Q4 2023 Taboola.com Ltd Earnings Call
Participants
Jessica Kourakos; VP of IR; Taboola.com Ltd.
Adam Singolda; Founder, Chief Executive Officer, Director; Taboola.com Ltd
Stephen Walker; CFO; Taboola.com Ltd.
Andrew Boone; Analyst; JMP Securities
Jason Helfstein; Analyst; Oppenheimer
Laura Martin; Analyst; Needham & Company
James Kopelman; Analyst; TD Cowen
Daniel Day; Analyst; B. Riley securities
Justin Patterson; Analyst; KeyBanc
Presentation
Operator
Good day and thank you for standing by, and welcome to the Golar Q1 excuse me, fourth quarter 2023 earnings conference call. (Operator Instructions)
Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Jethro, Jessica Kourakos. Please begin.
Jessica Kourakos
Thank you and good morning, everyone, and welcome to Dorel's Fourth Quarter and Fiscal 2023 earnings conference call. I'm here with Atomz and Golder towards Founder and CEO, and Steve Walker to bull as CFO Company issued earnings materials today before the market, and they are available in the Investors section of tubulars website.
Now I'll quickly cover the safe harbor. Certain statements today, including our expectations for future periods, are forward-looking statements that are not facts and are subject to material risks and uncertainties described in our SEC filings. These statements are based on currently available information, and we undertake no duty to update them except as required by law.
Today's discussion is also subject to the forward-looking statement. Limitations in the earnings press release and future events could differ materially and adversely from those anticipated during this call, we will use terms defined in the earnings release and refer to non-GAAP financial measures. For definitions and reconciliations to GAAP. Please refer to the non-GAAP tables in the earnings release posted on our website.
With that, I'll turn the call over to Adam.
Adam Singolda
Thanks, Jessica. Good morning, everyone, and thank you all for joining us. And before we talk about the business.
I want to start with a word about our people have always said that a company's true innovation, it's culture and people and I'm so proud of the tremendous resilience displayed by our nearly [$2,000] during the war in Israel.
The resilience is what's driving our progress in reaching new users, delivering engaging experiences in the Open Web, improving our effectiveness at monetization and driving yield. We have real momentum coming into this year and it shows in our Q4 results and strong 2024 financial guidance.
Turning first to our quarterly results. We had a strong end to 2023 Q4 X-Tack of $168.5 million, growing 6% versus 2023 Q4. Q4 adjusted EBITDA of $50.1 million, a significant beat to the high end of our guidance by $18 million, representing over 30% adjusted EBITDA margin.
Free cash flow in Q4 was $10.5 million, bringing our 2023 free cash flow to $52.2 million, representing 3X growth over 2022 as well as 50% conversion to EBITDA, which is our desired stated goal.
2024 is set to be a record year for tubular across all key measures. Revenue ex-TAC, gross profit, adjusted EBITDA and free cash flow.
On the revenue front, we're back to fast growth. Revenues growing 33% to nearly $2 billion this year. X-tack is growing 25% to $670 million. We are reiterating our adjusted EBITDA guidance of over $200 million, which is 2X 2023. And we are reiterating our free cash flow guidance of over $100 million, also nearly 2X of 2023.
On the business front, there's a lot of good momentum. 2024 is benefiting from fast adoption of our AI offerings and we assume yield expansion this year after two years of softness, Yahoo is ramping up already crossing the $100 million mark in Q1 with a great trust and collaboration between our teams.
Now since we signed the partnership with Yahoo. Many investors have asked us what is next, what will be the next Yahoo type partnership and I'm very, very happy to share that another iconic consumer brand has just chosen to belong as its partner of choice to help them grow their advertising business. I hope to share more about this very soon.
On the back of our business momentum, strong balance sheet and commitment to shareholder returns. We're announcing a new share buyback authorization of $100 million, which represents approximately 6% of our current market cap.
2023 was going to be an investment year for growth. We're investing more than $100 million a year in R&D and AI to bring users and advertisers the same amazing experience they have when they interact with search and social platforms every day, we're getting closer to the size of X, Pinterest, Snap and others in revenue and ad spend. And we're paving our way to becoming the very first must-buy platform for the open web.
As I reflect on our journey. 10 years ago, we generated just over $200 million in revenue. I remember it like it was yesterday and this year, 10 years later, we're approaching $2 billion.
Now looking ahead, I see two key themes that will allow us to achieve our financial transformation in 2024. The first one is reaching and engaging users in the open web with the addition of Yahoo. And now another iconic consumer brand, there's a lot of momentum here.
Second one is how well we can monetize our time with consumers, specifically growth in performance advertising and AI to drive yield.
Now let's expand into both of these areas, starting with how we reach users on the open web. We're seeing great momentum of publishers choosing to build on the back of our technology investments. We're so much more than just money to publishers as we empower the entire publisher organization, the editorial team, subscription team.
Audience team monetization team and more publisher win rates continue to improve with terrific new publisher partners joining to build a family from all around the globe, including a three 60 media posts media times Internet, not entertainment and more.
We renewed and expanded our scope with existing publishers, including NBC News, McClatchy editorial, Globo, Prisa winery and more in the industry. We're seeing a shift of great consumer companies getting into advertising in a bigger way.
This includes Disney, Amazon, Netflix, DoorDash over Walmart and more or to some advertising is already one of the most profitable lines of business they have. I expect that Fortune 500 CEOs will increasingly be asked to present their advertising strategy and that the advertising industry will get to become a trillion dollar market in years to come. This is just the beginning.
Now why I believe many of these companies were tried to sell directly to big brands. Many would consider partnering with a technology company like tubular to reach tens of thousands or hundreds of thousands of mid-funnel performance advertisers.
We have an opportunity to become the advertising engine of choice to the open web we collect advertising in a box, signing strategic partnerships with publishers and big consumer platforms, giftable another way to reach users and access new premium advertisers.
And we're seeing it already with Yahoo. As incredible brands are starting to spend. And these are the best of the best out there. Names like Samsung and Verizon, Hulu, Hilton Hotels, Southwest Airlines, Citibank and many others on the other front.
I can tell you we just had an executive off-site for the our leadership and we're focused on executing our plans this year and into 2025 our biggest priority is demand migration of Yahoo. Omnichannel advertisers. I'm happy to tell you we're seeing good results. And we recently shared the case study of large advertisers saying three times in lead volume at 24% lower cost?
Sure. Some of you have a good progress. We expect Q1 revenue to cross the $100 million in revenue, which is fast ramping beyond working with publishers. We also reach users as part of the news as we bring our publishers content to Android devices.
Popular news had a spectacular year in 2023 with revenue growing to over $100 million. It is still in early stages with a lot of work ahead of us yet. We expect another strong year for Timberland use in 2024. This is because device manufacturers all around the world continue to seek differentiated offerings to delight users with personalized experiences beyond publishers. Until the news, we're also reaching users with our header bidder.
We're continuing to take advantage of our direct demand, unique data and AI to build an inventory that is not exclusively ours. Microsoft continues to be our largest beta partner, and we expect to expand our scope across our network of publishers in 2024.
Microsoft made some changes to its Epic platform in Q4 that impacted all ad tech partners they work with, including us this had a single digit millions of dollars impact in Q4 and a small impact to 2024, which is already included in our guidance.
Now switching to the second driver of revenue growth, how we monetize time with consumers, essentially how we grow yield yield represents the revenue we can generate per user for comparison, we estimate meta mix $200 of revenue per user a year in the US Snap next $33, and we make about three to $4 per user a year?
Well, I think people as among the best in the Open Web, when it comes to monetizing user attention, you can imagine how much runway we have to improve and how much better the open web can do when we win the open web win.
Now the Open Web is about $80 billion market because it uses low yield monetization capabilities invented 30 years ago, such as display banners, text ads, interstitials and more. And on top of that, only in the open web advertisers are asked to bid using CPC or CPM, which companies like Google or meta don't do another three ways to build will grow yield.
First one is data. This is where current page being bigger and getting a large volume of clicks from the network makes us better at driving conversions to advertisers faster.
The second one is AI. Deep learning is really hard to do. We've been added for years and this is a key element as it relates to matchmaking between users to information. And the third one is advertisers. We have 15 to 20,000 advertisers as of now, while Google and meta have 10 million advertisers each bringing more advertisers mean better diversity and personalization to offer users the ad they may like we're seeing great momentum from Actimize conversions.
bOur advanced AI bidding technology, advertisers are seeing up to 50% boost in conversions while maintaining their cost per acquisition or CPA, as well as some advertisers are seeing reduced CPA by nearly 20%. Let's give an example.
If you sold 10 flower bouquets with Taboola and it cost you $30 to get a single customer, you can now sell the same 10 bouquets at a cost of $24 per customer or sell up to 15 bouquets at the same $30 cost to acquire that customer. Now that's selling a lot more flowers and saving more, which is great. Now as more advertisers adopt our AI.
And MAX conversions, we expect improved retentions essentially lower churns as well as increase in net dollar retention and DRs, which means advertisers are able to spend more with us over time.
In Q4, we launched generated AI ad maker, helping advertisers kickoff campaign faster for self-service advertisers. One in four new creative are being generated using our new generation of AI in 2024, we're focused on enhancing our data integration with Yahoo.
Continuing adoption and improvement to maximize conversions as well as launching a new maximize rollout optimization product called maximize revenue. Maximized revenue is a way for advertisers that have direct value associated with conversions like in the e-commerce space to optimize their desired return on investments.
I'm happy to say that with this momentum, we're already 50% of our revenue is driven by advertisers who adopted MAX conversions and our exciting roadmap were back to yield growth this year. Another segment of advertisers that is helping us drive yield growth and seeing momentum is e-commerce.
In 2023. We've benefited from the combined firepower of Connexity scheme links and Timberland. We launched turnkey commerce, which is where we partner with publishers to establish or expand their eCommerce business.
This is in high demand. We essentially create eCommerce content, drive traffic to it and monetize it all powered by Taboola. I'm very, very happy to say that at the end of 2023 we signed an agreement with the Associated Press one of the largest and most trusted news.
Publishers in the world to power its new e-commerce destination using Taboola turnkey content. E-commerce represents approximately 20% of X-Tack its premium revenue. And we continue to see it as an important growth driver for Taboola in years to come.
Now, as I'm wrapping up my part I would be remiss in not acknowledging that our industry is facing tectonic changes this year that cookie deprecation, JNI and the need for performance advertising in times of recession and market softness and we are so ready.
We have more current page than anyone. We understand intent with users clicking on Taboola tens of billions of times a year. And if history is a proxy for the future. We did well when Apple dedicated cookies.
In summary, we're coming in strong into 2024 with extending partnerships, fast revenue growth and a strong EBITDA and free cash flow profile. We're announcing a new $100 million buyback authorization. And after two years, if you had been soft, we're back to growth as our clients adopt AI faster than any product developed since I started to work.
With that, I'll pass the call over to Steve to review our financials and outlook in more detail.
Stephen Walker
Thanks, Adam, and good morning, everyone. As Adam mentioned, we had a strong end to 2023. Our Q4 revenues were approximately $420 million and grew 13% year over year, accelerating from Q3 levels. X-tack gross profit was $169 million, which represented growth of 6% year over year.
X-tack growth was driven by double digit growth in advertising spend and included a small contribution from Yahoo in the quarter. These positive factors were partially offset by margin compression due to the ad rate declines in 2022, which have since stabilized in 2023.
Net income was $3.7 million and non-GAAP net income was $31.4 million. Adjusted EBITDA was $50.1 million, representing a 30% adjusted EBITDA margin year over year. Adjusted EBITDA was down, which was due primarily to higher expenses related to the onboarding of Yahoo.
Supply that were not in the year-ago period. Operating expenses, excluding Yahoo, would have been relatively flat year over year, reflecting strong cost discipline in 2023, which we plan to continue into 2024. For the full year of 2023, we finished with over $1.4 billion in revenue, $536 million in X-Tack gross profit and $99 million in adjusted EBITDA, we had a net loss of $82 million and non-GAAP net income of $33 million.
We also generated $52 million of free cash flow in 2023, which was up 181% versus 2022. Free cash flow benefited from the stronger than forecasted adjusted EBITDA, which reflects the cost controls mentioned previously, partially offset by the expenses related to the onboarding of Yahoo.
Inventory in the period. Free cash flow in Q4 would have been even stronger, if not for the timing of some payables and capital expenditures that we mentioned were delayed last quarter. As Adam said, our strong revenue and X-Tack gross profit performance was driven by strength in our e-commerce, video and tubular news businesses as well as the initial contributions from Yahoo and relatively stable yields in our core business.
E-commerce had double digit growth in 2023, driven by strong growth in advertising budgets from some of our largest retail advertisers as well as strong momentum in Europe. In addition, we are seeing great success ramping to boost speeds and now Yahoo.
As supply sources for our retail advertisers. In fact, to bullet speed supply hasn't become a top 10 traffic source globally for these advertisers. As we have stated previously to bullet news grew very quickly and exceeded $100 million in revenues in 2023. In total, e-commerce Taboola news and header bidding now represent approximately 30% of our XTAC. gross profit.
This is exciting because each represents very valuable forms of supply that are valued by high quality advertisers. Our team, our teams have achieved accelerating revenue and X-Tack performance while improving cost efficiency indicated by our strong adjusted EBITDA margin.
Exiting 2023, operating expenses were $489 million in 2023, up $11 million year over year as a result of the costs incurred to onboard the significant inventory we are gaining with the addition of Yahoo. Excluding Yahoo.
As I mentioned earlier, operating expenses were essentially flat with the prior year. Our headcount is down approximately 2.5% from its peak in July of 2022, with our ongoing expense discipline and our strong growth expectations. We expect that in 2024, we will approach our long-term adjusted EBITDA margin target of 30%.
GAAP net loss for 2023 of $82 million included amortization of intangibles of $63.9 million, share-based compensation expenses of $53.7 million and hold back compensation expenses related to the Connexity acquisition of $10.6 million, all of which were excluded from non-GAAP net income. Our non-GAAP net income of $32.6 million was above the high end of our guidance range.
In terms of cash generation, we had approximately $84.4 million in operating cash flow in 2023 and free cash flow of $52.2 million. This includes net publisher prepayments, which were a source of cash of $19.7 million and interest payments on our long-term debt, which were a use of cash of $18.5 million.
As I have highlighted in previous quarters, I would note that net publisher prepayments were a source of cash for the full year due to the fact that new prepayments were lower than the amortization of historical prepayment.
Let's turn to the balance sheet. You can see that our net cash balance remains healthy. Our net cash position of $36.2 million remained positive at the end of Q4, even after share repurchases, cash and cash equivalents, plus our short-term investments decreased from $250.7 million at the end of Q3 to $181.8 million at the end of Q4.
This reflected a $50 million prepayment of our debt and $32 million used for share buyback activity in Q4, cash and cash equivalents and short-term investments remained above our debt principal balance of $142.2 million.
Speaking of our share repurchases, I would also like to provide an update on our share buyback and debt repayment programs. The share buyback program was initiated on June 1. And as of December 30th, we had repurchased over 15 million shares at an average price of $3.62 for a total repurchases of $55.1 million.
The average repurchase price of $3.62 represented a return of approximately 30% based on our closing price on Monday, today, we are also announcing a new share buyback authorization of $100 million that replaces our former buyback plan, which was largely exhausted.
We are fortunate enough to be able to fund our organic growth investments from our operating cash flow. Given that we believe that at current valuations, the best use of our free cash flow is to buy back shares to the extent that we have additional cash to deploy, we intend to pay down our long-term debt. We did this in October of 2023.
In fact, when we voluntarily prepaid, another $50 million of our long-term debt, bringing the total debt that we have voluntarily prepaid to $141 million. As always, both the share repurchase program and the debt paydown are contingent upon the availability of sufficient working capital as an Israeli company, we are also required to obtain Israeli court approval for share repurchases.
Also of note we will be filing a general purpose shelf in the coming days. We consider a good corporate hygiene for our company at our stage to have a general-purpose shelf on file given we believe our stock is a great value at current levels and have announced a new buyback authorization today. We obviously do not intend to issue new shares at this time.
I just wanted to make that make sure that was clear. Now let me shift to our forward looking guidance. As Adam mentioned earlier, in this last 12 months, we invested in technology that advanced our e-commerce and tubular news offerings successfully launched maximized conversions and onboarded all of Yahoo's global native supply.
Onto the two bullet network, 2023 was a year in which we invested heavily in these initiatives, sometimes in the advance in advance of revenue.
As we look ahead, we see the following tailwinds driving outsized growth in our business through 2025. First, we expect the Yahoo by advertiser migration to be materially complete by Q3 2024 and to continue ramping into 2025. Second, we expect yield growth to turn positive in 2020.
For third, we expect a phased onboarding of the supply from our new iconic consumer brand partner in 2024 and 2025 and lastly, we expect further yield gains over time as the volume of our contextual data increases with the addition of Yahoo and other supply to our network, which will further enhance yield as a result.
We are initiating guidance for 2024 that includes strong top line growth and improving profitability. We expect revenue of $1.89 billion to $1.94 billion, which represents growth of 33% at the midpoint, we expect gross profit of $535 million to $555 million and X-Tack gross profit of $656 million to $679 million. That ex tax is up roughly 25% year over year.
At the midpoint, we are reiterating our 2024 adjusted EBITDA guidance of over $200 million and free cash flow expectation of over $100 million. I will note that the adjusted EBITDA guidance represents a doubling of that metric versus 2023.
Finally, we are expecting non-GAAP net income of $84 million to $104 million in 2024 we continue to be very excited by the addition of Yahoo. To our business. Adam mentioned earlier, we feel good about the progress with Yahoo, and we expect revenue on Yahoo. To exceed $100 million in Q1 for competitive purposes.
And due to the fact that Yahoo supply has been fully integrated into our broader publisher network, we will treat disclosures around Yahoo. Similarly to how we treat other major publishers on our network on a going-forward basis.
Finally, we are introducing Q1 2024 guidance. This quarter, we expect revenues of $387 million to $413 million, gross profit of $94 million to $106 million. X-tack gross profit of $123 million to $135 million, adjusted EBITDA of $10 million to $17 million and non-GAAP net income of negative $15 million to negative $3 million.
Let me finish by saying that we are happy with our fourth quarter performance and excited about the step change growth that we are expecting in our business in 2024.
For the growth investments, we have made in 2023. The additional scale that Yahoo is bringing and the additional supply we will be onboarding as part of a new partnership with an iconic consumer brand is accelerating our journey towards becoming a must-buy for advertisers looking to reach consumers in the open web.
With that, let me pass it back to Adam for some closing remarks.
Adam Singolda
Thanks, Steve. I've never been more bullish about tubular, and I'm so proud of our people, our dedication, passion, making us a high performing company through the most difficult of times. We're coming strong into 2024, making it a record year for us.
Revenues growing 33% to $2 billion. X-tack is growing 25% to nearly $670 million EBITDA is doubling to over $200 million. Free cash flow is nearly doubling to over $100 million. And on the back of these numbers, we're announcing an authorization of $100 million of buyback, essentially looking to buy 6% of our Company.
As I mentioned, our industry is changing and with companies like Netflix and Disney, Uber, DoorDash Amazon and more expanding their advertising initiatives. I suspect we are the beginning of an exciting add menu, but as a chance of becoming the partner of choice to many of them.
As I said at the beginning of our call, in addition to Yahoo, I'm incredibly excited to have just signed another iconic consumer brand that validates two bullets advertising in a box value proposition. Our vision is to become the recommendation engine for the open web and build the very first multi-billion dollar gateway for advertisers to reach publishers.
OEMs and apps outside of walled gardens today. It's a good day for us. I'm excited to get 2024 going. So everyone, thank you for being part of our journey. And with that, let's open it up to questions. Operator?
Question and Answer Session
Operator
Thank you. (Operator Instructions)
Andrew Boone, JMP Securities. Your line is open.
Andrew Boone
Credit Thanks so much for taking my questions. Adam, as we think about yield improvements in 2024 and the inflection that you guys are expecting, can you just help us understand what the key drivers are as well as what are the products that are your key priorities in terms of improving yield over the next year?
And then I want to step back and talk about a big picture question for Yahoo. And Paula, if I go back and I think about 2022 pro forma revenue of kind of that $2.5 billion of gross revenue. Is that still on the table? Or is that still kind of the roadmap as we think about maybe 2025? Or what are the puts and takes as we think about kind of that benchmark? And thanks so much, guys.
Adam Singolda
Sure. Thanks. Thanks for the question and good morning, everyone. So on the yield front, there's a lot of going on. As you know, it's our number one investment as a company because we think this drive the most amount of value to our clients, our partners and to stimulate sales in a competitive way as we're adopting and going after new business.
So let me just dive in into that 2024. We're starting strong lead conversion already of course, in the 60% adoption.
As a quick reminder, next MX conversion is kind of our AI that allows clients and advertisers to work with us in a similar way to how they work with Google and Facebook, where they don't have to tell us what is the CPC. to win a bid or what are the CPMs and looking to to buy.
They just to give us their budgets at times they give us your target for what is worth what it would have declined fourth and redo the rest. It's the fastest adopted product has started to bottom, and it's really fantastic.
We're seeing great case studies not only from towards advertisers now also with Yelp advertisers migrating to the wireless technology and republishing those case studies because we're seeing advertisers that essentially either or able to spend more on new advertisers that are churning less and did a really good metrics for us to follow again in our flower examples on my letter.
But essentially, just from a numbers perspective, we're essentially seeing up to 50%, 50% boost in the amount of conversion at the same price. And in other times, we're seeing the same amount of conversions, but the price is being reduced by 20%.
These are serious numbers and also just from the client's perspective, the experience they have working with us, it's so much simpler and more easy to do when they have to do with the ad tech industry, which which I would argue one of the Achilles' heel of the ad tech industry is that we're still working with advertisers the way we used to work 30 years ago.
Whereby everyone around us are mainly platforms. Walled gardens has evolved to unionize. So I want by the end of this year, the vast majority of this business, as you know, approaching $2 billion to be using AINCPCCPN. to be a kind of a story from the past that what's coming next for us. I'm going to launch in H. two max revenue.
This is on top of next conversion. It's another sophisticated AI bidding strategy, allowing clients that know what is the price associated with a purchase to give us that margin and revenue goals they have and we optimize for that. This is going to launch in the second half of the year, which will be additive to next conversion.
Gen-i is continuing to get great adoption by self service. As you know, I love self service. This is an opportunity to get kind of introduced to great new clients that a lot of times, they come small, but they potentially become big and one in every four creative titles and some mills.
And these are selling open out there now already the industry's talking about video creation. So who knows where that goes, but 24 credit bridges with Gemini. And so that's been great. E-commerce is another source of bolstering our yield in 2024 you may have seen that I mentioned in the letter that Associated Press just chose to go to margin e-commerce business.
You all know, time.com and you know, advanced. I'm also working in e-commerce with turnkey and now AP. That was a new announcement today. And all of that is helping us to essentially attract new retailers and improve our basic basically weighted average yield across the network.
Then you add data integration. We're looking to expand our contextual data segments with Yahoo. That's something that I'm very excited about, especially on the back of kind of H. two cookie deprecation. So that's also going to compound our ability to drive yield.
And last but not least, more advertisers. So we're migrating advertisers from now. We expect that to the fully complete in two three. And these are the best the crème de la crème, best of the best you see others, Samsung and Citi and Verizon.
These are fantastic kind of enterprise advertisers, all of those things from the technology side, the data side and the client side, our compounding our yield expansion. And you mentioned also and I mentioned it on earlier my on my remarks that after three years of kind of softness in yield that, you know, all of us have experience in this industry to Villa.
We kind of assume that if nothing happens in the market, we will do better than the market. So we assume that the yield is back to growth in 2024. It's in our budget in our guidance. So we expect this initiative to two come to fruition.
Stephen Walker
And then to your second question, about a $1 billion opportunity with Yahoo. The simple answer on that is yes, we still believe there's more than $1 billion of value in that partnership is by the way, we did say that we expect to see $100 million in revenue from the supply in Q1.
So that's encouraging. That's a good step towards that. Advertisers will be fully migrated only in Q3. So that's also key to capturing the base value of the partnership. And then from there, what we expect is that the revenue will continue to grow as we capture synergies to get us to the full $1 billion value. So yes, at least, yes, we expect that it will happen over time.
Andrew Boone
Thank you so much.
Operator
Thank you.
Jason Helfstein, Oppenheimer. Your line is open for everybody.
Jason Helfstein
Just some clarification and then a question. So just to be clear. So the $100 million in Yahoo. That's not cumulative that's like for first quarter, correct?
Adam Singolda
Correct. That's $100 million on the on new supply, in my view changes.
Jason Helfstein
And then you said the fourth quarter obviously was a meaningfully below that. You're not giving a number. And but we have to guess just repeat the language, you said how much it was like the way you described in the fourth quarter when?
Adam Singolda
We said low tens of millions.
Jason Helfstein
Okay. So I mean, like zero kind of hit the elephant in the room here. I mean, you play around with the math that means it like the kind of and actually Yahoo. The business is accelerating, but like that's not really fair, right, because at the end of the day, you have a certain amount of advertiser demand.
There's different publishing sources, different yields you're trying to get. So just how should we all look, we're going to all kind of play with math over the next year to look at the kind of the with and without Yahoo. Impact, like how are you thinking about that?
Because, you know, I don't think you're describing the businesses like slowing down. So just how do you think about like the puts and takes around bringing that inventory and kind of like the yields you get out of that versus other inventory Emily, like should we be doing that math on the growth ex Yahoo? And then just one quick follow-up on identity and cookies.
Stephen Walker
Okay. So I'll take that first question, and it's a good question. So first of all, we're growing nearly $500 million in top line revenue this year. So 30%, 33% year over year. So obviously strong growth a good chunk of it is Yahoo, but not all of it as you observed. The complexity of that is that Yahoo. Comes with both supply and advertiser demand.
Some in the $100 million that we just talked about. That is q. one, and that's revenue on the Yahoo. Supply. And but it's a mix of tool advertisers and Yahoo advertisers. So where the top line growth comes from over time is also migrating the Yahoo advertisers over and growing our overall advertiser base.
Thanks to this really great high-quality supply we have. So in order to get full growth, we need to go there. That's Wave one and we expect to have the advertisers migrated by Q3. And then, as I mentioned before, in answer to Andrew's question, then Wave two is to start to grow the synergies to get to the full $1 billion of value.
So you are correct that it's not as simple as you know, you just bring over the supply and you're done, we have bring over the advertisers. And so it's more complex. So so that's kind of the way to think about it. And you're right, our core business is still growing. It's just that Yahoo. Will take time to get to the full ramp.
Jason Helfstein
And then just on identity, you've talked in the past that you're not dependent on cookies. And so folks should be less concerned about kind of where we go from here. However, there is going to be more identity metrics that obviously you're going to be adopted and come into the market on third third-party metrics. Can you use those metrics to drive kind of even more yield, even though you don't need to use identity theft?
Adam Singolda
Yes, I think I will take there. I think about it is from from a downside protection in terms of risk that companies might have, we believe the risk is mitigated for two reasons. One, we have the best when Apple definitely dedicated to cookies in 2020.
And we did we did well, in fact, have actually accelerated yield so that's good. And the second thing is that we have a large amount of first-party cookies today as we store. We reach 600 million people a day and people to click on a couple of tens of billions of times. So we think we have a good a good kind of setup for cookie deprecation.
So from the way, I think about it is we can do well and potentially even grow because again, in the past, other demand came to us when it couldn't find other channels. And we were a good channel to spend money on if there are if there's anything in the market that can accelerate that even further, we'll take it. I just don't personally, I feel comfortable because we don't need any new solution to do well.
I think we have written what we need to cross that bridge successfully to our publishers and advertisers. And again, just as a reminder, the vast majority, about 90% of our revenue comes from clients who buy from the biller direct Fanatics, no new agencies, which means that we have pixels on their pages.
So when someone moves from our publishers to their pages. We know we drove that conversion. So that's why we don't use third-party cookies to demonstrate value to clients as they buy from us and this is a fundamental point there is that there is potentially even further upside to yield, but the downside is mitigated.
Jason Helfstein
Thank you.
Operator
Thank you. One moment for the next question no.
Laura Martin, Needham & Company. Your line is open.
Laura Martin
And it's good morning again. My first one is on political. So globally, there's a really strong election cycle going on in 2024. And can you remind us how that impacts your impression growth in your readership and how that flows through to revenue in a political year appraisal. And I'll ask my second one.
Actually, that's alone.
Adam Singolda
Good morning, and thanks for the question. Hey, it's up. So we know what we're thinking about historically we did see some bumpiness in kind of demand coming on political season, but especially from video with some more kind of interest video demand in our guidance.
And we kind of like manage the business, we don't assume that it's coming. So we kind of want to be conservative in terms of what might happen. There's also potential acceleration in traffic because there's more viewership and things of that nature.
Again, we don't assume those things as a material kind of a financial benefit to us. But it historically we did see some nice bumps but again, nothing too significant that we would like to sort of embed in our planning.
Laura Martin
Okay. So that's an upside driver. It's not in the numbers, it's helpful. And by the way, they're talking about $17 billion of spending in the US alone. We think it might be a bigger political year that people when the near historical uplift during the second question I had for you, Adam, is I'm really curious, as you bring over these new types of advertisers that too bullish never had with Yahoo
Like Verizon and these big enterprise high-quality branding customers. Does that a I'm really interested in what kinds of challenges or what kinds of things they need that your historical advertisers have not? And secondly, does it give you a new new product idea when you think about the product roadmap, are there things these types of advertisers are asking for that could sort of if things develop them could really forever accelerate that trajectory of revenue growth optical, that's your point of view on that.
Adam Singolda
Yes, this is such a good question because we obviously this is a very new type of segments of clients that get introduced to boot up. Most of it right now is on the outside, right? Like we're filling that incredible kind of publisher with a mix of people and advertisers. But what we're seeing is, first of all, they really appreciate the technologies we can bring to the table.
So they're adopting MAX conversion into our pixels. And these are new things to them, and it allows us and our account managers to and I think a lot of account managers almost daily to see the graph and to see the trends.
And these are really good trends, both in terms of increase of budgets and performance as it relates to conversion rates and CPA. So it's early days. I know it's only $1 million. So it's still early days, but I'm seeing really good things and they're very happy. So these clients want to spend time with us and the IR team and this is all good beginning where.
I think it's going is this potentially will allow us to develop new formats and kind of new experiences that those clients are used to getting either historically from Yahoo or on other channels, I think that might open up a whole new way. Users would experience sponsored content and ads on its women network as well as in Yahoo over time.
So I would say stay tuned for a potential U.S. innovation in formats and experiences that those brand advertisers are looking for that we are yet to offer so I do think they might make us even better those clients.
And we're trying to, you know, we're trying to be humble and we're learning, we're asking questions and we're spending time with them. But I'm excited mainly by the performance. That's the most important thing.
But I but I'm I'm sensing they would like us to further develop the way we present ADS on the open web. And that might affect not only our relationship with young, but rather how we render ads across our entire network of Disney and NBC and the rest of our great partners.
Laura Martin
Thanks very much.
Operator
James Kopelman, TD Cowen. Your line is open.
James Kopelman
Good morning. Thanks for taking the questions. The first one is for Adam. In the letter you referenced the amount of contextual data that TiVo has for AI and deep learning. Can you talk about how you view bullish growing data set as a differentiator when it comes to training AI and leveraging generative NI over time? And then I have a follow-up for Steve Yes.
Adam Singolda
And so as it relates to just the amount of data we have, I think the most important thing and I can I speak a lot about becoming the must buy for the open web. And what I mean by that is it's a matter of how big is your actually gross revenue and your spend because this is a good proxy for how relying advertisers become a new because we're big enough that it's worth their time to spend money with you.
Because again, I think today the ad tech industry is a bit fragmented or to fragment for for advertisers to rely on you. And I'm looking at companies like Snapchat and Pinterest and X, it's in a $2 billion to $4 billion range. And now we're getting into that range. So I think first of all, the most important thing to become a must-buy is growing revenue and become, you know, get that flywheel going.
So that advertisers want to work with you and it's what's our time to the footprint. We have an accordion payable, as I would argue, is probably the largest in the opening level in the world. I don't know of any company that has a first-party relationship with publishers like double that at our size.
Which really gives us first party access to everything that takes place on the page from contact to scoring to clicks to purchase assets or things of that nature. And I think that's growing exponentially, obviously with Yahoo. So this is this is done.
I think one of the most important assets the Company has, which is covered on page exclusively for long term. And this is what gives us also predictability as a business to know that we don't expect any big shift one way or the other.
And then as we look into January, I think it's important to kind of reference what exactly is JI. Jenny, I can do to the market. Jni adventure is going to be a technology that is available to everyone what's going to make a difference from one company to the other is really the amount of data and the type of data you can prompt into the engine so you can get a better outcome. So as an example, when an advertiser comes to bill them and said, suggests some nails and titles.
For me, we are able to say, well, we've seen, let's say, let's take an example, an insurance client comfortable level to say, we've seen a $1 billion of insurance spend over the last few years, and we can pump that into the engine. And then we're getting really great kind of authenticating a authentic, a new original titles and Samuels we can suggest to the clients.
So I think what makes us special here is the amount of data we have our size and this is also why I love the our partnership. And as I mentioned in the letter, there's another iconic consumer brand that is signed and starting to have with us all of those will give us more data to come into the Gen-i.
And we have a senior person leading Jenny, I will announce and I can tell you we're working on very exciting things because I believe that the biggest opportunity JNI has to the advertising industry is to simplify the experience of buying it today is that it's very, very complicated to succeed I think, Jenny, I can make it really simple. So I'm so what's to come is our unique data into JNI, introducing special creatives that others don't have.
James Kopelman
And then for Steve high level, how should we think about the seasonality of growth of both gross revenue and expense in 2024, given the various moving parts around Yahoo. As a new unnamed publishing partner and your typical historical seasonality?
And then finally, just wanted to ask about OpEx efficiencies. What are some of the ways that you're able to limit head count increases this year, even as you scale?
Yes.
Stephen Walker
So in terms of the seasonality, so Yahoo is like a very large publisher in our traditional core business. So I think their seasonality is very similar to our historical pre Connexity seasonality. So that's so the way to think about adding them to our network as a company.
As you know, we've become more and more fourth quarter dominated because of our e-commerce business in particular. And this year, obviously, with the bringing on Yahoo over the course of the year, will be more back-half loaded than usual as well.
But generally, the way to think of seasonality with Yahoo is it's like a large publisher and they have very similar seasonality to other large publishers and they're number one or number two in news sports finance, and that is pretty much what the kind of core of our base is. So that's a way to think about seasonality in terms of OpEx and how we control headcount here?
Yes, I think we've shown pretty good cost discipline over the course of the last year. I mentioned in my prepared remarks that our OpEx for Q4 and in fact, for all of 2023 would have been flat year over year, except for the hiring that we did for Yahoo.
To support that, I would expect that our fourth quarter OpEx base, it's probably going to be similar to what it is the rest of this year. There may be a slight increase as a result of some additional hiring that we have to do for Yahoo.
But we're really working on kind of keeping a lid on costs and the way we do that as we find efficiencies and we find ways to leverage the people we have to do more. Frankly, we're using generative AI and other AI tools internally now to generate productivity and to improve things.
So for and a great example of that is exactly what Adam talked about. Historically, our account managers who support our advertisers used to spend a lot of time helping the advertiser figure out like what's a good headline, what's a good creative or image for this.
And now we have generative AI tools that help them do. It can generate a dozen of them instantly whereas they used to take a lot of thought and a lot of time to come up with a dozen. So it's not it's all about productivity, finding ways to leverage our people across more accounts. I think we're doing a pretty good job on that.
James Kopelman
Great. Thanks, guys. Appreciate all the color.
Adam Singolda
Thanks, James.
Operator
Thank you.
Daniel Day, B. Riley securities. Your line is open.
Daniel Day
Yes, morning, guys, and thanks for taking the questions on. So this iconic consumer brand that you've mentioned here and possible to say whether a traditional Open Web publisher that you typically partner with, but maybe on a bigger scale.
So do you feel like it's worth specifically calling out or and maybe like a new type of partner and thinking something like a retail media network or a company may be new to the advertising business or something along those lines? And then if there's any prepayment or anything else that could impact cash flow associated with some with this publisher win?
Yes.
Stephen Walker
And we can say the name, it's not a it's not a traditional publisher. So it's an iconic brand that have that signed rolling out with us. I don't think we can mention the name, but I hope we can mention that soon.
Daniel Day
Okay, great. So question, it seems like every week for since you last reported, we're hearing about layoffs at Open Web publishers. How much this industry is really struggling to survive for a lot of them and especially how they're struggling to generate traffic of search and social at anywhere near the levels they have in the past.
So given you're in part dependent on them generating traffic to their properties. How do you think about that as a headwind and opportunity for you to help them through these struggles?
Adam Singolda
Sorry, sorry, Daniel, I missed part of that question. Can you give to me again?
Yes.
Yes.
Daniel Day
Just generally like Open Web publishers struggling a lot of them going through layoffs, and I'm struggling to generate traffic to just how you think about your role as a as an ad tech partner here in helping them continue to generate traffic and what you can do there?
Stephen Walker
Sure. So I can take this one. Several were on our network. We're not seeing any any material impact today. And I think also many of our publishers are enterprise big publishers that have a lot of direct traffic. So something to date, we haven't seen any material impact.
And then also, I think this is an opportunity for us because the way we approach working with with publishers, it's really the most strategic level whereby you're able to use our homepage for you to drive home this personalization, we're able to use our e-commerce business to drive kind of diversification of revenue is subscription.
And we have Metro EI. and to help them kind of personalize a page watches with lens on it. And I think if you're a publisher, especially, you know, if you're a senior person on the publisher side or Senior Product Manager, when you think about who do you want to work with just want to make sure that you can work with companies that can drive audience growth because you're concerned about that going down.
You want to make sure we work with companies that can increase your engagement with consumers and then as well as collect your RPU or your lifetime value. So I think this is such an important differentiation we have I can tell you, I just had a call a week ago with a fairly big publisher and from the CEO and the CEO asked me, you know what a particular news or engagement is part of the deal.
And I said, well, of course, and instead what we have to work for a long time because we can just to put people on and off and and the entire composition was about added value. It wasn't about CPM. It wasn't about you know, you've talked about guarantees.
It wasn't much pressure. It was about other things. Publishers are thinking about so this is up to me such a fun part of my job as well as an exciting moment that publishers want to work with us because of the technology investments we made beyond just money.
Adam Singolda
So Daniel, just that certainly, it goes back to your first question about the iconic consumer brand. I checked with our PR folks, and we're allowed to say is we were selected by Apple as an official advertising partner for Canada and Australia at this point. So I think that's that's what we're allowed to say.
Daniel Day
Okay. Also that's good. To hear. Thanks, guys.
Operator
Thank you.
Justin Patterson, KeyBanc. Your line is open.
Justin Patterson
Great. Thanks for the question. I just wanted to up-level the conversation a little bit around these bigger brands that are opening up like Yahoo originally and now Apple in there, it seems like this is just a new opportunity for to move power, a lot more of these bigger brands.
I guess one just what's really changed around that? Was it just Yahoo. That opened U.S. dollar over the past year and then two, as you've gone through Yahoo. How should we think about just the incremental investment to support more of these brands and win more business and scale up over time.
Adam Singolda
Thank you. I'll start and you can do because I can't believe the CFO was able to bring the news about Apple than yesterday. And I know that, Steve, we're going to have to talk about this afterwards. But it's obviously we're very excited about apertures into this into this exciting market subject to your question.
I think to me what's fascinating is that you can already see companies like Amazon and others speaking about advertising being the second or third line of EBITDA they have. So the trend is that advertising is going to become a trillion-dollar market.
And I believe Board members of all Fortune 500 companies are going to Ester-C of what is our advertising strategy because it's too big and a few reach. Consumers cannot be ignored. Not only that to be a fantastic if not, what are the most lucrative growth engines for Fortune 500 companies are all around the world now.
I think the way it's going to it's going to pan out is that many of these great companies would want to sell directly to the top of the market. We want to do. We'd like to build relationship with enterprise accounts. However, there are two things that are would be missing.
One, it's unlikely you're going to sell to tens of thousands or hundreds of thousands performance, mid-funnel and advertisers. And the second thing is that it's unlikely they'll develop a technology that is able to use AI and data and matchmaker between users and ads in a way that works for advertisers to continue to buy.
And this is exactly, I think, portable and has an opportunity, which I'm very excited about. I mean, I never you never thought two years ago, we'll be in a position when we announced a $1 billion partnership with a great company like Yahoo.
And now steel stole my thunder but now Apple chose to boom. And I think this potentially can become an opportunity for the Company to kind of be this engine for, call it advertiser in a box for all these companies that say, well, we should get $1 billion or more from the advertising space.
So I'm excited about it. This is more than I ever thought will happen, but I do think it's a it's happening. And again, we're seeing exciting partnership with Pinterest with Yahoo. Netflix with Microsoft. This is really a whole new beginning, in my opinion, and I hope we can play a big, big part of it in terms of incremental upside.
Justin Patterson
No, go ahead. Sorry, Steve.
Stephen Walker
Yes, around in terms of incremental investment required to support these types of partnerships. I guess what I would say is the reason I think we're winning some of these great partnerships is because we have invested so much in our performance advertising capabilities and a young.
And while I think we have a long ways to go, I still consider us in the early innings here in terms of being great, we are world-class at it. And I think that's what helps us win these partnerships. Obviously, every partnership we do of significant scale has some unique requirements, Yahoo.
We're definitely learning from their ads average, Adam mentioned earlier, we're learning from their advertisers, things that they would like maybe they got some of it from Yahoo. Previously. Maybe there's new things. We're learning that week that they would like that.
They never got from Yahoo, but we could do so, yes, you always invest something in terms of building capabilities for any large partnership, but it's all part of kind of our core business, like, as Adam said, we're learning from these advertisers, things that they want, we're investing in, and that will impact and positively impact all of our business, not just that partnership. So while there's investment, it's basically just a way to advance your business and it's true of all of these partnerships that we're signing.
Justin Patterson
Got it. Thank you. Both And for what it's worth, I mean you still profit under there.
Adam Singolda
Thank you. Thank you, sir. Appreciate that. And we still will still get a review after this session.
I pass on.
Operator
Thank you. And this does conclude today's conference call. You may all disconnect.
