I’ve recently had the privilege of speaking with some incredible people from our investment firms at their globally recognized technology and media conferences — the 16th Annual Needham Virtual Technology & Media Conference and the Cowen 49th Annual Technology, Media & Telecom Conference.
In my conversations with both John Blackledge, Analyst, Cowen Inc., and Laura Martin, Analyst, Needham & Company, we covered some of the latest trends for media and advertising pioneers on the open web.
Below, I’ve chosen some of my favorite moments from those conversations, including why we believe e-Commerce is the future of the open web, news data that reveals market trends, and Taboola’s role in the industry’s future.
16th Annual Needham Virtual Technology & Media Conference
The 16th Annual Needham Virtual Technology & Media Conference featured presentations from over 350 public and private company management teams, one of which was Taboola.
Watch the Full Recording
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Laura:
One of the themes that I’m [..] hearing from my fireside chats this week is that there’s this convergence between display and e-commerce. Is it your view that more and more of the open web is going to be performance based […] like, “buy now” kind of buttons if there’s a signal there?
So, outside [of] search […] whether it’s CTV, or […] somebody is reading an article about cameras, and you can say, “buy – go to the Canon website,” or “go to the Nikon website”? What’s your point of view about that convergence?
Adam:
First of all, I definitely think […] that performance advertising is the leading vehicle for the advertising category. And by the way, we saw a lot of it in the pandemic, right? If you [have] reach, and you are great [at] driving performance for advertisers, you are the Oracle, and people came to you and said, can you help us drive growth when we can’t open [our] store, when we can’t sell products that we used to? So actually, last year was a great proxy for those who chose performance early on […] and those who didn’t, because we saw brand advertising slowing down during 2020. So, I think performance advertising is already the leading part of the open web. It’s the leading part of all advertising. So it’s a very important part of it.
The question is, or to your question, will that be diversified more towards e-Commerce versus just direct-to-consumer and other forms of advertising? I think so. I think that, especially as we’re seeing the privacy trends, and how context is becoming the Queen again, I think that we’ll see more and more e-Commerce companies taking advantage of that signal to be able to offer me a product I may like. If you think about even the comparison between the open web to social networks, what do you really tell Facebook about yourselves. You tell them what you want them to know, or what we want people to know about yourself. You will never tell Facebook things that you really like to do. But you read about [them] all the time. I’m never going to tell Facebook things that I’m concerned about, or my passion projects, I don’t want people to see it.
So, I tell Facebook, the things I hope people think of me, but the things I really want to do. I read about them all the time. And you’ve all seen this moment, you’re in bed, reading about stuff, you wake up early to get educated about products. And that’s whenTaboola sees you. And that’s when advertisers want to meet you. It’s that curiosity moment, not social moment. So there’s no social dilemma for the open web, […] so, I do think we’ll see more e-Commerce coming in. I think context is going to be fantastic for the future of the internet and open web specifically, which is why I’m also optimistic.
Laura:
It does sound like you’re going to try to integrate. […] That’s going to be a macro trend that you’re going to integrate more e-Commerce into your feeds, and into your business models, right?
Adam:
Yeah, I really like [e-Commerce]. I really liked what Instagram did with e-commerce, and how they are bringing merchants into that social feed experience. Look, the average person spends about 50 minutes a day scrolling in America. Why wouldn’t they go to CNBC? Great websites [like] CBS, Bloomberg, ESPN […] have a similar great feed experience, so they can spend 10s or minutes. But in those moments, if they’re used to buying things on Instagram, I want them to be able to do similar things, and even supercharge that in the open web, when we have that contextual signal. So, I do think we’ll see a lot more in e-Commerce. In fact, I think many publishers will become e-Commerce companies over time.
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Laura:
This issue of cookies, like post-cookies. In a post-cookies world does the open web actually survive? The Google, third-party cookie [is] going away. So, why don’t you speak to that next, like is there going to be an open web in three years?
Adam:
Yes.
Laura:
And why?
Adam:
I’ll give you what we see from Taboola, and then what I think about broadly. So overall […] we’re talking about a safer internet, which at the end of the day, it’s [the] right objective. Like we’re talking about an internet that has privacy more [at] the forefront of it, which I think is a good thing. The fact that my mom speaks to me about privacy is a great conversation, because it means there’s enough education now built into people’s mind[s] as they surf the internet. So, I think, fundamentally, we have the right goal, which is to make the internet safer, [and] feel better for people.
I think from [a] Taboola perspective, we’ve navigated the last few years, as third-party cookie[s] became less common, and things of that nature, and our yield went up. […] We’ve grown tremendously during that time, and that is because again, we don’t really rely on third-party cookies from a revenue perspective. So, most of our revenue is not retargeting or third-party cookie related. […] Native applications […] affect us [less], because it’s a small portion of our revenue. [..] Then ,we have our own first party cookie. Because Taboola has the editorial recommendation system, not just buying inventory and putting an ad inside of it, it means I’m interacting with you, as you’re just discovered the next thing to read on NBC Sports.
So that gives us this first-party relationship, which is valuable to us. […] We feel comfortable, as this continues, even potentially, as an upside, that we will become even more important to our publishers and advertisers, as we invest in this new version of the internet. […] For the category, if you go back 10 years ago, if you remember, when flash died, when Adobe Flash kind of start[ed] getting out of style, we were all freaking out, everything was Flash, video was Flash, banners [were] Flash, everything was Flash. And we didn’t know how the internet [was] going to look […] but it was the right objective. […] HTML5 replaced Flash, and became faster, safer for consumers. […] Now, who even remembers what Flash was, right?
I probably look old now that I even [spoke] about Flash, but I remember that a lot as a kid, that’s what we did. So, we developed code with Flash […]. That’s what we used to do. [..] I think […] we’re going to see maybe a similar HTML5 trend, whereby today, [with] no cookies, third-party cookies, how it’s going to work out. I think because we’re doing it for the right reason[s], I suspect we’ll see different tools, different sets of options to drive revenue growth. So, I am optimistic about where it’s going. And I think we’ll see more focus on the right stuff, context, first-party, advertisers success, all those good things.
Laura:
Okay. And then is it your point of view, Adam, that when we look back five years from now, the open internet will it continue to thrive, or do you think the walled gardens continue to take share out of the open internet [and] that all of digital grows 10% to 12%, but the walled gardens creep up in value, in total share, what’s your point?
Adam:
I think [the] open web is strong, and has a great opportunity to continue to grow. I also am optimistic about […] things like Apple News. [When] you’re seeing a company like Apple that integrates news on every iPhone, it means Apple thinks news matter[s]. Right, it means they think [the] open web matters, which means they will send traffic to the open web. I don’t think this is the end of it. We’re going to see a lot of different great companies like Apple, integrating the open web into their services, because it makes them better, which means the open web will become even more important. So, I’m optimistic from that […], the dynamics we’re seeing. I like that I see great companies like Apple that [are] very successful taking such a big bet under Eddy Cue on services. And one of these big services is us. It’s me, it’s the open web.
So I’m optimistic, I think, we’ll see a lot more of it. And in five years when you and I look back, we’re going to be like, [it was] obvious that when you buy a Tesla, you have Squawk Box in your Tesla, it’s obvious. […] And your fridge will recommend you articles to read about how to cook something for Shabbat dinner, so all of that will become normal, I think to us in the future.
Cowen 49th Annual Technology, Media & Telecom Conference
This three-day conference consisted of fireside chats and presentations with C-Suite presenters hosted by Cowen research analysts, one of which was my conversation with John.
Watch the Full Recording
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John:
Can you talk about Taboola’s role in developing the fast-growing open web and discuss why it’s important for consumers to have a choice between walled gardens and open web recommendations? And what are the different types of sites and apps [on] the open web?
Adam:
Sure. […] Let’s define Taboola’s role. We power recommendations for the open web. [The] open web is everything we all love to use all the time outside of […] walled garden[s]. Walled garden[s] [are] Google, Facebook, Amazon and […] every website [that] will have an app i[on] our phone, [or] an app on connected TV. All of those things exist in the open web. The open web is a big market. It’s a $60 billion market. It’s growing 10% to 15% a year, but it’s super fragmented. There’s no Shopify for advertising [on] the open web.
There is no one company that gives advertisers sure scale [on] the open web like they get on Google and Facebook and so forth. And also funny enough, most of the open web is still using banners that were invented 27 years ago. [A] banner is that cube you see on a webpage that you rarely click on, and sometimes […] you click on it […] by mistake, but that’s actually most of the $60 billion. So there is a huge opportunity to […] transform or reinvent the internet as we know it, [to] look like WeChat, Instagram, TikTok, a fate of beautiful recommendations that are both editorial to things we like, as well as including paid recommendations by advertisers. So that’s […] the category in our mission statement.
To your question of why I think it’s super important [on] the open web, I think it’s important to all of us. It’s important to us as people, publishers, advertisers, small businesses to you John, to me. We all want a free [and] diverse internet, giving voice to people. It’s the reason we all fell in love with the internet to begin with. I think advertisers want diversity. They don’t want to be relying on any one company. And also I think the open web gives advertisers this curiosity graph. Facebook, we tell Facebook who we want to be, but you will never share with Facebook things we really care about, health care concerns, things about our kids, but we will read about it all the time and we’ve all been there. You just scroll on your phone at night. You wake up early to read about something, and that’s when advertisers see […] the open web and […] Taboola. And I think that [they] really appreciate that moment in time. So for those reasons, [the] open web is great for the entire industry.
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John:
You referenced the technology AI. Can you talk about Taboola’s proprietary technology and AI that is powering the recommendation engine, and […] what type of investments are you making to meet the rapidly scaling demand for information on the web, on the open web?
Adam:
I think recommending things to people is really hard. We tell Google what we want. We tell Facebook who we are. Enabling discovery [at] that moment of next when people want you to do something without you knowing them, or what they want, is […] a huge technological challenge, which we’ve been investing 13 years […]. It’s kind of like, [these] Amazon people who bought this also bought that. […] I mean Amazon is really a recommendation company for e-Commerce. The entire homepage is just suggestions for me, and I use it all the time. So this is really the concept of how difficult that is, and then to do it for the entire internet. And we’ve spent 13 years building machine learning technology. About four years ago, we transformed our tech stack from machine learning to deep learning.
In simple terms, machine learning is when you define a certain parameter ahead of time, and then you follow those parameters and [try] to predict something, deep learning is way more advanced. It’s really a revolution like the invention of electricity. […] It’s so advanced in the sense that it’s trying to figure out, “what are the parameters?” without [you] telling the machine what [they] are […], so they’re trying to make basic […] behavioral predictions in a way more accurate way, and it self-learns. […] It’s [a] way less manual process and that’s really an amazing revolution in technology. I spoke about it and I wrote about it in Morton School. […] I wrote an article called the difference between machine learning ML, deep learning DL and bullshit BS.
[…] It’s just because there’s like so much – it’s so difficult to do and so rare to see it you realize, but we’re hard at work trying to invest in that. It also needs a lot of scale, which we spoke [about] earlier. We reach […] half a billion people a day. We processed one petabyte of data every day. We [got] 30 billion clicks in 2020, half of them were on editorial content and then half of them were about paid recommendations. We invested so far in about 8,000 servers. So to summarize, I think it’s really hard, and it takes a lot of scale to do it. And Taboola is just at the beginning. There’s so much more for us to do.
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John:
This has been something that’s been going on in the advertising space for the last year, the IDFA, the Apple change IDFA, we cover Facebook and Snap and some of the platforms that investors have been concerned about the impact that change would have. So could you talk about how you guys are navigating through that, and also, […] other related […] privacy issues that you have to navigate through?
Adam:
[…] First of all, I think categorically, we’re seeing Apple, Google, Microsoft working, and others are working on making the open web safer. And I think it’s a good thing. […] When I talked to my mom this morning, I’m not sure she underst[ood] all the bad behavior that exists out there. […] I think my family and my mom should be safe and protected. So overall, I like a better, safer future for everyone. […] I think all of us in the industry should participate in that direction. So overall […] I’ll start by saying that for Taboola, we feel comfortable navigating […] privacy dynamics for [a] few reasons.
[…] If you look at last year at $1.2 billion in revenue, the revenue […] we have that is associated with third-party revenue, a third-party cookie, it’s independent of those […] dollars, so [a] very small portion of revenue. We reach about 0.5 billion people [a] day, [and] we have first-party cookie[s] with those consumers, which allows us to know they’re the same people when they come back [to] the same site.
[…] Then we have this Amazon curiosity graph, the data we create and capture whereby if we see someone that reads about news on […] certain websites from New York City in the morning from their iPhone, we get to see what decisions they make, and that model and that curiosity graph is relevant for when we see someone else on a different site. Just by saying, people in New York City, from the West Village in the morning on a financial website, [read] about furniture, really liked to do one, two or three.
[…] This is something that, like I said, […] similar to the Amazon people who buy this, also [buy] that. […] All of those things allowed us to navigate the past, right? […] We’ve been living without cookies actually for a long time from 2017, if you think about it. So the past is a proxy for the future, we feel comfortable. […] I will also say that if you’ve been here – I’ve been here, but if you’ve been here 10 years ago or so when Flash died, you remember when Flash, we used to have […] Flash online, Flash video players and Flash banners, and Flash was a thing, and that died. [There] was this huge concern about what [was] going to happen, and then HTML5 came and replaced it. […] It was just a better, faster, safer, more secure implementation of the same thing. So from my perspective, I believe we’re going to see something similar. We’re going to see a better, safer, faster implementation of […] better advertising in the future.