Q3 2022 System1 Inc Earnings Call
Thanks Kyle.
Afternoon, everyone and thank you for joining us for our Q3 earnings call together with me is treated could dombey system ones longtime CFO .
Before we dive into our business performance I wanted to give a quick recap of our year to date.
In January our entry into the public markets was an exciting time for system one with.
We joined forces with the excellent team of protected and the first half of the year, we got off to the start we expected.
EBIT as much of the technology market has started to decline our advertising and subscription businesses, we're exceeding our already high expectations.
Our performance through June gave us the confidence that 2022 was going to be another banner growth year for system one.
Okay.
In hindsight, we probably should have been a bit more guarded.
Since January the NASDAQ is down more than 30% in technology stocks in particular, we've had a rough 2022.
We've also seen some difficult macroeconomic conditions that are affecting the digital advertising market and see what we operate in.
These conditions have made our early life as a public company bumpier than we hoped and expected when we went public.
It's not easy to ignore the outside noise, but our team is staying heads down focused on the business and plain for the longer term.
We are disappointed with how the back half of 2022 is looking but we all sort of weathering the storm of a difficult market.
Let's get onto our quarterly update.
On the operating front, we continue to focus on our priorities that will enable us to significantly scale over the next few years.
In Q3, we made we made considerable progress upgrading our ramp platform launching new subscription products integrating recent acquisitions and pushing into new marketing areas.
Some of these efforts, particularly our increased marketing as we scale new subscription products have had a negative effect on our short term financials.
However, we are confident these shorter term investments will pay off many multiples overtime.
So let's talk about our investment in ramp specifically.
As we mentioned last quarter for most of the year upwards of 25% of our product and engineering teams have been working on our next generation ramp platform.
We made significant progress in our new platform is faster better and more efficient.
Increased automation will enable us to keep scaling our business without adding significant head count.
Faster performance accelerates our international expansion in particular.
And advanced machine learning improves the overall performance of our platform, we began migrating over to our new platform during Q3.
As we migrate advertising traffic, we also keep suntrap Ike on our legacy platform to maintain a direct head to head comparison.
Our data shows we are seeing a material monetization lift in certain areas and some cases well over double digit percentages.
The lift comes from two primary areas faster speed and better monetization algorithms.
As we move more traffic to the platform and further optimize our algorithms we expect to see continued improvements.
It was a very difficult decision to focus so much of our 2022 product and engineering efforts on the longer term initiatives.
Particularly during a year in which we went public.
So we believe we have made the right decision.
We have also continued to make good progress integrating our road warrior coupon and follow and answers dotcom recent acquisitions Coupe.
Coupons follow officially launch our new Cashback shopping program across all participating merchants.
And we continue to work on integrating coupon data across our network of owned and operated properties.
For road Warrior and answers Dot com, we are focused on increasing paid traffic and delivering on our acquisition thesis by significantly increasing growth from marketing efforts.
Our efforts on both properties are starting to show promise and answers dot com in particular is approaching a 10 million dollar revenue run rate and Thats up from almost zero at the time of the acquisition.
So moving on to our financials Q3 was a tale of two cities.
In our subscription business, we have positive news to report.
As we discussed during our Q2 earnings call headwinds in the overall digital advertising market and provided an opportunity to acquire additional new subscribers to our owned and operated subscription products.
This translates to an increase in new subscribers across our product suite.
Added 338000, new subscribers in Q3 at an average Cta in the mid $60 range and for the third consecutive quarter, we added more than 100000, new subscribers for our newer total our block product.
At current growth rates total our block is on its way to being another $1 million plus subscriber flagship product for us.
We also launched a new mobile utility applications speedy clean in Q3, consistent with our plan of launching new products on a regular cadence.
We're bullish on these opportunities to continue to add meaningful numbers of new subscribers.
With our accelerated customer acquisition also comes increased in quarter marketing expenses are.
Q3, marketing spend was $22 million versus versus an estimated 19 million when we reported in August .
We expect that trend to continue in Q Q4, while this will result in a hit to 2022 EBITDA will also translate into increased twenty-three EBITDA as these subscribers renew.
This is an important dynamic for our investors to understand we often will have quarters, where we spend more on marketing than anticipated due to increased opportunity to acquire customers.
Each time, we do this you should expect a reduction in near term EBITDA with a corresponding increase in our future EBITDA performance.
The subscription team continues to be focused on activating new customer acquisition channels, launching new products and increasing retention across our renewing customer base.
I remain excited about our near term and long term opportunities in this segment.
And our advertising business.
Our story is not so rosy.
When we last reported earnings in August we thought we saw glimmers of a turnaround heading into the fall.
Unfortunately advertising has continued to be negatively impacted by macroeconomic trends that we communicated last quarter.
These trends continued into Q3 and in some cases accelerated since our last investor call.
The headwinds are impacting consumer demand and our ability to acquire traffic on our buy side and lowering monetization rates on the sell side.
This combination is putting pressure on our ability to scale our marketing spend.
On a positive note we were able to increase our margin per session from 35 up to 38% quarter over quarter.
This points to the ability of ramp to maintain our spread and uneven economic cycles.
However, in our owned and operated business the amount of overall advertising spend we have been able to put to work is down substantially from our Q3 and Q4 budget.
This has been driven by lower overall consumer demand as well as a decrease in the amount of revenue we generate each session.
As our advertising gross profit is largely driven by our marketing spend our advertising gross profit is coming in substantially under budget.
Our partner network has also been impacted by these same trends and the momentum we saw in this segment exiting Q2 has slowed somewhat.
<unk> is going to walk you through the specifics of our lower advertising spend and lower revenue per session.
Overall, we remain bullish on our business model and the growth opportunities, we see across our different businesses.
System, one remains highly profitable and our long term strategy to invest during a forecasted economic downturn has not changed.
Now let me be clear.
We are very disappointed in the underperformance of our advertising business in the back half of this year.
We recognize that the macro environment remains choppy and we are very focused on our cost structure and operating efficiencies.
We expect minimal opex increases in 2023 and growth is going to come from realizing our investments in our technology <unk>.
Expanding our current advertising markets.
Continuing to push on international expansion and scaling our subscription products.
We know our recent performance has not met the expectations of our new public shareholders.
Management shares your pain as we own over 50% of system, one and much of our net worth is in system one stock.
We remain highly aligned with our public shareholders.
Now, while we have not had the 2022 growth that we expected our business is continuing to show its resilience.
We're generating substantial cash flow and difficult market conditions, and our and our management team knows how to navigate through these economic headwinds.
While we are watching expenses very closely we also will continue to invest in our ramp platform and our customer acquisition initiatives.
In the past this strategy has paid off and we are confident history will repeat itself.
Now we are confident in our long term success, we can't control the macro environment and I can't predict where our share price will be next week or next month.
As we said last quarter, we have begun our announced corporate stock buyback and I personally plan to be a buyer of our stock at these levels.
I'll now hand things off to treaty to discuss this quarter's results and our updated guidance.
It away Treaty.
Thanks, Michael.
As previously mentioned the headwinds we saw early in Q3 have persisted significantly longer than we had hoped which has impacted our results versus guidance.
However, given the investments we have made thus far and the progress we've made with our ramp migration, we feel we're in a strong position to grow significantly when the advertising markets rebound.
One quick note as I talk about year over year results for the prior year I will be combining the results of system, one and protected for 2021 periods to provide an apples to apples comparison of our results.
Let's move on to Q3 results.
Revenue was $201 million as compared to $210 million last year, a 4% year over year decrease there year over year decrease was driven by owned and operated advertising, which was down 10%, partially offset by an increase in network revenue of 13% and an increase in subscription revenue of 16%.
Adjusted gross profit was $63 million, an increase of 9% compared to last year's adjusted gross profit of $58 million.
Revenue less advertising spend for the owned and operated advertising segment grew approximately 12%.
13% for the partner network segment, and 5% for the subscription segment.
Revenue and adjusted profit were lower than expected for the owned and operated advertising segments in our previous guidance, we have forecasted spending approximately $115 million in advertising during the quarter.
However, as a result of reduced consumer demand and specifically less available user sessions for us to acquire we only deploy $106 million of advertising spend.
Reflective of lower at lower overall advertiser demand, we saw revenue per session at 14th.
Down <unk> <unk> sequentially and down five <unk> year over year. Similarly, our acquisition cost recession was 10.
Also down <unk>, <unk> sequentially and down <unk> <unk> year over year.
Even in this environment ramps still identified and acquired over 1 billion sessions to our owned and operated advertising properties in the quarter, reflecting a 25% increase year over year.
Revenue and adjusted gross profit in our network advertising business was down quarter over quarter impacted by the same headwinds we saw with our owned and operated advertising business.
Year over year revenue was up 13% and network sessions were up 31% over the same period we.
We saw 364 million sessions on our platform and 8% quarter over quarter increase but revenue per session was down 30% quarter over quarter from four to three.
These trends and costs and monetization precession across both our owned and operated and partner network advertising businesses are in line with the softness recorded by Google One of our key monetization partners and their partner network business.
Conversely, our subscription business performed well.
With revenue up 16%.
We continue to benefit from the shift to renewing customers and our ability to retain and upsell at the large total and total Avi user base subscriber <unk> was $19 40 in the quarter versus $17 13 last year total subscribers were flat quarter over quarter as we saw increased churn as we anniversaried renewal terms or subscribe.
<unk> acquired during Q2 of 2020 in 2021, which repeat pandemic periods.
Subscribers were up 4% year over year.
The challenged advertiser macro environment gave us an opportunity to deploy more advertising spend and forecasted at attractive cost to acquire metrics. We spent close to $22 million on subscription customer acquisition marketing in the quarter versus our guidance forecast of approximately $19 million, which represented a $5 million increase in marketing spend year over year.
As we have discussed in the past given the attractive payback characteristics of our subscribers less than one year and overall LTV to CAC ratio of around three X. We generally will make the tradeoff to invest short term gross profit in exchange for future highly profitable cash flows from customer renewals.
With respect to FX exposure, while our advertising business, including our international business, primarily transaction in U S. Dollars. We do have some FX exposure on the subscription side as we acquire and build customers in their local currency in the third quarter the impact of FX rate changes was a negative 450000.
Adjusted gross profit and adjusted EBITDA.
Operating expenses net of add backs were $34 million for the third quarter of 2022 compared to $21 million last year the.
The year over year increase is reflective of our continued investment and ramp primarily via head count and increased Opex as a result of public company costs and costs assuming from acquired businesses.
That being said going forward, we do not expect to see material increases in head count or other operating expenses in 2023 over our current trajectory instead, we expect to generate operating leverage as we align our existing resources around our biggest growth opportunities.
Adjusted EBITDA was $29 million versus $37 million last year, representing a 46% margin on gross profit.
With respect to liquidity, we ended the quarter with $32 million of cash on the balance sheet gross debt was $439 million, which includes a $49 million revolver balance.
To finance the coupon follow acquisition.
As of September 30th LTM Billings based EBITDA as defined by our credit facility was $148 million, resulting in a net leverage ratio of 275 times.
Now onto Q4 guidance our guidance assumes that the current macro environment will continue throughout Q4, which will continue to negatively impact our ability to scale advertising spend.
We expect some tailwind for seasonality, but given current market conditions. We believe it is prudent to be conservative with our projections.
Additionally, we are seeing several pockets of new subscriber growth in our subscription business that we will continue to pursue.
While we view this very positively at the short term effect of increased marketing spend in the current period impacts Q4 adjusted gross profit.
We are estimating Q4 revenue to come in between $178 million and $193 million, representing an 8% sequential decline at the midpoint.
For the full year, we expect revenue to be basically flat year over year.
We are estimating Q4, adjusted gross profit to come in between $57 5 million and $62 5 million, representing a 6% decline from the Q from Q3 at the midpoint for.
For the year, we expect adjusted gross profit to grow 21% year over year.
We are estimating Q4, adjusted EBITDA to come in between $24 5 million and $29 5 million, representing an 8% sequential decline at the midpoint for.
For 2022, we expect EBITDA to be flat year over year.
As part of our guidance, we are assuming that we will deploy approximately $100 million of advertising spend to acquire traffic to our owned and operated sites at.
At a spread of approximately 40%.
Slightly higher than what we saw in Q3.
For our network advertising business, we are assuming approximately 350 million network sessions with monetization of <unk> session in line with Q3.
We're also expecting to spend approximately $24 million in customer acquisition for our owned and operated subscription products.
<unk> taken an average of 4000 daily sales on an average Cta is $65 a user.
Last quarter, we announced that our board of directors approved a repurchase program for both shares and public warrants of up to $25 million.
To date, we've purchased 190000 shares at a cost of $1 1 million, which leaves us with $23 $9 million remaining on the initial authorization.
Along with paying down the revolver, we will continue to evaluate the repurchase program as a use of capital for the balance of the year.
Yeah.
While our recent financial performance has been negatively impacted by market conditions, we have a proven business model with a track record of performing through volatility.
In the short term, we will continue to streamline our cost structure, while investing in and deploying our resources against our most compelling opportunities.
We have been prudent stewards of capital and we historically and we expect to be able to continue delivering adjusted EBITDA operating cash flow and margin expansion in the short term.
Without compromising our future success.
Thank you for joining us today and now let's go to questions.
Thank you Trudi will now go to line of Q&A. My first question is from Tom Forte with D. A Davidson Tom go ahead with your question.
Great. So thanks for all the details.
I'm going to start with what I think is probably like a silver lining type question.
Historically strategic M&A has been one thing you've done very well I would imagine that there's a lot of attractively priced opportunities today.
Can you talk about how you think about the landscape for potential strategic M&A.
Yes sure. Thanks for joining Tom Yes, so we're continuing to be out there in the market looking at looking at opportunities.
We're seeing a lot of interesting things, we don't have anything to report now. We're also trying to be very disciplined as we always have and we're really waiting for pricing to adjust a little bit in the M&A market. We haven't seen that just yet I think the last.
Three to five months have been a little bit of a shock to the system and the digital advertising markets that we play in and as.
As we're going out and looking for companies to acquire.
Haven't they haven't yet.
Hi.
Come around to the pricing and everything is more reasonable in this market.
It'll happen time.
Alright, and then for my follow up.
I'd like to thank a lot about how when the pandemic first started in April of 2000, and digital advertising went negative.
Then when we realized that the economy was holding up reasonably well a digital advertising rebounded very significantly.
So.
How should we think about the things that you are monitoring when looking for a rebound in digital advertising and then.
Now.
Quickly.
Rebound hit your performance.
Yeah sure. So if you go back to Covid was probably the last big shift we saw in digital digital advertising that happened almost overnight.
And.
Our system adjusted adjusted I would say down so we lowered pricing as cost per revenue per session goes down.
And then as it rebounded I don't know if people people can go back a couple of years to nine years ago seems rebounded pretty quickly and then our system snap out really quickly as well same thing will happen. This time. This is actually a little bit more of a sustained.
We'd say leveling off.
And digital advertising than we saw at the start of Covid.
At that point in 2020 things snap back pretty quickly.
Right now we're seeing is things have essentially leveled off more than we would've expected and particularly in Q3 and Q4, which is where typically we would expect the markets to start ripping upwards pretty quickly.
As youre heading into the holiday buying season, we just haven't seen that yet.
The holiday shopping we will for sure be kicking in a little bit more more strongly here around the Thanksgiving and we hope to see an uptick then but we haven't seen the expected moves in the markets that we've seen really the past 10 years, we've been in operation.
Thank you and then my last question is.
Wanted to know if there's anything interesting happening on a category basis.
So it seems like.
Travel in particular has been very strong.
The beauty of your models you are well diversified.
Overdependent on financial services with mortgages being more difficult things like that but is there anything interesting going on in the category basis.
What categories are helping and what categories might be hurting you.
Yeah for sure. So some of the larger categories that are that are pretty profitable for us like finance.
Job, So general health category, those have been a little bit negatively impacted.
And Youre seeing that show up in some of our marketing numbers.
Other categories like travel is up substantially year over year auto has I think flat flat to slightly up so we haven't really seen auto negatively impacted the way that some of the other categories have been so the ship that our systems moving around finding the categories. We should be in it just happens right now some of those.
Categories have been a little bit at the lower lower revenue and lower performing categories.
And we would typically see shopping I would say is an area, where we would have expected to see a little bit more of a balance.
Right now again fast forward a couple of weeks when Thanksgiving.
Rolls around we might see more of a bump, but it's been a little bit slower to accelerate than we typically see in Q4.
Great. Thanks for taking my questions Michael.
Thanks, Tim I appreciate it.
The next question comes from Doug <unk> with Evercore ISI Schweitzer.
Thank you.
Could you could you. Please talk to how you are thinking about expense management next year and just at a high level, how you're thinking about.
Guardrails for growth and margin. Thank you.
Sure. Thanks for the thanks for the question Charles and Thanks for joining so with with respect to head count just to echo the comments from the prepared remarks.
Again, a lot of the a lot of the Opex growth that we've seen this year has been driven by.
First year public company expenses everything from legal insurance audit fees.
Opex acquired from the businesses that we acquired around coupon follow a road warrior et cetera.
And then also investment in ramp.
As we think about going forward in 2023 and beyond.
We don't expect and are not planning for any real significant increases in opex off of our current run rate. So we believe a lot of those are onetime step ups. Both in terms of the investment and ramp as well as public company costs.
So just from a from a margin perspective, and an EBITDA perspective, we would expect.
Most profit to a high degree to flows directly down to EBITDA going forward.
Specifically as we think about what we hope is kind of inevitable rebound in the advertising markets in terms of guardrails around around gross profit margin specifically.
That's certainly something we spent a lot of time thinking about and planning towards.
I think even just a real testament to ramp in the business that we built.
Sorry, actually an expansion in our spread between Rps's GPS on the O&M side, this past quarter, maintaining maintaining that <unk> spread and actually going up a little bit. If you go out to the decimals to 38%.
So again those are things we're constantly looking at.
As we think about ramp as we think about how we're operating in the market.
And at the same time on the subscription side, we're continuing to really be able to harvest the subscribers that we've acquired in the past and that model in terms of really high flow through renewal revenue has also been helping us from a margin perspective, it's why still we are able to kind of maintain a 46% EBITDA margins on gross profit even in even in Q3.
With what we saw in the macro headwinds.
Thanks, So much over the next question will come from Dan <unk> with benchmark Dan go ahead.
Yeah.
Alright, so so.
Michael.
Having ownership of coupon follow I'd love to kind of get your perspective is there has been.
It's funny listening to guys like group and just say in retail media is greatest thing and all of the dollars are shifting there.
Sexy thing right now, but maybe not the biggest dollars I'd love to hear from your perspective as you view.
Saw that weakness is sort of Google networks.
And there's kind of a narrative out there around sort of thing.
Intermediaries versus the direct to the digitally native brands and organic.
Amazon and ebay, obviously spending much money.
Provide.
They should be the starting focal point for search now too so how do you view kind of ecosystem.
System spend is there a shift.
In spend to some of those categories.
Obviously monetize inquiries or just way down so like when things come back do you anticipate those budgets coming back and your ability to continue acting as the spring.
Do you think that there is any change to kind of the ecosystem from from the dollar shift that we've seen out there.
Yes, so I guess, that's really a two part question. So we wouldn't anticipate Google doing anything, but continuing to stay very strong in digital marketing its the best advertising machine ever invented and.
We think people will advertisers will continue to spend as much money as they possibly can profitably.
On Google.
To your question, though also really addresses or we're getting direct advertiser demand on onto coupon follow.
Shopping site that we that we own the answer is yes, yes, we're having definitely advertisers and retailers come and want to spend as much as I can on coupon follow.
And so we're getting.
China direct advertisers there.
People want to work directly with us to sin sin shoppers directly to their site.
Issue that we're seeing here in Q4 is shopping demand from.
On the consumer side.
The supply really hasn't kicked in as substantially as we would like to have seen.
Again, so shopping is one of the verticals that we thought would be little bit stronger here in Q4, and we just haven't seen it yet.
So I guess, if you fast forward, absolutely as the market normalizes a bit.
And consumer consumers want to buy more things that they typically do we're going to have the direct advertiser demand there waiting for more consumers.
Got it and then just.
Sunny units kind of talk about this in the past, but just as we think about.
The strength of your platform benefiting from market disruptions it sounds like we're seeing now.
<unk> shift away from brand towards performance pretty much everyone has kind of said that going into next year you guys have obviously been incredibly strong in performance.
We're seeing a little bit of downward pressure on pricing across several verticals and kind of add buckets or industries or categories and so your ability to kind of maybe reaching a little bit and take some market share I just kind of love to hear if there are any particular area.
You guys think there is some opportunity I'm not sure CTV is washed out enough yet, but just love to hear kind of thoughts.
Yes, I mean look so what's been pretty interesting and this is the way our platform always works as market conditions change, we really shift with it so even in the.
The digital advertising market is.
It's not having the best back half of 2022.
Now as pricing has come down we've been able to go and find the categories, where we can maintain profitability as treaty mentioned, our session counts actually pretty good.
In.
In Q3 and here looking at Q4, so we have been able to find the pockets in the verticals, where there is consumer demand right now what we're seeing is some of those verticals are some of the lower paying lower revenue verticals. So while we can maintain our margin dollar. So we can put to use.
We're just not putting as many marketing dollars to use as we'd like.
And so obviously, if things reverse which they always do digital marketing goes through cycles and this is particularly.
Not a great one as digital marketing reversing the economy reverts will be ripping ripping up along with it.
And then one thing that is happening when you look at the remember we've got the subscription business as well, which is doing quite well and as you as we see the overall advertising market depressed a little bit on both the buy and the sell side. So prices are coming down a little bit we're buying traffic and we're making a little bit.
Last one when we're selling we're selling the traffic that's actually about our subscription business to move up in the AD auction is the way to think about it because the amount of revenue we make on a session into our subscription business Hasnt changed.
So as as pricing comes down wherever actually get by more and more marketing dollars on subscription and so that one in particular.
<unk> has taken up a lot of the slack.
The advertising market has given it.
And so we're seeing subscriber growth and new new new subscriber acquisitions go up materially as the digital digital advertising market is depressed.
Got it Super helpful. Thanks, guys.
Thanks, Sam Thanks for joining.
The next question, we're going to go back to Tom Forte with D. A Davidson go ahead Tom.
Great three more from me so you talked about and ensure that to point out is probably not the right number but will call ramp two point over ramp one can.
Can you quantify the potential benefits higher sales better margins both.
So it's really on the buy the buy and the sell side most of the work and the upgrades that we've done on our platform had been more focused on cell sides and so what we're seeing is essentially better monetization per session.
And we get enormous leverage out of that we don't have all of our traffic on on.
Our new platform, we're trying to be very measured about it and but we are starting to move move more and more of it over and what Youll see is we can buy traffic for the same price. So our costs are the same we may in some cases materially more.
On that traffic, it's not across every every traffic segment that we're on.
And so our algorithms optum.
Optimization algorithms are different if we are in France, or Japan, or the U S and it's it's different different verticals as well, but as we're seeing.
Revenue per session go up.
All of that money drops to the bottom line.
And so so we actually have pretty high hopes.
As we're moving more and more traffic and getting our optimization algorithms.
Working better.
Increases margin substantially and then as we're making more money on the sell side. So more precession, we actually can increase pricing on the on the buy side and get more sessions in the door.
So that combination.
We will allow us, particularly as ad markets.
Start normalizing, we should be ripping pretty nicely.
That market has normalized and a true do you want to add anything there.
I think that's right I mean, the other thing is also I think on international there's a really big advantage in terms of the way.
Hey that the new Ram platform is optimized disappear on speed.
That hasnt really big impact to Michael's point, mainly on the sell side as well.
So that's why some of the simple things Tom are literally just making the whole platform operate faster, we'll see a direct correlation to getting efficiencies in our buy and sell side and so we literally have done things that putting servers closer to where our major traffic centers are.
Things like that that are helping helping quite a bit.
Alright, and then <unk> sort of treating us. This on my next question. So on international expansion I feel like you've touched on a couple of times in Europe .
Prepared remarks can.
Can you talk about that and then I know you talked about the impact of the strong dollar as it pertains to your subscription business is.
Is there any impact on your ads business from a strong dollar.
Sure. So let me let me take those in order so as a percentage of revenue advertising revenue on our platform International was 19% in Q3.
That's up over 18% in Q2 of this year and 15% in Q3 of last year. So still growing song slowed down a little bit I think along with all of the macro headwinds in terms of what we have seen in the velocity of that percentage again international still remains a very.
Strong initiative for us.
Again, not just we think that should be 25% to 30% of our advertising business, while the entire pie continues to grow.
With respect to FX.
Very little impact on the international side so the.
The platforms that we buy and monetize on.
Primarily Google on the monetization side.
And then Google and other large partners on the buy side primarily.
Primarily are denominated in dollars throughout so we're buying and selling in dollars.
Even though the traffic itself is international so little exposure or very little exposure there for us.
Alright, and then last question and I'm trying to think of the perfect way to phrase this.
The social networking environment right now is unique when you think about what's going on with kind of the individual companies.
Your early in identifying Tic Tac.
And starting to leverage tick tock, but given what's going on in social networking right now.
Is it easier.
Or more difficult for you to make money on social networking traffic right now.
We haven't seen a big shift in terms of.
Our ability to effectively buy traffic I think our Facebook app.
<unk> looked at the last month or two it's been it's been up a bit our spend on Facebook.
So we haven't we haven't seen things really shift around much and remember.
Lot of the social networks, particularly ones that are that are.
More mobile focused which is really all of them.
What are the kind of advertisers that are not super adversely affected by the by some of the changes in privacy that Apple rolled out. So we're more searching and 10 base Advertiser, which is.
We have an advantage there so we haven't seen big big.
Really seeing anything go up or down what we have seen on Tictoc is.
We don't have huge scale and tic Toc, we've been in there.
Kind of experimenting and learning their system.
Recently, starting to get some pretty substantial scale.
A little bit on the on the on the advertising side of the business, but our subscription business is starting to figure out some really interesting marketing techniques on tick tock.
And.
And what's interesting about Tictoc is youre, creating the advertisements which are more video base. Some of those advertisements are actually transportable over to some of the other video based platforms. So we're optimistic that as as.
Those AD formats get a little bit more standardized you can create one ad that youre going to be able to use across all the various video based platforms.
Great. Thanks, so much for taking both sets of my question.
Thanks, Tom I appreciate you joining.
At this time there are no further questions. So I will turn it back to Michael blend for closing remarks.
Okay.
Well, thanks, everybody for joining our earnings Q3 earnings call.
We are powering our way through what has been a somewhat difficult macro environment in digital advertising.
But we're heads down and continuing to invest in our technology and our people.
I'd like to say that our performance reflects the diversification of our business. We're happy right now is the overall digital marketing.
The macro environment looks a little bit weaker, but really glad to how the subscription business to be able to take advantage of that weaker environment.
We are keeping a close eye on costs for next year, but no matter the market conditions for next year.
We intend on rewarding our shareholders with a lot of growth in 2023 so.
Thanks for sticking with us thanks for joining and I look forward to meeting some of you at our upcoming Investor conferences in the next couple of months. Thank you very much.
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