Justin Patterson: Jeff, I was hoping you could talk about the Kokai launch. I know it’s really early, but would love to hear feedback on just initial reaction, how it’s compared to your expectations? And just perhaps even stepping back, some of the behaviors you’re observing from this versus what you’ve seen in prior launches like Solimar and Next Wave. And as a quick follow-up for Laura. Could you talk a little bit about just linearity in June and July. There’s been a couple of prints so far this earnings season talking about a little bit more macro softness in there. So curious about any trends you’re seeing there.
Jeff Green: You bet. Thanks Justin for the question. I’ll take the first part and then have Laura, you take the second. So first, let me explain what Kokai is. So Kokai is a Japanese word that means open for business or open waters. And the reason why we chose that is because we believe this is a very important moment in the open Internet to make it possible for more and more companies to build to us in a variety of ways. One of them being to sell their products. So we have value-added resellers that are selling on our product all the time, whether that’s in data, whether that’s in algos, there’s a whole bunch of ways with – contextual data, so many ways. And then the other is then is advertisers, in particular, bringing their first-party data to the table.
And so with those as the overarching mission, Kokai has really built in 5 major sort of categories or pieces. The first is massive improvement to the use of data so you’ll recall, we launched Galileo earlier this year, and we also announced that Kokai, the creation of a partner portal where people can integrate to onboard their first-party data. The second is the use of AI across our platform. You’ll recall that we launched AI in our platform in 2018 before it was trendy. And we called it then Koa and distributing that AI across the platform in a variety of different ways and different deep learning models so that we’re using that for very specific applications rather than trying to create one algo to rule them all, if you will, which is something we actually very – in a very disciplined way, try to avoid.
So that we can create checks and balances in the way that the tech works, and we can make certain that AI is always providing improvements by essentially having A/B testing and better auditability. The third thing is measurement. So first, we improved data onboarding. Second, we improved AI distributed throughout the system. Third, we improved measurement so that we can to measure the efficacy of ads, especially using retail data. We came up with a couple of new ways of measuring, which is the Retail Sales Index, where we take a variety of different retailers and put all of their data together so that they’re way better than the sum of the parts. And then TVQI, the TV Quality Index, we’re helping advertisers see the benefit of being on premium content versus cat videos or worse that often comes from user-generated content.
Then fourth, in the second half of the year, there will be a new user experience. So that’s right around the corner, of course, because we’re in the second half of the year. So very excited about what that means. I believe this is our biggest and most impressive U.S. upgrade ever, and it’s going to create better behaviors among buyers and because it comes with much better forecasting, they’ll get to see the decisions they’re making and the impact before they even run, which is new. That is something much better than what we’ve had over the last 14 years. I’m very excited about what that means. And then last but not least is integrations for better CTV measurements and performance across the board as well. So lots to be excited about, but Kokai is our biggest relief.
I expect it to be our most successful, but I will say that because this requires adoption during the busiest time of the year – because this requires a change in behavior, I don’t expect there to be lots of adoption during the busiest time of the year. And so most of the benefits will be reaped in 2024 and 2025. But we’re seeing a lot of the rollout of especially the first couple that I mentioned already seeing some impact already, seeing some performance enhancements. But as we go into 2024, we expect this to once again change the way that media buying is performed. Laura, do you mind taking the second half of the question?
Laura Schenkein: Yes, absolutely. Thanks, Justin. On linearity in June and July, we’ve seen visibility improve as the year progressed. And we continue to see improving trends throughout Q2, where we saw our revenue growth accelerate to north of 23% year-over-year from around 21% in Q1. We exited June on a great trajectory, and that’s continued so far in Q3. So we expect a strong Q3 for the same reasons that we outperformed the rest of digital advertising over the last few quarters, which is that we’re continuing to see strong growth in CTV, in retail media and in international spend, all of which have been accretive to us this year. So I believe we remain – are well positioned for the second half of 2023 and even further out as we move into 2024.
Operator: The next question is from Brian Fitzgerald with Wells Fargo.
Brian Fitzgerald: Jeff, we’ve seen some developments around “premium” marketplaces in CTV built around SSPs. As you talk with marketers, do you get a sense that some may be willing to give up some of the precision or expressiveness with which they manage their programmatic CTV budgets in exchange for a lower tax or are they really more focused on getting as precise as possible to maximize ROI?
Jeff Green: Yes. Thanks for the question. So let me first just describe a conversation that I had with the CEO of one of the publicly traded SSPs, where we were just talking about PG, or programmatic guarantees. And just talking about how he saw things. And he and I agreed that as people are moving budgets over from traditional television or linear – they are – sorry. As they’re moving over budgets, from traditional TV or linear. They’re often looking for programmatic guarantees as a place where they’ll spend first. But as he and I both agreed, they always end with spending in decisions because decisioning is much, much better. So we’ve recently done some studies on decisioning across the platform and compared it to PG.
And we found that the value of decisioning or the performance of the decisioning on a CPA basis is 5x better in general, or if you were to say it in terms of savings, it’s an 83% save in order to – in CPA costs in order to decision. So whatever incremental tax, as you put it comes, which is usually, in our case, the 20%-ish take rate, that take rate is more than justified by the power of decisioning that comes to the table. And that’s exactly why even the SSPs and their leadership are predicting that long-term things move towards decisioning, but the PG is an on-ramp. We sometimes compare it to a freeway, where it’s an on-ramp and you get on the freeway. But if you stay on the on-ramp, you’re doing it wrong. And so that’s what we see happening.
That’s what we think the SSPs see happening, but there will be some moves in the very short term towards these premium PMPs that are centered around especially programmatic guarantees that long term, we think, move towards decisioning and broader data usage.
Operator: The next question is from Dan Salmon with New Street Research.
