James Kopelman: Good morning, and thanks for taking the question. First one is for Adam. You mentioned financial advertiser doubled their campaign budget or more than doubled. What was the role of AI specifically and the success that they experienced, and how will that potentially reap larger benefits as more advertisers take advantage of your AI and GenAI tools? And then I also wanted to ask about retention rates, which you mentioned benefit from training your AI models. Question is, how much of your R&D budget are you allocating toward training AI models over time? And then I have a follow-up for Steve.
Adam Singolda: Sure. Good morning, and good questions. So on the first question, Max Conversions and AI play an incredible important part of advertiser success. In this case, what you’re seeing is a fantastic brand name that we all know that’s migrating to use Taboola’s core technology, Taboola ads with Max Conversions and what they’re seeing and — but their objective was very lower funnel specific metrics they were looking to get. And once starting to work with us, they had an initial spend goal, which was significant, by the way. The results were so great that they decided to double the spend. Now I don’t know if that doubling came from someplace else, but I was happy to see it. But I can tell you it was all driven by AI and specifically showing that cost per acquisition is well within the range of what they were expecting and even better.
And like I told my Board yesterday, we had a Board meeting. I said, all I want is just 1,000 of those, right? I just want to see that again and again and again. Because at the end of the day, if you think about Taboola, we now reach about 600 million people a day DAUs. So roughly the size of Snap or so. And so we have significant reach and a lot of supply. So for me, if I can continue to make advertisers successful and get more budgets, I truly believe we can double and triple the company. And that is why this is the number one priority for the company. And that is why we invest so much from the product and tech team on making performance advertisers successful, and ideally, top-tier performance advertisers successful. In terms of allocation, nearly half of our R&D works on a variety of different things relating to performance advertising.
And I can tell you that team presents to the Board, every board. It’s top of mind for our management team, our Board, us as a company. In terms of financials, I’m not sure if we share specifically how much dollar-wise, but it’s about half of our tech team is working on that.
Stephen Walker: And then you also asked a little bit about retention rates. So I think we disclosed in this — in our shareholder letter this time that our NDR of our advertisers that are using our AI and our new, like our new tools there have double digits improvements in their NDR, which is a great measurement of kind of how they’re doing. We haven’t disclosed any new information about advertiser retention rates, but obviously, your NDR can’t be that positive if you’re losing your advertisers. So it’s obviously a good sign.
Adam Singolda: Yes, I think you were asking, so what we do now and again, we didn’t show the financial cost of that, but what we’re doing is we’re essentially, and that’s a big transition. In 2024, we’re spending a lot more resources on training or AI to — from a cold start perspective, to look at historic data so that we can create lists of recommendations that are taking advantage in a greater way from advertisers that are like you. So if you’re starting a campaign with Taboola today, if you remember, I said earlier that one of the biggest opportunities and challenges around advertiser retention is showing them success really, really fast. The faster you can get them conversions, the less the likelihood they’ll churn. So what we’re doing now is we’re training our models in a significant new way to take advantage of historic data and create better lists of recommendations that can come faster to consumers, so they’re hopeful we can make conversions come earlier in the process and from that increased retention rates.
So that’s what we’re doing now. And we’ve mentioned that in the letter.
James Kopelman: And then just one last one for Steve. On the cadence of sales and marketing expense through 2024, it is your biggest OpEx line. Can you just remind us what are the key drivers this year for sales and marketing and should it — should that expense line continue to rise sequentially throughout the year given your various investments? And do you have any other callouts across OpEx as we go through the year?
Stephen Walker: Yes, I think so, generally, we’ve hired most of the people that we’re going to hire. Most of the hiring, by the way, in sales and marketing is to support the transition of advertisers from Yahoo to Taboola and to support kind of that revenue jump. So we’ve hired most of what we’re going to hire at this point. Q1 was a mostly full quarter for that. So while there probably will be a slight step up going forward, it’s not going to be very large. So generally speaking, I think we’re at about the right level at least now. Now let’s — we’ve got work left to do. We’re going to finish that work over the next couple of months and by midyear we’re supposed to be fully ramped. Then we’ll reevaluate. We’ll just see where we’re at and see if there’s any need for additional resources or anything like that.
As of now, the expectation is we have what we need. And like I said, the only other call out I would give is that we think that we’re going to be roughly flat on operating expenses from here for the rest of the year. So I think generally we feel good about where we’re at with the caveat that we’ll reevaluate once we have all those advertisers on board and we understand what we need to do.
James Kopelman: Great. Thanks, guys. I appreciate all the help.
Stephen Walker: Thanks, James.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Jason Helfstein of Oppenheimer. Your line is now open.
Jason Helfstein: Thanks for taking the question. So two questions, just one, on the progress around Yahoo, given you did $100 million in the quarter and I think we had like a $450 million target for the year, it would seem like you’re definitely going to track above that given the seasonality. So I don’t know if you want to kind of help us think about what the new number would be, whether it’s like $500 million, $550 million. And then second, if we back out Yahoo, it would imply, like, the business is down four, although we have talked about how it’s not really a fair way to look at it for a host of reasons. But were there any specific pockets of weakness, either on a product side or geographic side or ad category side, that just, we need to be mindful for in the quarter? Thanks.
Adam Singolda: No. Jason, good morning. No. So, while Yahoo did cross the $100 million as we expected, which is great to see. We like to see that things we say happen. I think at this point, we’re looking at Yahoo as part of our core, similar to Apple, similar to other big partners we have, in a way that we have one source of demand, and that demand is being distributed across multiple types of publishers, some big and some small, and Yahoo is obviously a big publisher. So from that perspective, core, if you do that type of math, it’s growing double digits, which is good to see. So from that perspective, I’m happy. I’m happier even to see performance advertisers that are spending and migrating getting good results. We spoke about that earlier today.
So things are moving as we like them to see. We’re on track to complete the migration by midyear as we plan. And again, there’s a lot of work ahead of us, so we’re not taking it slightly. It’s obviously ramping a big, big partnership. But as of now, there’s nothing new to share beyond the fact that we do the work and it’s going as planned.
Jason Helfstein: Okay, thanks.
Operator: Thank you. Please stand by for our next question. Our next question comes from the line of Justin Patterson of KeyBanc. Your line is now open.
Unidentified Analyst: Thanks for taking my question. This is Jacob on for Justin. With revenue from top brands and agencies crossing the 20% revenue mark, what efforts are driving the recent success you’re seeing with these advertisers? And with the introduction of Taboola Select, is there anything you can share in terms of early reception from these premium advertisers? And how you believe this expands the opportunity with a cohort of advertisers?
Stephen Walker: Yes, thanks for the question, Jacob. So what we can say is, what’s driving success for those advertisers, and why is our premium kind of brands and agencies’ business growing to above 20%? I think it’s a combination of factors. As with anything, it’s not one thing. So Adam spoke earlier about the fact that we’re seeing really good performance of Max Conversions and our AI technology for those advertisers. So that’s definitely a big part of it. So I think the financial advertiser that we talked about, who came across and spent a lot more than they even expected to because it was working so well for them, that’s a big part of it, like, when the technology works, you get more budgets. But we’ve also had a sales focus on this.
So we have built out capabilities and teams that are specifically targeting and building relationships with major brands and agencies, and that’s helping. What we realized is that with the success we’re seeing with the technology being at the state it is, we then announced Taboola Select because we think we’re at the right time and in the right position now to package everything together into an offering for these large brands and agencies that we think works really well. Technology works. We’ve got the right inventory. Like, if you think about the quality of our publisher inventory and what’s happened to it over the last year, we’ve added Apple, we’ve added Yahoo. We’ve built our relationship with Microsoft. Like, we have really, really high quality supply that has grown dramatically.
