Good afternoon, everyone. Thanks for joining us for the Fireside Chat with Adam Singolda, CEO of Taboola. Most of you are now familiar with the process. There is a little chat box right under the live stream, so if you have some questions, feel free to put them in there, and I will ask them on your behalf. Otherwise, let's get to it. Adam, thanks for being here.
You bet, Amit.
So, let's start with this: How has the business evolved since the IPO? One of the topics that have come up is, you know, Taboola has been different things over the years and continues to evolve. So, maybe start out with that. How has the company evolved since you've taken it public?
I mean, I think, you know, a lot has changed, obviously, in the industry around us, and, and for us as well. I, I think some of the key things that we've been focusing on since we went public, obviously we've won a lot of great partnerships, so demand has been a big deal for us. We've been more and more, probably over the last two or three years, kind of aggressively focusing on how do we grow demand? How do we get more budget? How do we make advertiser more successful? With a key vision to really try to own in the open web, which is a big market, the performance category. You know, if you wanna buy video or top of the funnel, and I think that The Trade Desk has done such a good job, but the rest of it.
If you have a CPA in mind, today you kind of have to go to the walled garden, and we want to be the open web kind of bridge to that market. So we've been, since the IPO, you know, shifting more energy and resources to that. Beyond that, of course, you know, we've partnered with Yahoo and Apple, which kind of set us off to this, you know, I call it advertising as a service, almost, that big, great, iconic consumer companies are choosing Taboola to help them build their advertising business. And that is exciting independently because they chose us, but also because what that could mean for us as a company longer term.
And lastly, you know, what I like about being a public company is that you're public, and that means, you know, when you're a private company, you tell things and sometimes they, you know, they happen, sometimes they don't. Nobody knows. When you're a public company, you're as good as what you actually get to do, and investors, as well as us, you know, we get to, you know, tell our story and go and do the hard work. And, I think we're doing a good job, and that, that's great because our, you know, publishers and advertisers get to look back and see how we're doing, and I like that. You know, when you're good, I think it's better to be public. And when you're not, better to be private, and I think we're good.
So for us, that's been actually a source of strength, to just be doing the work, executing, and having the ecosystem around us appreciate our good work.
So, you operate a two-sided business. You serve publishers, you also sell directly to advertisers. It's different, but probably more challenging than a DSP who's largely serving advertisers and SSP who's largely serving publishers. So, you know, how do you think about, like, the balancing the competing factors, you know, whether it's, you know, again, the investment side, right? Balance investments on both sides, how you evolve products, you know, kind of?
Right. I mean, I wanna think in many ways we look like a walled garden, 'cause, you know, Google has YouTube, and they have an advertising business. We have publishers, we work with Yahoo and Apple, that's our supply, and then we have a direct significant business with advertisers. So we look like walled gardens, only we don't have the conflict they have. So in many ways, when we try to operate, our relationship with the ecosystem around us, it's a very much a win-win relationship. We will never do something that hurts publishers or hurts advertisers, because we only grow when they grow. So in many ways, we operate a two-sided marketplace with a full alignment w hich is fantastic and great.
I think beyond that, you know, we always wanna make sure that whatever we do from a technology standpoint serves the objective of our clients and partners. That means that, you know, we, on the publisher side, we always try to follow the opportunities. As an example, these days, big opportunity to be more than just money to publishers, because they wanna find ways to drive audience. They wanna find ways to drive engagement. They're seeing the growth around them for social networks, and they're asking themselves: How do we go from the average consumer reading 1.5, 2 articles a visit, to 3, 4, and 5, using personalization and AI? How do we get more people to our sites to begin with?
So we invest with publishers to be strategic to them, so they choose us for three, five, 10 years, and sometimes 30 years. And with advertisers, we make sure that we're focused on value, so that whatever money they spend with us, they see a ROAS that would enable them to do it again and again and again. So that's kind of our mindset with publishers, to never be just money, so that everyone in the organization wanna work with us. And you see the results. You see amazing publishers renew with us and choosing us all the time, and it's fantastic. And on the advertiser side, most of our revenue is direct to the advertiser, optimizing for its performance. So that's kind of how we're thinking about what we do and how much we do it.
Right now, I did say before, I believe that by just getting more budgets and more advertisers, we can probably double to triple the company on our existing supply base, given how fairly significant we are already, reaching about 600 million people DAUs.
That's a good segue. Talk about the logic of the Yahoo deal and how it's tracking versus your original forecast when you announced it.
I mean, the Yahoo deal, there's so much to say. First of all, obviously still early. You know, I love that deal because, you know, strategically, it makes us a better company with access to unique data and unique supply and unique demand. It gives us scale. It's something advertisers really like. I mean, like, it's hard to explain how wonderful it is to put money and have it convert on Yahoo, because it converts really well. So overall, I mean, I think this, it, it will play a very important role in our strategic growth in years to come. Right now, what we've showed on the last earnings call last week, I suppose, it's all one long day, is that we've migrated the accounts.
So we had a goal of migrate the accounts of Yahoo. They've migrated. We have now a budget goal for H2, so we know how much these guys are supposed to spend with us. We're working towards having them spend that with us, and that would be really great. Beyond that, we've learned a lot from Yahoo. Specifically, that those bigger brands, Samsung, Verizon, and others, when they spend, they not only wanna be on a good publisher, they also are willing to pay a premium to be on their own kind of advertising experience. So thanks to that, we kind of rolled out Taboola Select to allow those bigger brands who spend on Yahoo now to, over time, get to Apple, get to, you know, other publishers of ours.
So all of those things have been kind of already taken place, and in the future, you know, I think there's gonna be so much more we can do with these guys. You know, e-commerce, bidding into the display stack, coming up with more contextual segments. So there's really gonna be a multi-year wonderfulness, I think, with Yahoo!
Got it. And we definitely covered a lot, and you covered a lot in that answer, and so, really, when investors kind of look at, you know, so far, you know, the business, you know, basically there was a priority of having the Yahoo! advertisers fill the Yahoo! inventory first, or, or basically. And then your ability to kind of branch out to other publishers. So, you know, point is, we're, we're pretty in the early innings of this kind of cross-sell opportunity still.
Yeah, yeah, yeah. From a synergy perspective, yeah, we're still focusing on, w e're not there yet, so we're still focusing on these are Yahoo! advertisers migrating to Taboola's technology, buying Yahoo!
Right.
I've said this before, which is, it's the ultimate, actually, vote of confidence from the market because it's the same client, same advertiser buying the same website, the same supply on Yahoo, only via different technology, using our AI, and they're seeing better results, and that's great. We've published many case studies. I encourage you to check it out. The idea is that first, you know, earn their trust, make sure everything is going well, and then start enjoying the benefits and the synergies, as it all can overflow outside of Yahoo. That is in exploration mode right now. It's not yet, you know, being captured, but we think it could be significant.
And so, we've heard from a lot of companies, and I'll ask you the macro question in a bit, but there seems to be more of a focus on performance in the marketplace. And historically, performance was a smaller part of your business, but now you're really pushing that, to try to ultimately, over time, become the majority of the business, so between performance and e-commerce. So maybe talk about kind of where you are in the evolution with performance and e-commerce, 'cause e-commerce is a performance product, and kind of how investors should think about the strategy over the next few years.
Yeah. I think we're laser focused on performance advertising. In fact, you know, we don't think, you know, right now, the opportunity we have, again, the way I think about this, when I look at the open web at this market, the video ads, and bigger brands and agencies have a good, you know, product and offering with The Trade Desk. I don't think this is a space that is, from our perspective, they're a good friend of ours, we wanna be complementing that gap by offering advertisers who wanna work direct and by CPA in mind. That is a real gap. There's a real void there.
If you're an advertiser today, you kinda have to work with Google and Facebook and Amazon, which they're good companies, they do a good job, but you never wanna put all your money in that, just those three baskets. They change their pricing models. They deprecate things and bring them back to life. They're big. Nobody wants to be, you know, 70%-80% or more, God forbid, too concentrated within two, three companies. So there is a real need for a company to be big enough to allow advertisers to spend in open web, and I spend a lot of time with CMOs. I mean, I can tell you, it's a real pain point, and that's our focus.
To do a good job in that, you need a lot of data that is unique, you need great supply, and you need great technology that can help advertisers, you know, succeed. The biggest investments we have here on the AI front is called Max Conversion. It's essentially similar to what Google and Facebook are doing in the sense that you don't have to come up with a CPM or CPC. You just come to us, you give us your goal, whether that's a target CPA, or you may not even do that, and you give us your budget. You can create creatives using GenAI, and we just take it. And the idea is that you're very quickly able to see what's your conversion rates and acquisition costs that we can deliver to you, and you can compare it to, you know, social networks and walled gardens.
So that is our main focus. We're seeing really good adoption. About a year, actually, exactly a year ago, it was the birthday of Max Conversion yesterday. A year ago, we launched it, and then right now it's been the fastest adopted product ever, and it just crossed the 70% of adoption of revenue, which means that most of our business is now, you know, using AI to drive performance. We're gonna continue to invest in this a lot. In September, there's gonna be a great rollout of something fairly cool that relates to AI, and we're gonna basically, over the next many years, keep taking pieces of the advertiser journey to buy performance, making it simpler, easier, reduce churn rates, and increase NDRs again and again and again and again.
And again, we're, we wanna be as good as anyone in that. So that's our focus. That makes sense to us, and I think it's a big, it's a big market.
And so, Taboola News, you know, in the very beginning of the business, you were a way to kind of drive, I guess, what we used to call clickbait once upon a time, and then you integrated into news publishers and helped them understand how to source content, older library content, to increase viewing. This has now become a significant initiative around news. So just maybe talk a bit more about that, and how you see Taboola News evolving over the next, you know, few years.
Yeah. So just to level set for those who may not know, our core is working with publishers and advertisers, that is a significant business. Over the years, you know, we got so much trust from the publisher community that they've gave us essentially the rights to distribute their content on other touchpoints so we can bring people back to their site. Which is an amazing asset for the company to have, you know, so many publishers giving us rights to distribute their content globally. Taboola is a very global company, about 40%+ in the U.S. We're big in EMEA, big in Latin America, big in Asia-Pacific. So that means that we can work with fantastic OEMs all around the world to become their news provider.
The reason this is important is because many of these companies, whether you're a utility app, an OEM, they all wanna go up the food chain. Nobody wants to just sell a device. Nobody wants to be just a utility app. They want to be going up the, up the food chain and offer more touchpoints with consumers so they can engage them and monetize that. We're seeing now, l ook, even Amazon now, their number one EBITDA line is advertising. Netflix is out there building an advertising market. Uber will generate over $1 billion in advertising. Everyone wants to be part of this information revolution, where they can offer value to consumers and monetize it with ads, to enable them to offer their services more affordably around the world. So, I'm very excited to say that it's a startup that was built within Taboola, Taboola News.
We did say it cost $100 million, and I think this could be, again, hundreds of millions in years to come. Similar margin to the business, 35%-40%, so we love it. And from a competitive standpoint, the more this business grows, the more traffic we send back to publishers. The more traffic we send back to publishers, the more we get to win great relationships with publishers at a good margin. And that, again, goes back to our philosophy of being more than just money with our publisher partners and being strategic to them as we drive audiences and help engage them. So Taboola News is a great organic startup within Taboola. I always say, you know, we're like a startup of startups.
That's great to see that we're able to build something so significant from within.
So, give us a similar update on Apple News and Stocks. Another, obviously, you know, anytime you can develop something with Apple, it's an endorsement of the business. But just how, you know, what is that, and how, how is that evolving, and where does that go?
Yeah, Apple News essentially is, if you go on your iPhone and you swipe right, and you click on News, you see ads on your feed and in the content, and we essentially announced that t his is n ot seeing an ad now. Yeah, here's an ad. So that ad, which is again, 100% share of voice, and also there's one in the article itself, and we're very honored to work with a company like Apple. You can only imagine, you know, that obviously they could work with anyone, and, you know, we feel honored to be chosen. Even more than that, you know, I mentioned I just spent some time with them in Cannes.
You know, it was an incredible moment to be at Taboola, to listen to folks at Apple speak about how much they appreciate their work with us, and how, you know, flawless things have been, and that's been really, you know, a moment for us. The opportunities, you know, Apple, we said it's not gonna be probably as big as Microsoft or Yahoo, but we do believe it's gonna become one of our bigger partnerships, so I think of them as a very significant publisher. So from that perspective, it's great. I like it because it sits well within our premium-ness. You know, getting more bigger brands to spend with us. We just spoke about Yahoo, we spoke about Taboola Select.
I liked, I like seeing those bigger brands spending performance budgets with us, that are, again, meaningful budgets. So Apple is obviously t here's not a lot more premium than Apple, so that's great from that perspective. And last but not least, again, going beyond financially, you know, this could be one of our bigger partners, and the fact that it can help us attract bigger brands, I like it 'cause it fit perfectly within kind of my vision that Taboola will be a company that many, many iconic brands, other consumer companies would consider working with us as they wanna go into advertising. I think we're at the beginning of what could be a revolution for the advertising industry.
The growth will not come, in my opinion, from necessarily Google and Facebook, but rather from many new entrants that will come and wanna monetize in different ways, which is exciting. So, from that perspective, it's a good vote of confidence, and I hope we're able to share with all of you many more to come.
How important was the Yahoo kind of partnership into getting Apple, or totally, totally independent?
It's hard to say. I think it was important. I think, you know, my guess, when we announced the Yahoo! deal, you know, a 30-year partnership with Yahoo! and Apollo at that size, my guess, you know, many, many, many companies had a meeting about Taboola and said, "What the hell is this?" You know? Like, you know, "Did you know about this? What, what does it mean to us? Why" You know, all those y ou know, we're all reading the reports of, like I mentioned, Amazon generating the number one EBITDA line from ads. I mean, you can't be a Fortune 1000 company without your board asking you, "What are you doing in advertising?" You know, I think as a CEO of a of a company, a Fortune 1000 company, you need strategy, operation, and ads.
Like, you need to know what, what is your advertising strategy. So I do think it may y ou know, I don't know you know, I, there's no attribution for those things, but my guess is that it helps to know that, you know, sophisticated, smart people like Yahoo and Apollo chose us, and then, you know, and then Apple. But so I think it helps. It's hard to know, but, there aren't many companies, you know, again, outside of the big walled gardens that are guiding for $2 billion in revenue. So we, you know, we have the scale, we have the direct revenue, with advertisers, all those things help.
Just like more of a shorter term. So obviously you've spent a lot of money to integrate Yahoo. A bunch of that cost, you know, should come out over time, 'cause it was one-time cost. Some of it, you'll keep some of those talented engineers, 'cause you wouldn't otherwise hire them. But, I mean, you came in meaningfully better than expected on margins in the quarter. So should investors assume that, like, we're now on the other side of that and the Yahoo costs kind of are starting to come out of the business, the one-time costs?
I mean, some of it will over time, you know, come off. I mean, from an engineering perspective, we'll do. We'll be able to shift to other things. But in general, I think, you know, when you think about our financials, you know, we're fortunate to be able to fund, you know, all of our investment needs from operating cash flow, and this is still generating, this is guiding to generate over $100 million of free cash flow on top of it. So from that perspective, I think, you know, we're in a good place, in a market that is obviously exciting and interesting. And from, you know, from a use of cash perspective, you know, just we speak about it often, I don't think we'll be doing a big M&A or something like that.
We have, I think, everything we need as a company to grow significantly in years to come. So from my perspective, I wanna focus and execute. And again, we always wanna grow profitably, and I think that the numbers we're guiding this year are exciting. I mean, we're talking 2x free cash flow versus last year, 2x EBITDA versus last year, 25% extra revenue growth. So I like those numbers. It's a big year for us. We have to focus and execute. And then this will become our new foundation as we go into the, you know, in years to come.
So, I mean, to that point, again, I think we have you generating $100 million of free cash this year, $140 million next year. Again, you know, would seem like, I mean, so far you've bought back, since you announced it, you know, yeah, was it's $80-ish million or so of stock, roughly. You know, it would seem like you could kinda keep buying back, you know, that level or more on a trailing 12 month basis for the foreseeable future. Just, I mean, how do you think about returning capital to shareholders versus M&A?
You know, I don't think, s o we'll continue to buy back shares and consider paying down our debt over time. So we still think buying our shares is a good investment, and so we did so in market during that. M&A, I think we'll always be out there looking for something that could be, like, a tagline always, or maybe something that has, you know, good synergy that's obvious to us. From a bigger bite perspective, I don't think we have an appetite to do that, at least near-term. Like I said, we have, you know, we have almost 2,000 people strong. We have a lot of organic growth ahead of us. Our core has a good trajectory to grow as we continue to get more budgets. I'm less interested in doing that.
I think that I wanna have as little distraction as possible and focus aggressively on executing on this market, because now is the time to do it.
What do you think is the, I mean, you talk to a lot of investors. What do you think is most misunderstood about the company?
You know, I get this question, you know, from time to time. I don't know if it's, you know, exactly what it is. I think for the most part, investors want Taboola to just get to a normal state. You know, we're a fairly new public company. We, you know, I think we have a diverse growth engines, you know, commerce and Taboola News and Yahoo is integrating. So I think people will, you know, they like us progressing, and I can see it every quarter. I can see it by the type of questions we're getting.
So they like the progress, and I think as we get closer to the end of the year and into 2025, we'll be able to, I think, just be more easier to model for investors and easier to just be more, you know, normalized from that perspective. That's my guess. I think it's a busy year, and just people wanna see things get simplified. And from my perspective, I'm focused on executing and building a great company, and I think, you know, the more we do a good job, we'll attract people that wanna be part of our journey.
So, I wanna dig a little more into e-commerce. And, you know, obviously, retail media is an important area. I mean, look, we understand why you can do performance. You know, it's really about kind of like closing the loop between the advertiser and the publisher, 'cause you're sitting on both sides. You know, just talk about kind of the bar on e-commerce just continues to go up, right? With what major retail platforms are doing and, they said you, we're gonna have more identity data that's gonna be available for making connections. How do you play a bigger role in e-commerce, just given the scale that you have?
Yeah, so, so there's a supply angle and a demand angle. From a demand perspective, I think retailers wanna spend aggressively and drive sales, so long as it works. We're seeing that with, obviously, the big ones, the, the Amazons and Walmarts, and even we're seeing, you know, the, the tier after. They're all looking for, like, audience extension opportunities and spend outside of their own domain to bring people back to their stores and merchants, and I think that will continue to rise, and we will benefit from that, because we have great places to show those products on. From a supply perspective, you know, I, my sense is that the supply angle of retail media is a bit competitive.
Maybe even concentrated, you probably have, and I don't know the numbers exactly, about 10 companies that own 90% of the market. And my guess, over time, they do it themselves, because that's usually what happens when you have someone so big. So I wanna be there when the money's coming out, and put this on timestamps to know, because they- so again, my. The way I think about it is many great publishers will become e-commerce businesses, too. Because if you're going to Time.com or AP or The New York Times, and you already trust them with news and things that matter to you, you might also trust them to buy something for your house. Because it's written by an editorial team, and it carries the trust of the organization.
So I think that we'll see Wirecutter-type relationships across the internet over time, and that's gonna be a very high intent source of traffic, consumers re- And by the way, if you're listening to this, I know none of you or most of you don't buy on Amazon before you read on a website. If you wanna buy a coffee machine, usually you search and see best coffee machines, you know, the most expensive, up-and-coming, all those things. You buy a trampoline for your house, what do you know about trampolines? You know, you wanna buy a mattress, what do you know about a mattress? You need reviews, you need someone you trust. And this is the open web. That's why we like the open web in general. It's, it's an editorial, journalistic, premium environment versus UGC and social networks.
I think supply will grow, and we will help publishers get in that business, and we'll hopefully attract overflowing budgets from retail media as they look to be spent someplace.
So, last question. So cookies, you know, prior to Alphabet's most recent announcement, I think you talked consistently about your platform was not cookie dependent. And if anything, kind of cookies going away on an unpredictable time schedule or against publishers' control would benefit someone who does contextual advertising. Cookies are now probably gonna be here to stay, but most likely, Alphabet will put in opt-out provisions, so, you know, publishers will lose half or some reasonable percentage of the signals. There'll still be alternative IDs that will come into the market. Just how has your thinking now evolved around kind of where we are with the cookie journey?
Yeah, I wanna. I mean, to be honest, the end is exactly. So I think nothing happened. This was a no, no news news, because eventually we're getting to the same result of no cookies, only consumers will just make it happen. You know? So I don't know that there is- and actually, I don't think anything changed. We're gonna be in the same position where cookies are deprecated because most people will just opt out, most likely, I guess. And then there are no cookies developed, no third-party cookies. First-party cookies are forever available, contextual is forever available. So from my perspective, what we've said before, and you're right, is that because most of our revenue is direct to the advertiser, we have pixels on both sides.
We have a pixel on the publisher side and a pixel on the advertiser side, so we have good attribution. I think Apple deprecated cookies 5 years ago, so we know what the future looks like in many ways. And I'm guessing, you know, Google with the sandbox will be somewhat better, like they'll offer more capabilities, but I think cookies are going, I mean, my assumption is, my working assumption is there are no third-party cookies. Google provides some utilities and hooks to make sure that people can still participate in this industry, and for us, hopefully it's, you know, potentially an upside.
Okay, I think we'll leave it there. Adam, appreciate the time, and anyone has any follow-up questions, feel free to email us and we'll get in touch.
Thanks for having us.
Thanks.