Q2 2023 Viant Technology Inc Earnings Call
Before and third the ongoing transition of $60 billion of linear TV moving into connected TV.
I want to share a bit more on each of these areas and provide more clarity on how we see them driving our growth and profitability.
The promise of artificial intelligence is not really new for the AD tech industry at <unk>, we're working aggressively toward our vision of building an autonomous AD platform <unk>.
Similar to the way the automotive industry has its sights set on self driving cars to boost the number of vehicles sold per year. We believe an autonomous AD platform that leverages AI to help advertisers achieve superior campaign performance will grow our total addressable market.
Our goal is to leverage AI to make the programmatic AD opportunity available to millions of small and midsized businesses by making it simple for them to reach new customers and grow their businesses.
We envision AI is the key to scaling our customer count from the hundreds into the millions and unlike autonomous vehicles are industry Hasnt fully realize this vision yet.
However, we have been focused on laying the groundwork of automation and training deep learning models that solve programmatic traders problems one by one to help them improve their campaign results in a more automated fashion.
One Great example of this is the release of our new AI powered bid optimizer late in the second quarter.
This translated into immediate benefits for our advertisers in the form of more efficient CPM pricing for.
For customers, who have opted into the AI powered bid optimizer, we've achieved the CPM savings on average of over 35% for the same publisher ad inventory.
Bid optimizer is achieving incredible results for our clients.
And is a great example of how buying is leveraging newly developed AI to increase the value of our AD platform to our customers.
Which drives them to consolidate more of their AD budget into our platform.
We believe that the application of AI and the programmatic is the largest market opportunity since the invention of real time bidding itself.
These new AI powered solutions are allowing us to deliver a best in class experience and results to our customers.
We have an exciting product pipeline and I am excited to share more with you in the future.
On the second point I'd touch on Google's impending deletion of cookies, which they have recently stated is set to start in Q1 of 2020 for.
This will create additional revenue opportunities for volume.
I'd like to remind investors that <unk> patented technology gives marketers the ability to execute omnichannel advertising using our household IV and this does not rely on the cookie like other solutions in the market or.
Our household IV has achieved more than 80% availability across all AD requests that we see.
We believe that google's pending deletion of cookies and other identifiers will further accelerate the growth of AD spend flowing through our platform.
On the third opportunity.
Linear TV to streaming to streaming the adoption of streaming services will continue to shift marketers dollars and we see an additional $60 billion of thats been coming into the programmatic ad market.
In CTV, our household ideas available on over 90% of all AD requests, which is a significant advantage in this fast growing space.
I am happy to report that we outpaced the market in Q2 with strong double digit growth in CTV.
There are multiple factors that contributed to this growth, but our ability to measure return on AD spend against a household rather than a device is critical in a cookie less environment like CTV.
And it's important to remember why CTV gets so much attention.
Nearly 70% of Americans engage with CTV and there is still significant room to grow as.
As linear TV dominance wanes no single measurement protocol has been developed with the application of our buying household IV marketers can confidently apply the AD spend previously allocated to linear television to a far more sophisticated CTV ecosystem.
Now with the use of biomass AD platform those marketers can run campaigns in this high growth channel with the same precision and visibility expected from our programmatic platform.
And to close we had a very strong second quarter.
We're making immediate strides on our AI initiatives that are translating to record into value for our customers and our shareholders.
We're well positioned and excited to share the strong financial results, we're expecting for Q3, as well, which Larry will touch on in a bit.
We are accelerating our momentum into the second half and we look forward to providing an update on our product pipeline at an innovation event. This fall with more details on that to come soon.
Now I will hand, the call over to Chris to discuss more around our products and customers. Thanks.
Thanks, Tim.
Q2 was another strong quarter of wins across our client base with particularly strong results within the mid market, where we believe our efficiency attribution and measurement capabilities, along with our unrivaled customer support have made US a go to choice for marketers, whose objective is maximizing their return on ad spend.
In the past Im discuss crucial elements that differentiates the <unk> platform and make us such a formidable solution in the mid market.
First and foremost you must offer the best product, which means the lowest CPM to deliver the best return on Ad spend.
Second you must demonstrate superior performance in the form of comprehensive measurement and reporting and.
And finally, you have to provide the support infrastructure to ensure the customer experience is seamless.
With more than 14000 AD agencies in the U S alone the mid market is a large and dynamic marketplace and one in which we are particularly well suited to win.
In much the same way in mid market agencies become attractive choices for brands looking to establish themselves and innovative and creative ways. So too are their preferred tech partners. In this way vine is working with these mid market agencies and brands to break free from a tire paradigm of one size fits all platforms by offering industry.
Leading tools approaches and service.
The benefits of the self service programmatic model are well known but we specialize in multiple pathways to get our clients up to speed on our platform.
Our intuitive intuitive user interface and focus on automation further enhances that ramp up while our unique data tools enable targeting forecasting reporting and ultimately visibility that is largely unavailable anywhere else.
I want to talk a little bit more about two specific areas of our DSP that truly differentiate us and each in their own right are vital to the success of mid market customers.
For several quarters, we've discussed investments, we've been making in the <unk> data platform.
With a long history of effectively and safely leveraging massive datasets to drive our customer success. The <unk> data platform in many ways is the culmination of that journey.
How to manage data and how to extract value from that data are two questions faced by nearly all of our clients.
They want to be able to use their first party data in conjunction with their advertising campaigns.
Through integrations with industry, leading data warehouses and clean room providers, we're able to provide secure solutions that deliver real time insights that can be inserted directly into campaign design and implementation.
None of our competitors have a tool suite this comprehensive and more importantly, none of our competitors have <unk> track record to leverage that data in a commercially viable and privacy friendly way.
The <unk> data platform is being leveraged by our largest customers and is future proof their programmatic advertising strategy for the impending deletion of third party cookies by Google next year.
Clients and leverage our household IV along with the <unk> data platform are able to deliver relevant ads, while still being able to measure the impact of those ads in a cookie less world.
Next I want to share more information on our supply path optimization initiatives direct access.
Direct access as the program develops the most efficient supply path for our customers by creating partnerships with premium content owners to monetize their content directly while lowering cost per advertisers by eliminating the reselling of inventory amongst middle man.
Our focus for the direct access program has has centered on CTV.
Tim discussed the strong results, we're seeing in the CTV space and direct access is helping to drive that success with a more efficient supply chain advertisers see lower cost of media with a higher win rate and add auctions as well as lower instances of fraud, which all boils down to better campaign performance and higher return on Ad spend.
Notably we've partnered with many of the largest connected TV content owners in the industry.
Representing some of the most premium inventory being watched by consumers.
Although still early our direct access program is gaining a lot of attention by both new and existing customers, who are seeking lower CPM on premium and premium inventory by leveraging a more efficient supply path and.
In the second quarter direct access represented more than 10% of CTV spend and we expect that to increase throughout the year as we see steady adoption by our clients.
Additionally, I am proud to announce by its recent inclusion and prebuilt Dot org.
<unk> is open source technology that provides an alternative path for premium publishers to take bids directly on their advertising inventory rather than through multiple resellers.
This leads to better economics for publishers and advertisers alike, and ultimately a more efficient programmatic ecosystem.
We expect to release new technology in this area as more and more publishers look to gain direct access to our customers' demand across all channels.
And with that I'll close by saying, we've wrapped an excellent first half of the year and we are encouraged by the strong buying signals, we're seeing from our customers as we move into the second half.
We continue to focus on delivering best in class product and we believe the gains we've made so far this year are only the beginning.
Thank you and I'll now turn it over to Larry to provide more details on our financial performance.
Thanks, Chris before I begin I'd like to remind everyone that we've posted a presentation to our investor Relations website that includes supplemental financial information to accompany today's call.
As Tim mentioned, we successfully capitalize on our first quarter momentum exceeding our revenue and adjusted EBITDA guidance for Q2, and achieving the high end of our guidance for contribution ex Tac.
Revenue for the quarter was $57 2 million, an increase of 12% versus the prior year period.
37% higher than Q1 and exceeding the high end of our guidance.
Contribution ex tax for the quarter was $33 7 million, an increase of 6% versus the prior year period, 20% higher than Q1 and at the high end of our guidance.
We continue to see improving signs with regards to AD spend as evidenced by Q2 revenue and contribution ex Tac growth rates accelerating from Q1 levels.
We expect this encouraging trend to persist and strengthened throughout the second half of the year.
In terms of customer verticals, we saw a strong rebound across our retail and consumer goods verticals with both delivering solid double digit growth in the quarter.
Spending across our travel online gambling and automotive verticals also remained strong.
In terms of channels, we saw robust growth in CTV in the quarter driven in part by the promising outcomes of our direct access program.
Additionally, our customers continued to positively positively respond to our unique ability to deliver highly targeted messaging at the household level and this cookie less environments.
In the second quarter CTV accounted for over one third of total total advertisers spend on our platform.
From a format perspective video encompassing both CTV and mobile video accounted for more than half the spend on our platform and had strong growth in the quarter.
Streaming audio though still in its early stages also experienced solid double digit growth in the quarter.
The promising upward trajectory of streaming audio in many ways mirrors. The early success, we had with CTV reaffirming our commitment to remaining at the forefront of the driving forces behind present and future ad spending.
Advertiser spend per active customer increased 7% on a year over year basis, and our percent of spend customers spent on average more than three times that of fixed price customers.
It is important to highlight that the cohort effect created by the power and scale of our self serve DSP continues to widen the gap between our percent of spend customers and fixed price customers.
Our percent of spend customers not only exhibit higher retention rates. They also have a greater propensity to expand their business with us.
We ended the quarter with 314 active customers a net decline of 13 customers during the period.
As discussed on previous earnings calls, our philosophy around customer growth centers on cultivating deeper relationships with high quality customers capable of higher spending levels as.
As part of our strategy, we are gradually shifting away from servicing lower end customers, while actively attracting and onboarding customers greater long term value potential.
This strategic shift allows us to focus on building enduring partnerships that contribute to sustainable growth and success.
Moving on to operating expenses in the quarter, our non-GAAP operating expenses totaled $26 9 million, reflecting a year over year decrease of 23%.
This reflect this reduction reflects our commitment to driving operating leverage across the business.
While achieving these cost efficiencies.
Main equally dedicated to investing in future growth as demonstrated by a notable 39% increase in the size of our product and engineering teams over the same period.
Our approach is to strike a balance between efficiency gains and investing in the teams and technologies that will propel our long term success.
The integration of generative AI technologies across our organization has also had a profound impact resulting in significant and a significant increase in productivity.
These transformative initiatives have enabled us to achieve remarkable and results with fewer resources further strengthening our confidence in our ability to substantially grow our operating margins.
One metric we use internally to measure productivity is revenue per employee, which grew 27% in the current quarter versus the prior year period.
By leveraging cutting edge AI, we are well positioned to continue driving both innovation and operational efficiency.
For the second quarter, we generated adjusted EBITDA of $6 8 million well above the high end of our guidance and representing an increase of approximately $10 million from the prior year period, and $7 $2 million from the prior quarter.
Adjusted EBITDA margin as a percentage of contribution ex Tac was 22% for the quarter, representing a 30 percentage point improvement from the prior year period.
For the second quarter, non-GAAP net income, which excludes stock based compensation totaled $5 1 million, which compares to a non-GAAP net loss of $5 9 million in the prior year period.
non-GAAP earnings per class a share totaled <unk> <unk> in the current quarter, which compares to a loss of eight in the prior year period.
In terms of share count we ended the quarter with $62 4 million class, a and class B common shares outstanding.
We also ended the quarter with $204 million in cash, which translates to a noteworthy $3 27 per share outstanding.
$224 million of positive working capital and no debt at quarter end and we continue to have access to a $75 million Undrawn credit facility with.
The solid financial foundation positions us extremely well to fully capitalize on the substantial market opportunity ahead of us.
As we look ahead to Q3, we are optimistic about the accelerating growth rates of our business and the continuing improvement in the advertising environment for.
For the third quarter, we expect revenue in the range of 56 to 59 million, representing a year over year increase of 18% at the midpoint.
We expect contribution ex Tac in the range of 35% to $37 million a year over year increase of 12% at the midpoint.
non-GAAP operating expenses are expected to be $28 five to $29 5 million, representing a year over year decline of 14% at the midpoint and finally, we expect adjusted EBITDA to be in the range of six five to $7 5 million, which represents a year over year increase of $8 eight.
At the midpoint.
In closing Q2 marked another quarter of strong execution.
Power of our platform combined with our unparalleled service continue to be strong drivers in attracting new business and fostering growth in existing relationships.
As the broader economy shows encouraging signs of improvement, we are well positioned to build on our momentum and further grow our market share.
Robust financial profile disciplined cost management, and relentless focus on execution position us to achieve strong topline growth and EBITDA margin expansion going forward.
Above all our dedication to delivering long term value to both our customers and shareholders remains at the core of our mission.
And with that we've concluded our prepared remarks, and I will now turn it back over to the operator to open the video to questions.
Operator.
We have now reached our questions and answers part of the presentation, if you'd like to ask a question. During this time. Please use the raise hand function located in the bottom of your screen.
First I would like to call upon Maria reps connect cord.
You can now begin.
Okay.
Alright. Thanks, so much for taking my questions can you hear me Alcon.
Yes.
Thanks, so much.
Any thoughts on how sort of the macro environment progressed throughout Q2, and so find Q3 relative to your expectations on that were better than expected results more of a function of strong need a stronger broader macro environment.
For <unk> that sort of suggesting that we're going backwards in the platform named bringing Q2.
<unk> market share.
Yes, Larry you want to take the first John I mean, I think the key here is and we said this last quarter.
It's truly stabilized.
Coming out of January really the second half of last year into January there was much more uncertainty and really since that point, we have seen stabilization across the board.
Q2 grew faster than Q1, we expect that trend to continue in Q3.
Part of that in Q3 at least it was easier comps given that we were impacted last Q3 and Q4 by the macro challenges.
But we are also winning a larger share of our customer budgets. So it's really twofold.
In terms of the acceleration of growth rates.
Although we're not we're not assuming that the economy is going to improve in Q3, we're assuming it remains stable as it is today.
And on the second question I do believe we are gaining market share in the mid market product is performing very very nicely. Our team is executing very well and we offer what they need which is the household I E. The data platform the level of analytics that the hold codes have to offer their customers. So I do.
Believed it was macroeconomic improving somewhat but I also believe that we are gaining market share in that mid market area.
I would add one other point to that is where we're seeing the improvement in areas like retail and CPG, which had been down for a couple of quarters that came back nicely in Q2.
That's more of a macro macro development.
That's very helpful. And then how much of incremental upside do you think it's reasonable to expect as a result of three key cookie condition next year and do you think most mall.
Preparing for this transition at this point.
I would say that most marketers are not prepared for the transition. They continue to operate with the current platforms that utilize cookies until they don't work anymore. There is no point to make a change until they do in terms of how to size the upside opportunity.
Personal opinion towards it is that it's an enormous wall of money. That's currently being spent that needs to get re platform into platforms that operate in this new world of consumer privacy friendly or a lack of identifiers and the old way so to me.
Huge wall of cash that will be re platform. Our platform has been out for multiple years now being tested poked prodded question and yet it continues to deliver results that marketers are looking for in these environments and so I think we're very well positioned as that.
Shifting away from cookies happens and I think the larger one just in terms of the market Maria if you look back to apples changes with the <unk> you saw the impact that had on meta and snap immediately.
A few quarters later, you saw that even Youtube.
Most people are focused on what's happening in 2024 hero, Google deletes, the cookie they've been somewhat muted around the googles mobile AD IV, but at the same exact thing is going to happen. So we not only expect it to hit open web players that are completely cookie based we think that will be.
Beneficiary of that but we also believe that this is going to hit meta it's going to hit snap Google All these other walled gardens that more money is.
Phil set to come out of US yes, our estimate is Apple's iOS was about a third of the AD spend that's how we our best guess on social platforms like that the Google change should have a <unk>.
<unk> the size impact on those businesses. So it will be a tough challenge for them.
Got it talks about how coke insurance for a car.
Thank you, except we have Laura Martin from Needham.
Hi, guys I'll ask two.
The first one I am very curious that your third leg was the $60 billion moving from linear TV to connected.
Connected TV and I think it's great you guys are doing the direct access my question to you is.
Have you really gotten any inclination that advertisers on linear are willing to substitute com chat based buying and targeting with audience based buying in targeting which is required if they're really going to move money into the open internet.
I would say my answer is yes, I think if that answer was no digital would've never grown in the first place and all we've seen is that digital eats analog technologies over time, because they are more sophisticated and produce better returns for the publishers and better results for the advertiser. So.
There is no doubt in my mind that addressable advertising crushes traditional broadcast advertising.
And in no way shape or form is competitive so digital will bear out compete linear that was part of my my address remarks, I think the big challenge is that linear is measured from a Nielsen panel that gets gross rating points digital as measured in actuals, which are real impressions delivered verified.
And there is just a difference there and the way that they're measured and marketers are trying to resolve those two but it is certainly.
I wouldn't characterize any one that I've spoken to is not willing to spend and streaming or addressable CTV. It's just.
They are waiting for consumers to fully adopt that channel.
Okay cyclical and then the second thing I was really interested in is this 35% number so you implemented.
And now you are getting your customers to hear a buy side platform, 35% lower prices for the same content.
Unreal Unreal.
Unfortunately, I would take the negative side of this is like what the Hell are you guys doing before overcharging your clients, 75% I mean, that's sort of the way why is it you are able to get such great improvements Bye bye now using AI because AI machine learning has been out there for like five years and what's new is generally they are using shattered it.
Why is that why these improvements are so radical.
I wouldn't classify it as generative aio classified as deep learning versus machine learning that's really the difference of the two that were applied and Youre right, 35% is an enormous number in Walmart that we're really proud of and.
And I think that one thing that is important as we achieved 35% savings on what we believe is already the lowest cpm's getting cleared through all competitive dsp's. So we do believe we have the lowest CPM and we just raised the bar again and that is our goal. If you. If you watch any of the discussions that I have in the industry. We go to war.
Or with the sell side to drive pricing down and we unleash technologies data algorithms everything we can to work on behalf of that Advertiser and this is just another breakthrough innovation that has changed the game for the buy side and one thats going to reap huge benefits for us as we continue to compete in the market and I think one thing to point out.
Nearly all of our customers are all self service at this point and so they themselves control bid pricing.
So that's one piece our platform always has worked well to achieve the lowest price one that when they are bidding but in the end the customer has the control and I think with our new AI powered optimizer here.
We're not only.
Say the CPM savings is massive and this is great and the clients love. It what it also does it's a multi <unk> API based optimization.
So.
We clients find that even with this they're they're pacing and their AD performance is more streamlined more even as well and so it has other benefits here.
We've gotten great response from our customers out of it it's part of the reason in the prepared remarks, we feel the AI opportunity is more important than the invention of the real time bidding protocol itself because of the numbers that we're seeing internally when its applied in trained properly and given the chance to go it really is a transformative technology for AD Tech and.
General and I think for many other industries as well.
Alright, Thank you very much great numbers.
Thanks.
Thank you. Our next question will be from Andrew Boone and J M P.
Hi, guys congrats on the strong results.
The key takeaway for me this quarter as the inflection profitability EBIT came in much better than we expected if I go back and I look at 2020, one assuming a stable macro environment do you guys have a path to kind of high Twenty's margins next year or how do we think about you guys balancing the profile of growth versus profitability.
Yeah, it's hard to comment on next year, Larry. Please comment if you if you'd like to I think what we're focused on is the application of artificial intelligence on internally as well as externally for our clients and then we're going to see adoption rates of these technologies AI is also.
Scary concept for some users of it they don't know how its going to do they don't want to mess up results. So it's watching the adoption rates.
In a perfect World certainly those numbers you talk about are achievable in a perfect world, but again customers have to adopt it the product has to perform but certainly the early results. We're seeing are encouraging.
I would add in terms of next year, we'll continue to make strategic investments.
And continue to innovate, but I would say that do you.
I would not expect to see our operating expenses growing anywhere near what our.
Contribution ex Tac revenue will grow.
So hence the answer to your question on our EBITDA margins will be higher next year than they are this year.
That's helpful. And then I wanted to go back to the mid market right you guys answered this.
Certain respect with Mario's question, but how do you guys think about the needs of the middle market agency and how are they different than the whole codes and how would you guys are addressing it right. So what how are you guys winning that business, yes. So much.
Number one I think the.
Right off the bat the mid market agencies in the Midmarket customers in general they need it's all about campaign performance. They have to see the return on AD spend these are customers who in Laura's question.
And on the Holdco as you get a lot of broadcast style buying when there is buying content youre delivering ads.
Levering X millions of impressions of ads. So the bar that you have to clear from an AD performance isn't very high when it gets to the Midmarket. These customers are staring at customer acquisition cost. It has to perform that's number one a big a big component of that is the price that you are paying for the AD impressions. So we're really stay.
Adding out there as we highlighted with our AI bit optimizer. The second I'll say is that the mid markets don't carry the level of staff that we typically see in trading.
Our programmatic trading so the platform has to be a lot more automated so they demand. It just because they don't have that same level of head count and again, we have a huge focus on automation. So that's why we continue to win there.
But in the end the mid market needs exactly what the hold codes have by partnering with Google Mehta at huge levels in billions of AD spend they need a sophisticated AD platform, that's able to get the right AD in front of the right user and pay the right price I think that's where the DSP steps in and helps them accomplish those goals very efficiently.
From an employee productivity perspective.
Thank you guys. Thanks.
Thanks, Andrew.
Thank you next up we have Andrew Merrick from Raymond James.
Yes, Thank you for taking my questions.
Understanding that youre, making intentional efforts in terms of which customers allocate resources to I guess in light of that customer list optimization. How many of the remaining 314 customers. Do you think are ones that you can forge these higher value relationships with and I guess, how does that impact your sales strategy.
<unk> and potentially the sales and marketing line as well.
The predominant amount of them are those types of customers.
Without a doubt so we feel really good around the engagement with our customers right now I think what you're highlighting is just the decision that we made with lower spending customers, who don't show the same level of adoption is the higher spending ones that we basically it's not that we kicked them off the <unk>.
<unk>, but if.
If they don't spend a certain amount there, they're going to they're going to have higher pricing and.
And so we do expect some of those to continue to drop off.
Again, the customers we want although we are in the mid market.
We're aiming for customers that are going to spend in the tens of millions.
And that's really where we're focused at this stage its important to scale with customers that can scale with you.
Great and then.
With direct access we've seen a good number of peers, introducing these kinds of disintermediation products, where theyre coming from the demand side into the supply side or vice versa. I guess can you talk about how you see that space evolving if everyone has a direct product and then how does buying kind of set themselves apart in that future scenario.
Well I don't think Thats somewhat saw about dis intermediate them, what I think it is from our standpoint again buy side, we represent the advertiser, it's about getting them the the lowest possible price or eliminating unnecessary tech tax in the middle.
And Theres a lot look in programmatic and historically, there's been a lot of middlemen trading.
That I think the buy side has really been focused on driving out and I think thats. What you are saying so anyone who has direct relationships with publishers theyre going to continue to do well there.
This is just a I would say this has been going on for probably three to four years. This concept of supply path optimization, that's really what it's about is they want the most direct path.
For the content owner and they don't want a bunch of unnecessary people in the middle of taking attacks. So that's really what it's about in the end price drives.
Huge component of campaign performance and at the end of the day customers rely on us to drive that campaign performance. So.
Again, we're going to remain completely on the buy side.
We don't these aren't sell side initiatives, it's giving the sell side direct access to our customers' demand.
I appreciate the color. Thank you.
Thank you Andrew.
Our next question is from Jason <unk> from Craig Hallum.
Hey, guys. Thank you.
Great results you talked a lot about mid market until after the quarter. We saw the announced bankruptcy of one of your competitors and I think they had a presence in the mid market. Just curious if you see an opportunity for further share gain on the heels of that.
Yes.
Believe youre, referring to the bankruptcy of media mass that happened right at the end of Q2 there.
We had many shared customers with medium asked we believed we were gaining market share from media math, regardless of the bankruptcy and obviously they filed bankruptcy, which was tough to see for the employees, but I think it's due do we offer a superior product and that was just capitalism playing out.
We saw benefits the day of media mass bankruptcy filing we had many shared customers and we saw.
Budgets flowing out of medium app and into our platform and so we were evaluating medium out from an acquisition perspective.
Unfortunately, we couldnt get conviction on their cost structure. It was just upside down there, but ultimately we felt like our product was going to beat them competitively and organically and so we decided not to deploy capital there, which I think proved to be a good decision we gained many.
<unk>, many more AD dollars not necessarily new customers, but more AD dollars and the platform that the data did file bankruptcy. So I think one there just one competitor in the mid market, we compete against the Yahoo. A lot in the mid market head to head and were very focused on beating them in that area as well too and we've done a good job of it.
And so I think overall, we're gaining market share from multiple people and.
And what happened in media math was an unfortunate event.
One numbers follow up for Larry the GAAP revenue outperformance was greater than the contribution ex Tac performance I don't know if thats related to <unk>.
Between revenue models between fixed fee and percent percentage of spend that would be my speculation. Just wondering if you can add or unpack. The difference yeah. I mean first of all as compared to last year the growth rates across spend revenue and contribution ex tax have are beginning to converge, so theyre getting closer last year that.
It was not the case, when we were going through the mix shift.
But that being said there may be some variability of relative growth rates in any given quarter.
Based on mix based on seasonality of customer spend.
But we don't expect growth rates for the different top line metrics to be materially different from one another certainly not like they were last year longer term as fixed price continues to become a smaller and smaller percentage of total revenue, we do expect contribution ex Tac rates growth.
<unk> to outpace revenue growth rates, and we will see that quarter by quarter.
But long term, we do expect that to be the scenario.
Thank you.
And our last question of today is from Chris <unk> from UBS.
Hi, Christy there Victor.
Victor on mute Chris.
Hello, Jason.
Can you guys hear me now yeah, great can we just talk about some cost efficiencies. It seems like you guys have gotten great leverage there just visibility into the ability to take further cost efficiencies. As you guys are growing your head count and the R&D group at 39%.
Yeah, I mean, a lot of the the.
The cost efficiencies, we knew we had a predominant amount of them already in the bag from the actions that we took at the end of last year, but I would just say the productivity gains that we're seeing by leveraging.
AI tools internally has been tremendous whether that be in our marketing group them leveraging <unk>.
Whether that would be I would say on our data science team.
And anyone in our analytics groups, Utah.
Utilizing that for customers on top of campaign performance data.
And then in engineering as well I mean, just doing using basic tools like <unk> co pilot, we're seeing just incredible productivity gains there and we think we're only scratching the surface. So that's really where we're looking at.
And I think there is some offset to those as we leverage AI tools Morris there are some technology cost increases there, but nowhere near the benefits that we're getting from it so that's a big focus.
Going to remain in the back half of the year.
Got it and just as we kind of think about some of the idiosyncratic wins that you guys here.
Hey, I did optimizer definitely stands out and we're getting the 35% CPM savings here just curious like if you could potentially quantify what the contribution was in the quarter or it's just more anecdotally you're seeing more budgets open up it's bringing more commerce, you guys, bringing guys to more conversations on the table just help us frame up yes, aside from that Melissa.
Our revenue driver as well, it's important to talk about the business model as we roll this out when we achieved savings for our customers, we make a percentage of of that savings. So we charge in general it's about 20% of savings and so as we create value for our customers it creates value and grows our revenue.
<unk> was it was very early Chris in Q2, So we wanted to just share some of the data points on on some of these exciting numbers. So adoption is low the positive is that scales into the into the future and it's just another revenue driver for <unk> as we exit 'twenty three and enter 'twenty four with more widespread adoption by the <unk>.
Customer base, but when you have 35% savings in the initial data points that helps accelerate adoption through our sales team and I think that's a big one and I was just going to say that if a customer has typically what they do is they go on the platform they put on their budget.
Youre getting 35% lower CPM. So that means you get more AD impressions more AD impressions is more reach.
You're influencing consumers therefore that turns into more customers and the campaign performance. Therefore increase that's why we talk so much around price.
It might be it depends on who it is that it may be the largest determinant of a campaign performance as the price that you pay.
An easy example of you paid $10 CPM versus a $5 CPM.
$10 CPM price has to perform twice the rate of the $5. So campaign.
CPM pricing is so important to performance when we hit the performance level versus other platforms. They may be using it helps us win share of dollars. So it's just a circular effect that although is since it is early we're really excited about it and we expect the adoption to steadily increase throughout the end of the year.
Got it and then as we think about this kind of ramping I understand from the adoption side, maybe just from the upside to that 35% are we kind of are we going to be having a conversation around 40% to 50% kind of lower CPM.
Time for three Q earnings or is it kind of 35%.
Eddie in your early findings, yes, 35% as the average so we saw as high as high Forty's high double digit parties and so on some advertising campaigns. It all depends on what they're doing we also saw further increases on top of our own prior bid optimization using machine learning so.
Theres many benchmark some customers use a third party AI algorithm to try and predict bids and we were able to beat those as well too. So I think that's the that's the value of one all of these products are integrated into the DSP not various third parties doing it but it's a range and it's also a range by channel as well CTV display online video.
So there's a wide disparity of pricing out there on <unk> and what it's worth so the ability for us to come in and apply a consistent algorithm across every channel format on behalf of the trader and make sure it's working on their behalf.
Big important thing as a human can only check of campaign. So many times, but a deep learning model can actually check it all the time consistently and make more changes and then humans. So man versus machine machine is always going to be able to perform those tests more consistently more often.
Drives huge savings and I think what we're what we're seeing I want to just talk and I shared this on our last earnings.
Our last earnings call.
When we talk about direct access so its something thats different what when you combine the two really what we're seeing is what we're finding is not that publishers are getting lower cpm's interestingly they are getting higher cpm's because what we see is that the win rate in the auction actually our win rate goes up.
What we are identifying is in the middle we're finding that there are multiple intermediaries that really are getting squeezed. So when you combine our efforts on direct access and that our AI that optimizer, we're finding true market price. That's what we're that's what clients.
Really what we're getting to.
And that is always changing clearly right one quarter the next market maybe stronger.
Certain publishers, maybe selling out so maybe pricing increases from one quarter to the next but in the end clients want to make sure they're getting a fair shake and we're making sure that they're getting.
Got it thanks for the color.
Perfect.
And that concludes our questions portion.
Great.
Well I'd like to thank everyone for joining the earnings call I want to thank the <unk> team for an incredible execution in the second quarter and we will see you all at an innovation day later this year and at our next earnings call. Thanks for joining.
Thank you everyone for joining us today. This now concludes today's webinar you may now disconnect have a great day.
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