that meaningful-sized advertisers as an area of focus and I think the greatest area of opportunity there.
I mean, 'cause these are—Yahoo has done a really great job building a very big business with great clients, great advertisers who trust Yahoo as a DSP and trust Yahoo as a big publisher that people love. And those clients, you know, they've been around for a long time with Yahoo, and migrating them and getting them to use our new technology is something we're taking very seriously. We want to be patient in that process so they can test it out, see that it works, and do more. I did mention a great brand in my letter that have done this migration recently and have seen such a great performance. They doubled the budget quickly, and that was a significant double. It wasn't a small double. It was big doubles and small doubles.
That was the financial services?
Yeah. So that was-
Got it.
Again, it was, like, great to see because, you know, you it was a very important name that loves Yahoo and now loves Yahoo and Taboola together even more. So I told the board. I had a board meeting, and I told them, "Wow, I just want 100 of those, and I'm done. Like, that's all I need." So that's the biggest thing ahead of us, more of those that are migrating and testing. We want to be patient with that process, but the upside is significant because these are great businesses and clients, and they can spend a lot, and I hope that it creates also this, you know, network effect of others who say, search Google, Facebook, social, Taboola, open web.
Once Yahoo is fully ramped in 2025, how should we think about the new core growth rate of the overall business, and how should we think about that core growth rate plus growth initiatives, plus the potential of ongoing yield increases?
So, think of Yahoo, Apple, and all of our publishers as a big pool of supply. All of that is core supply, and then you have a big pool of advertisers. About 90% of them work with us directly and about 10% through programmatic channels. So that is our core business, where we match, make, you know, our matchmaking technology, our AI, brings users with the right content and the right ads. All of that is our core, significant business, and that should grow 10%-15% for a very long time. That's how we think about it as management. And on top of that, we have our growth engines, which is approximately 30% of our ex-TAC already, which is our commerce business, Taboola News, and our bidder. And those grow even faster.
So those should compound another 5%+, which is how we're thinking about a 20%+ ex-TAC growth year-over-year. Of that, we, you know, aim to convert about 30% to EBITDA, and then of that, to about 50% of free cash flow. So that's roughly how you should think, how you should model Taboola as a business.
And you mentioned e-commerce there, and I think you said, and, and you and Steve both said that e-commerce is growing faster than Taboola overall, and you've had some significant successes there. How do you, you know, you expect... Sorry, you expect that growth rate to continue to exceed the rest of the business. So what do you see as the key drivers for that success over time? Maybe you could talk about AP Buyline shopping, turnkey, or, or any other things you think are worth noting.
Yeah. I just had dinner yesterday with, you know, Jess, the CEO of Time.com, which was the first to do turnkey with us, which is writing commerce in a box. And then before that, we've had other publishers who we've worked together with in collaboration, but Time.com was our first, kinda like the whole shebang. We built an e-commerce website and personal finance website side by side to the editorial content, and it's really fantastic value to consumers. They can now review products before they... And you've all done it before. Before you go to Amazon to buy something, how many times do you search on Google to see what should I buy? And then you land in an article, you read about it, and then you go and buy it. That's e-commerce for us.
We're the source of trust before you go in and buy it. We may send you to Amazon, we may send you elsewhere, but we're the place you go to, to just get educated and trust before you do, before you buy. And I believe, by the way, that's a big opportunity for the Open Web because again, we trust those websites and publications. I mean, Time.com has been around for 100 years. We trust them before we buy a coffee machine. So, so that, that's a great opportunity for us. And over time, the way I think that evolves is we're gonna expand to more categories. So right now, we're in commerce, straight commerce, and personal finance. Over time, you know, I believe we'll get into healthcare, education, travel, all of this direct-to-consumer revenue beyond just ads.
If you think about publishers making money from ads, they're gonna have a big source of revenue whereby they offer things directly to consumers. We're gonna hopefully own that in the open web.
I'd like to fit in a question on Taboola News, given it's one of the most dynamic growth areas for your company. It's recently been growing 100% year-over-year. Could you talk about the drivers of the Taboola News business? Maybe discuss your efforts to drive engagement.
Yeah, Taboola News, just as a level set, it's where we aggregate all of our publishers' content, and then we partner with Samsung and Xiaomi and OPPO and others to create an Apple News type product, where you swipe right and you see news on your device. It's a great product because, like I said, all of these companies want their real competition is not other device manufacturers, it's time and attention. So all they want is just more time with consumers. So news is such a great way to engage people. And Taboola have, we have distribution rights from thousands of publishers all around the world. So we partner with those, and then we monetize that with ads, and we send traffic back to our publishers. So it's very synergetic to publishers because if you work with us, you're gonna get traffic from Taboola News. That's great.
Two, it's another source of time we can monetize beyond just publishers direct. And I think this, this business could become, $hundreds of millions and more for Taboola. Again, it's a growth engine. It has a similar margin, 35%-40% ex-TAC margin from every dollar we, we generate. I know there's about a billion Android devices a year that's been sold, so. And we're, we're about 100+. You know, so, so I think our growth rates are more devices, more markets, and increase the RP we, RP we make per user. Right now, it's mainly news. I did mention in my letter that this year we're getting into video in a bigger way. So think Reels, like TikTok type experience. You click on a Taboola recommendation, it opens up, and you're in this Reels environment.
The second thing is utility, whereby we offer you more things than just news, games, weather, and so, again, stay tuned for a lot, a lot of exciting news coming up for that business.
What regions or mobile device OEMs are you seeing the strongest momentum? Should we expect a broader rollout of countries and OEMs, or is future growth driven primarily by this higher engagement, for example?
You should expect growth in all of those. I mean, more, more countries, more devices, more touch points. It's, it's like, it's such a startup at Taboola. It's a startup that, by mistake, made, made $100 million, you know, type of thing. Like, it's such a small team. I mean, it's incredibly small, and they're doing such a good job, and we just... At Taboola, you know, you cross $100 million, you get a lot of attention. So now we're just trying to be as supportive as we can, and invest more in that business and try to see how we can... You know, I, I, I task the team with building me a billion-dollar revenue plan, you know, because I think we can and we should. So, it's, it's so early.
I expect growth and, of course, also risks in that business. You know, it's a startup like all startups, but I see, you know, significant upside in, primarily more partnerships. In those partnerships, more markets, more devices, and then per device, more touch points, notifications, apps, swipe right. There's, like, so much going on that we should be powering. And over time, like, you know, I, I was just in one of our partners', headquarters, and they show me, a car that they, they released, and, there's no reason why I wanna be in that car, you know? So I, you know, I can imagine you, you go into that car, and we offer you a podcast that we have and text to video and text to audio, and if you're in the back, I can show you videos.
All of that experience should be, I have the content, and we have the ads.
We have time for maybe just, one or two more questions. Just a macro one quickly. There's some uncertainty, obviously, around the broader environment with interest rates where they are. This is more applicable to the entire digital space. What has been your sense of the environment from your conversations with advertisers in recent months? I know we've seen that, advertisers coming into the year were somewhat more optimistic about the macro relative to where they were a year ago. So just curious what you've heard from your conversations.
I think in general, you know, we kind of see the market as surely stable. So it's not 2021 up, it's not 2022 down. It's kinda like, you know, good, good, stable market. I think clients in general are on the back of 2022, in general, want to make sure that whatever money they spend works. So it will take, in my opinion, a very, very long time before we go into 2021, money is free, and whatever happens, happens. Those days, I don't know when the, when the next time that's happening. It's great for companies who have a very good attribution model that can show that the money is, is well spent if it's here. I think it's very risky if you're relying on third-party cookies and you hope it's gonna, you know, you can value the, the, the spend.
I think it's risky if you're mainly in, you know, top-of-funnel type of things. It's just a bit riskier. So I sense that even bigger brands want to buy performance.
And last one, what do you think might be the key puts or takes that could potentially drive outperformance in the back half of the year?
For us?
For Taboola.
It's mainly investing in technology more, reducing churn or improving retention rates and improving NDRs. Those are the leading indicators that if we see them continue to move in the right direction, that should affect yield. And the second thing is Yahoo! But those two are the biggest ones this year.