Good morning, everyone, and thank you for joining us for the Fireside Chat with Perion Network. I'm Jason Helfstein, Head of Internet Research at Oppenheimer. Very excited to have CEO Tal Jacobson and Chief Revenue Officer Stephen Yap. Gentlemen, thanks for joining me. So the format, Fireside, if anyone online has some questions, there's a box you can put in and I can ask your question or email me at jason.helfstein at opco.com. So, gentlemen, thank you for joining. So to start off, for those not familiar, and perhaps because the company has morphed over time, just describe what Perrion does and why you think its offering is unique for clients.

Yeah, absolutely. Thanks for having us, Jason. So, yeah, as you said, Perrin has been around for many years. In the past few years, we've concentrated mostly on the supply side of advertising. So we were kind of an SSP, a bit different in the mechanics, but kind of an SSP. In the past two years, we realized that there's a major shift within our industry and we wanted to focus mostly on the demand side. So mostly on the people that are actually spending a trillion dollars a year over digital advertising, and we morph the entire company into becoming a centralized platform for marketers, mainly CMOs, to be able to orchestrate those trillion dollars worth of spend in a very fragmented industry. So we're just making everything smoother using AI through our entire technology. And we're now announcing more and more features. We just announced our new algorithm for performing CTV, which is, you know, CTV is one of our biggest selling products. But we have so many other products like digital out of home and other products. But our main focus is focusing on the CMO, focusing on our client, and we're shifting in between channels to get them the best outcome.

So, Stephen, thanks for joining us. So, for those of you who don't know, Stephen joined the company. Was it late last year? No, it was February. February, earliest year, right. So, I guess, tell us, like, what was appealing about your longtime ad tech executive at much better companies? What was appealing about joining Periana as Chief Revenue Officer?

Yeah, well, and again, Echo Tal, thank you for having me. Yeah, I mean, as you know, I'd spent 17 years at Google, right? And I was blessed with the opportunities to, during that time, take multiple products to market. I built a few like Google Analytics or the LATAM platforms business for Google, some of the different reporting tools, Tag Manager, things like that. And during that time, you know, what I really started to understand and fundamentally enjoy, right, was, you know, the ability to build and architect solutions for the marketplace, right, and then get them to scale, obviously, inside a huge place like Google. You know, in my last stint, I, you know, I was placed in charge of Google marketing platform and kind of was asked to rebuild that. And after about two years, you know, there's an opportunity I kind of came across through a friend of mine who said he kind of floated my name. And when you look at Perrion, which was the opportunity, there are very few companies right in our industry right now that kind of have the position where they kind of approach their business like a startup. They have the cash to kind of back up all of their innovation aspirations. And they're really just kind of looking to rebuild solutions for kind of the modern marketer. you know, all of those combined, you know, how often do you get a chance in your career or even your lifetime, quite frankly, to rebuild a company and a public one at that? And so, you know, given the vision of Perrion One, for me, it was really just a no-brainer.

Got it. So let's talk about, it's a great segue. I almost think you have my questions. Let's talk about Perrion One strategy, right? So Tal, you know, kind of just broadly like,

you know what is the perion one strategy yeah you want to see from a customer yeah stand of

point why would that be yeah so so so the perion one strategy again when you look across our industry right like one of the things that really stands out is it's just how innovative the industry has been um over the course of its inception um you know that that's also kind of provided some of its challenges, right? With every piece of technology, you know, or every challenge that you have in digital marketing, there's another piece of technology for it and another one. And so what we've ended up seeing across the industry plane has been, you know, a very siloed, very disconnected approach in technology, right? And it makes it for a lot less efficient, much less cost effective than the industry originally had been for a while. When we look at Perrion, we saw the opportunity in Perrion, you know, in this concept called Perrion One, to actually unify across people, processes, and technologies, right? And so, you know, in its simplest form, when you look at where we were, you had multiple technologies, so up to like five different sales teams calling on a single person, right? Now we've actually unified that group, so you only hit, you can, you know, you're only speaking to one, and you're talking about the entire spectrum of your digital marketing challenges. Around the technology side of it specifically, it's how do I start to envision when I want to deliver a digital marketing campaign, how do I do that in the most objective way possible across both technologies and media that allows for the biggest impact, right, that I'm actually going to have. And so what Perrion 1 allows us to do is create connective tissues between all of these technologies between the channels and allow the systems to dictate, hey, based on the performative nature of your KPIs or the goaling that you have set forth, the system can help you actually achieve those goals by being very channel agnostic as well as being kind of media agnostic. So we don't necessarily care where it runs or how it runs, so that it just simply delivers that impact for you. And so that is kind of what our aspirations and our vision for, you know, the Perry on One platform going forward. And look, I know investors, you know,

ad tech can be very confusing, you know, the term DSP is broad, there's, you know, There's managed service, self-service. So, you know, and like why does a customer, let's say, choose your buy-side tools versus, let's say, you know, like, you know, buy-in, trade-desk, you know, basis? There's other solutions out there. Why do they pick the Perion 1 solution?

I think that's a great question. And we're actually getting that quite a lot from investors, less so from our customers. um the way we're building perion one is not to replace other dsps it's a way of having a centralized platform to orchestrate your uh in media investments versus to replace them right so think about it this way the majority of the market is actually closed gardens right so you have meta and you have google and now you have tiktok and you have reddit and you have pinterest we're not going to replace their DSPs, right? And that's the majority of the business, the majority of digital advertising. But what we can do is saying, let us sit in between you guys. Let us optimize your spend. Let us optimize your creative. Let us optimize your data. And with that, because we're sitting in between that and it's a centralized platform, we can actually tell you what works best. So maybe for a meta, a specific creative would work better for them on TikTok or on YouTube, a different creative, right? But because it's in one place, you can now actually compare them. Now, we do get some customers that are saying, listen, you guys are great, but I do love to work with the traders. And we think the traders are great. We're not trying to replace them. But we do have a feature called Sidekick, which we would tell our customers, listen, you can do a lot of things over our platform, But if you want to use a trade desk, and that's totally fine, you know, just click on a button and that will push it towards the trade desk. Now, we do get our fees from, you know, data or planning or anything else, but we're not trying to replace the trade desk. We're not trying to replace Google or Meta. We're just trying to make a sense out of the whole mess of what digital advertising has become.

Yeah. So does that mean like you're targeting a specific size advertiser that, you know, let's say the largest, you know, is it the largest advertisers maybe can kind of either figure this out on their own or maybe they get kind of a bespoke level service from like a trade desk or Google Amazon, whereas like a medium size or smaller advertiser is not getting that. And, you know, so maybe talk about what you're like, you know, what was it maybe the average spend per advertiser today or like what's the sweet spot?

So we haven't broken it down in our data yet. But what I can tell you is our sweet spot would be advertisers that are using at least two or more DSPs, right? So maybe customers that are spending money with YouTube and Meta. Smaller companies that tend to push older budgets towards one platform don't actually have that issue, right? They have one platform. They don't need our help. Bigger companies, the 1,000 brands of the U.S. or worldwide definitely need us, and we're working nicely with a lot of them. But we're also getting into the middle market, not S&Ps, but middle market, and we're seeing tremendous help that we can provide to our technology. So those are the kind of audiences that we're targeting.

And so I think about like going back two years ago, a good chunk of the business was managed service DSP, like, you know, kind of more customized campaigns that were like harder to run programmatically. So on a self-service, you really needed like people with your expertise, but yet like that isn't the most efficient. You've been transitioning away. So how much of the business would you say is still managed service DSP right now?

um so you know you're absolutely right as and as we said six months ago so we only launched this new strategy and new spirit platform six months ago and we said that uh that it's a transition phase right so as we're going to look at the future in the next couple of years everything is going to be period one anything is hopefully most of it is going to be self-serve but we still have all those amazing working products that some of them actually need managed service. Now, having said that, since we're getting into the AI era and we just announced our new COO that is coming in, she's going to focus mainly on how do we make managed service streamlined through automation and AI versus manual work, right? So that will free a lot of our people to do more things to our customers versus just doing manual work. So even managed service today, you know, I think Yap here, I love that he has a phrase of instead of self-serve, he calls it AI served, right?

That's where we're going.

Yeah, I mean, and I think that's the-

The machines, well, eventually all of the managed service becomes AI serve, actually.

That's a better comparison, right? I mean, and I think right now, I think there are a lot of things that are driving that, It's also one thing that we often don't talk about is it's the education and the evolution of the end advertiser and the marketer, right? Like how sophisticated are they? And there are obviously a lot of companies that we know that still do last click attribution and things like that, that, you know, we came up with like 15 years ago as an industry. So I think the important thing, too, is that, you know, as we move into the AI world, it becomes AI serviced, right? And so it becomes much more efficient on that level. But the cool thing is, is that our ability to pivot and meet kind of marketers where they are in that moment, right? So, look, if you're using one channel, that's great. We can help you there. If you're totally self-sufficient, wonderful. We'll give you the keys to the tools and off you go. And we begin to layer on our AI on top of that to help you be more efficient. If you need a hand, so we hold your hand all the way through the process, which we have a lot of clients, our job is to also partner with them, right, to help them in their journey to get them to be more sophisticated. So the optionality exists for both. And I think a lot will also depend on, you know, how the marketers evolve over time, right?

I mean, I think that's actually kind of maybe an overlooked aspect where it's like when you think about self, you know, kind of, again, historically to do self-service, I wouldn't say it needed a level of simplicity, but like you needed a level like of standardization, right? And we all know it's gotten more complicated, more features, whereas, like, things that you really couldn't figure out how to get the machine to do, you had people do, hence managed service. That being said, the AI becomes the replacement of the machines. And if you were the one doing that, presumably the advertiser will look to you first with a machine-based solution as opposed to, you know, no one's really talking about it. But I think that is an opportunity for Perion if you can move fast enough.

Yeah, I mean, it's a huge opportunity and something that we are, number one, completely focused on and heavily invested into. But yeah, it presents a really cool opportunity, I think, to, again, direct the market versus, you know, follow it.

So I'll talk about channels for a minute. In the first half, your breakdown was 63% open web, 23% digital out of home, and 14% CTV. How do you see that mix evolving with the new products? And you also announced the new CTV offering as well, if you want to kind of weave that into the conversation.

Yeah, absolutely. So, you know, as I said, our business is not focusing on channels, it's focusing on the client, right? So within that, we're constantly going to see, you know, fluctuations in between the channels, as long as we can get more and more budgets and more and more customers. Having said that, you know, we do feel very optimistic about how our CTV solutions are going to grow. We're already seeing, you know, we have good indications in Q3 and the pipeline. So we're feeling very comfortable with saying that we're going to, you know, beat the market in terms of the market growth in terms of CTV. I mean, we're feeling more than comfortable with more than 20% on an annual base. uh but again i think i think there's um because we're evolving into a new type of company i think there's a lot of confusion still about uh i think some of the people think that our channels are are like separate businesses and they're not right so they used to be but they're not anymore absolutely absolutely i think that's where the confusion comes from and i think the once you know it's one business and it's okay if if a budget moves in between channels as long as it stays with us it's fine right i think people think well if that moves down maybe that specific business which is ctv is going down no it's not a business it's a channel within a platform right but we do feel comfortable with ctv going up just because we think we have a great solution there we have actually three solutions we have the high impact ctv we have the performance ctv and now we have perion algo which is actually the green bits part which it uh offers algorithm for ctv over youtube right so all of those solutions should provide just like like like just go into

a little more detail on that so so like what is that why is that appealing to an advertiser that

product the perion algo yeah absolutely you want to so the perion i mean it's it's it's incredibly appealing because when you look at CTV, right, a lot of the questions around CTV were, you know, when it first came into the industry was a lot of basically it's digital TV, right? So it's how do you measure it, right? What are the metrics in which we can measure? You know, what has been really kind of cool to watch is as GreenBids has kind of taken shape and now as we kind of move it into kind of the peri-analgo, you know, we find our customers, what they're able to do is they're able to give us their goals and their objectives, right? So here are our KPIs. This is what I need you to hit. And when you consider the ways in which this is approaching versus here's my budget, here's kind of my creative, here are the channels I want to be in, they're simply saying, here are the KPIs I need you to hit. Can you have your AI systems begin to optimize that? Now, obviously, you know green bids was primarily focused on dv me you uh youtube via dv uh for a long time but when you look at kind of the impact that they've had they've been able to outperform basically every single client that they had signed on all of their kpis right what's really interesting about that business as a marketer going into kind of the ai era is and this kind of almost goes back to the channel conversations. But when you talk to a lot of our customers, it's this mindset shift within the industry of, wow, so I can give you a budget and give you objectives, and then you can optimize for outcomes in those objectives, right? Because the marketers of the future, what eventually is going to happen is the CFO is going to give the CMO a budget and say, here's $20 million, and I want a 5% return and this type of ROAS.

it's gonna not matter basically we're saying it's p max it is advantage plus it's these basically products that the biggest wall gardens have created and it's almost like they've made the new standard and everyone's gonna have to like like the goalposts have been shifted

right so yeah yes and yes and no and in in that like yeah i mean the p max i think p max was like the first iteration of this kind of based campaign metric but again when you kind of go back to where we're really unique is that look we're agnostic from media technology and right right that that's pmax in their solution as opposed to exactly and so and so this is what you're also saying from the industries everyone's developing ai capabilities on top of their silos so you're basically having siloed ai our our intent is we need ai to actually work like green bids does across multiple channels and multiple entities so that instead of me saying oh you buy more youtube it's look the systems the system is delivering outcomes for whatever circumstances they are based on the data so a great example of that is look like in the dead of winter of new york when you're experiencing a blizzard the system pulls in the weather data and figures out look i'm going to start pulling budgets from digital out of home because no one's walking the streets in new york i'm going to put it all to ctv because everyone's at home nice and warm under their on their couch So being able to do very simple things and do them objectively with no other intention of I want to drive you to my media or I want to drive you to technology, I think that's kind of where Green Bids gets really exciting, being able to layer kind of objective AI on top of all channels and allowing the system to then operate in an intelligent way based on all the data feeds that we have.

I think there's another big shift happening now in the last few years where marketers are looking at themselves like basically traders, like investment managers, and they want to get the best yield. So think about the green beds or perio and algo, as we call it now, more like an algo trading. right i'm i'm putting a million dollars of investment i want to best the best yield and we've improved uh we've proved that to our customers that we can get up to 40 percent

better yield on the same budget we basically you don't have to maybe the comparison in trading would be as opposed to having a trader who's like watching the bid and be like looking for patterns and trying to make sure they're like okay now i'm going to place my order like the I'll go rhythmic. Basically, you know, it's going to get you maybe not like the top, you know, 98%, but you're going to be within the top 10%. And if you can save that time, it's a good value trade off to give up the other eight points or something. And it's managing a portfolio, right? Like that's

why it's so similar versus managing just a simple, I'm just trading this stock. This is all I'm going

to optimize for. Right. So, I mean, so when we think about connected TV, I think a lot of like initially or as well we like we still have somewhere between 90 and 100 billion dollars it's still in linear tv okay um when we think about cdv you know the the most premium channels right the initial view was like oh you don't need ad tech to buy it you're going to mostly buy it direct or it's going to be like programmatic guaranteed and the ad tech fee for that's going to be like pretty small yet like as we're you know now fast channels right are um you know growing faster than kind of, you know, you know, SVOD right now. And you're just seeing like more of a proliferation. And then, you know, where does like YouTube go, right? Like if you watch YouTube on your television, is that CTV or is that like online video? And so, I mean, maybe talk about how like the explosion of more outlets like kind of plays into that strategy where like maybe this wasn't something that you know was even available to perry on like two or three years ago

yeah i mean so i think it's a great question it's also a great example of why ad tech is actually needed um right we we created our own problem now we're trying to solve for the very problem that we created which is the proliferation of channels you know when you look across the digital ecosystem i think that's always been the issues like there's there's content being created everywhere and anywhere at any given time. Now we're seeing that in the video channel realm as well. What we need the technology to do is understand, hey, based on where your audience is, based on kind of what you're watching, and then even you're going to start to layer in things like brand suitability, right? Like those types of metrics, having the system be able to intelligently go, okay, so we want this type of audience and this type of content, not this type of content. And I think, you know, when you when you look across the ad tech ecosystems, it's it is very relevant. I mean, you know, when you look at something like YouTube, right, YouTube, YouTube's bought via AdWords and or it's bought via DV. You know, there is and there's something to be said because there is a I would actually argue a vast majority of the YouTube buys happen via DV.

And the reason just for a moment, you don't mean double verify.

No, no. Sorry. Sorry. Sorry. He's already corrected me. You're using your legacy, you know, the legacy. DB360, the DSP, Google's DSP. But there is something to be said of, hey, like marketers understand that they really need technology to cut through and make these buys much more efficient and optimize them. And so your ability to do that in a tool is worth that investment. And so it's a lot of the reasons why, you know, you have DB360, which customers are willing to pay for to buy YouTube, which is also owned by Google. I do think technology is going to serve the industry much better and more efficiently, especially in the AI era where you're able to very clearly define, here's the target, here's the accepted brand suitability I'm looking for in terms of a grade, and then here's the budget that I've got, and then allow the systems to actually optimize across the web for that. I mean, it's interesting, right? Like,

I mean, look, the ad agencies are merging to try to get efficiency. And at the end of the day, like they're going to use AI to do more with less people. And at the end of the day, it's going to be like their AI talking to your AI talking to the publisher's AI. I mean, that's kind of where this ends up going. I mean, everyone will give it, you know, the commands, but like there was a whole lot of stuff in the middle that was manual that's basically going away right yeah that's right and

it's and look i mean i think i think when you look at the agency world right like they're they're they're combining for those two things right efficiencies and the data play right because they also understand fundamentally which is again why we why we want to be in into all these different channels because not only do we want the optionality for our customers and say look we'll deliver your ad and wherever, wherever your customer may be. But also AI is only limited to, right? Whatever data pools it sits, sits on top of. And so you're seeing the agencies play because they now sit on top of these huge, traditionally large data companies that they've acquired over the last couple of years. And so that's kind of the efficiency play. They, they recognize, Hey, when we get the AI laid on top of this, we'll be able to do that. Now, I think it's also interesting, right? Because you do have siloed AI. All these tech companies are making their little silos of, hey, I've got AI for search. I've got AI for this. I've got AI for that. So again, I think taking a more channel agnostic approach is what really the industry needs to get an AI that sits on the AI. An AI for the AI.

So I would just say that when we're getting into the AI era, it's not about AI. AI is great, and it becomes a commodity, right?

Yeah, it's an efficiency tool. It's all about outcomes at the end of the day. That's what you're going to be judged on by your client.

And within that, AI, it's not about the algorithm or the model. It's about the data. Because if AI has the wrong data, it will destroy everything you do, right? And we see that, that AI is hallucinating. It's becoming worse and worse because it now reads its own articles and making decisions based on whatever it said before, right? So our goal is if we're going to have a unified centralized platform, we're going to have so much data and the quality of data is going to be so high that you will be able to depend your business upon versus silos, right? Which is always harder to understand.

So let me ask a macro question. So, I mean, look, we've seen the business kind of pivot back to positive now. There's obviously a lot of noise in the numbers on a year-to-year basis. But, I mean, did you see any kind of, in your opinion, macro impacts on the second quarter or not really? Again, was there any kind of tariff or, you know, do you see any categories pull back because, you know, with blaming macro or not really in the, you know, in the results I just got reported?

I think what we saw at the beginning of Q2, we saw people getting more nervous. And that's why they've asked to push some of the budgets from CTV towards web where it's proven to be more performative. They're getting better results. But as we moved on, you know, to the last phase of Q2, we saw it coming back. We saw CTV coming back. We saw people getting more relaxed. Now, within the current situation in the market, I'm not sure anybody is fully relaxed, but things are getting, we're feeling that things are getting back to normal. We're feeling, you know, again, within our customers, we're feeling very comfortable of them coming back, spending more and spending more on the more premium channels like CTV.

Yeah, I would agree. I think as we enter into it, especially if you look at advertising, right, and digital ad spend, it's, you know, the vast majority of the industry holds, you know, they basically have this kind of ramp effect all the way going into late Q3 and into Q4. As you enter the second half of the year, where they now, okay, so the budgets have to go now from now until Q4, this is where we're going to start to see the ramp up. And I think anything that kind of, from a macro level, anything that kind of shakes the market's confidence a little bit in ad spending, I think the marketers go, well, hang on, don't know, let me hold this for a minute, and then we'll just start to, and then we'll start to go. So to Tal's point, yeah, they're a little bit nervous, right, and hesitant at the start of Q2, but then we just saw it basically go right back to where it was towards the end and speaks to the ton of confidence we have in looking at the early indicators of our Q3 that, yeah, we're seeing the net effect of that.

I want to go back to gross margins for a second, kind of tying back to Periana 1. So gross margins peaked around 90% in 22. It's on track for something like 74% of our model this year. I mean, as you move towards CTV playing a bigger role, is that like positive or negative for gross margins?

So CTV, but not only CTV. As we move more towards a platform play, and a lot of our features are going to become more and more self-served, we're going to become more efficient.

You'll be supporting less systems, so there will be less costs to support different systems.

So less system, less manual work, the opportunity to scale, not necessarily with scaling the amount of people with the same magnitude. right so we you know we do predict that the company will become more and more and more efficient

and then just maybe asking the same question on sales and like you know sales and marketing head count um and like what's you know just how do you see that kind of like playing out like as this strategy goes i mean you know if the business moves to more self-service maybe there's less people executing but then you have more people selling like you shift those resources and then that gets you more growth but that more growth is on a higher incremental margin right uh so i i

think as we move towards the platform play i think we're going to take a page of the books of google and meta right you're going to have you're going to need less sales people to sell campaign by campaign, but you're going to transform your people, your salespeople, to actually build relationship and implement your platform within bigger organizations and make sure that they're actually using that, right? So we're going to really transform to a Google meta type of...

So basically, we're going to go through an upgraded Salesforce. You may have less sellers, but more experienced, better sellers with deeper relationships.

Yeah, I mean, I think when you start to look at a platform sell versus kind of an I.O. by I.O., which was how historically media has been transacted, right, especially in some of the older businesses, it becomes a less transactional-based relationship. In those transactions, you need to basically resource, right, like kind of almost like a one-to-one relationship with each one of those buyers. In a larger kind of platform play, it's a one-to-many. So, you know, what I would say is, look, I think that's where we are now in this transition. We're moving towards kind of this, you know, in this evolution to get to that platform play. When we have it, right, when we're kind of organized and ready to push into the market, we do expect we're going to have better efficiencies, right, and better ratios in terms of, you know, what that revenue per head looks like. And then obviously we're all about, you know, which is, which is one of the cool things about the company. We're all about looking like, how do we invest in more growth? Right. So as we see the growth, we don't, we don't want to just kind of rest on our laurels. How do we invest for more? And so what are the different markets that we can get into?

So we have five minutes left. So just, we left, we kept searched till the very end. So Tal, I mean, I guess like the, the typical investor question is like, is there a certain point at which, you know, it's not worth keeping search, like you shut it down because it's just a distraction to manage. I guess, A, how much of it is that business a distraction to the advertising strategy, which is the future of the business? And look, it is generating cash flow, but is there just a point at which it's just not worth the organization's effort?

Yeah, well, I would imagine that maybe not in the next year or two, But at some point, maybe that will be the case. But for now, you know, it is generating $20 million, roughly a quarter. It's pretty stabilized. We're not putting any new investments in R&D on that product. So as long as we can continue to generate revenue through that, we're happy with that. It's not, it's not creative. It's not revenue.

It's as long as you can generate cash flow from it.

Right, right. So within that, as long as it keeps producing, you know, we're happy about it. It's not, we've actually built our new company, the new Perion, in a way that this is not a distraction.

So it's a completely side business, you know, effectively, if it got separated out tomorrow, it would have no impact on the organization. So, okay. So one question came through online. basically was asking about you know you're generating cash you know basically why keep so much cash on the balance sheet you know why not expand buybacks dividends you know at the current price because just mathematically buybacks are more accretive

than pretty much any acquisition you can do yeah no I so I think we're absolutely aligned I think You know, you saw that last quarter we accelerated our buyback. I think last quarter we actually bought buybacks pretty much at the same level of the amount of cash we're going to produce this year. And we've done this in one quarter, right? And we're not going to stop. We believe the stock, with everything we have going on, we believe the stock is not going to stay that cheap for so long. And that's why we're very bullish on continuing to buy it. At the same time, we do need the cash, some of the cash to continue to invest. You know, if we have big expectation of this, we are expecting to change a huge industry in a meaningful way. And that also involves investments.

Great. I think that's a perfect ending. Gentlemen, thank you very much for joining us today. If anyone has any more questions online, feel free to reach out to us. We can connect you with the company. So everyone, wherever you are, have a good rest of the day. Thanks, Jason. Thanks for having us.