That’s a different set of data that I also think will have some licensing potential. I mentioned this a few calls ago in the early days and early days meaning two years ago, we did do a licensing deal for Moz with OpenAI relating to our database of domain authorities. We probably didn’t understand it then we understand it now a little bit better that was likely used as part of their LLM waiting and using our DAA’s domain authority data to weight different sources of text. So look, there’s a lot here. I would say that I view these as incremental revenue opportunities, not compensation for harm unless there is some fundamental change in the way the search engines operate and I don’t believe that’s the case.
Ross Sandler: Got it. Okay. And if we go back to the ad business, and we look at your guidance, the 5% to 7% for 2024. How do we think about the, the inputs to get to that that that kind of revenue growth? Like, if we look at traffic that you’re attempting to drive more of to your sites or CPM and you mentioned new video product at IGN, things like that. How do we kind of bridge to getting to that that mid-single digit number between things that you can control and just the overall ad market being in a better place in 2024?
Vivek Shah: Yes. Look, I mean, it’s there’s a very unpacked category by category answer. I won’t give you that in the interest of time. What I will tell you is if as long as tech doesn’t decline another 20 plus percent, we’re fine. And our view with the turn in consumer tech in Q4 and our view into the enterprise market stability, we don’t believe that’s happening again.
Operator: The next question is coming from Kunal Madhukar from UBS. Kunal, your line is live.
Kunal Madhukar: This is Jason on for Kunal from UBS. I have a couple of questions. So the first one is on the M&A. I know you guys have been seeing some signs of thawing since the end of last year and that trend is continuing so far. And you also provided some general commentary on sort of the environment where strategic buyers are more willing to transact. Can you unpack that a little bit? Could you provide some commentary on which industry vertical you are seeing the trend? And also, apart from that, independently, where do you guys want to grow in your portfolio in five years vertical? And I have a follow-up.
Vivek Shah: From an M&A point of view, our sourcing activity as you know comes in two ways. One is we have these 7 platforms, right. And so each of our platforms, tech and gaming and connectivity and health, cybersecurity, Martech, shopping, all of these platforms are each individually looking to source deals. And I would say that they’re all having success in engaging in a lot of discussions both inbound and out bound. So there’s a fair amount of sourcing that happens there. And then we’re always on the lookout at the corporate level Bret and myself and our corporate development team looking for new platforms, new verticals in which to enter. So both sets of activities are happening. And because we have this sort of wide breadth of places to look and people who are looking, we generally see a lot and I would say tonal — I would just say the tone in each of these is lots of responsiveness, lots of willingness to provide information in diligence processes.
These are the things that I look for, right. In the end is how open are they? How willing are they to give information and answer questions? How quickly are they responding? And what we’re seeing now is a lot like what we saw in the 2020, 2021 and those time periods. In terms of where, I’ve said this before I tend to like bolt on’s the existing verticals for a variety of reasons because they’re generally underwritten with a fair amount of synergy value as a function of being bolted on. And so from a cash on cash return point of view, those tend to be very good. The second thing is that we have a lot of mouths to beat here. And so the degree to which we can support the capital allocation needs of each of our 7 businesses and platforms, I think we like to be able to do that.
And the last is that these deals are sized in a way where there’s a good sort of risk reward balance. Having said that, as we did with Everyday Health, which got us into the health vertical and has been as you know a very successful business for us and with RetailMeNot, which has gotten us into the shopping vertical, we are always on the lookout for the next vertical. So look, I think it wouldn’t be appropriate for me to say I favor one set over another or any one of these groups because we’re in all of these verticals because we like being in these verticals. And so we hope to be able to spread it around.
Bret Richter: The only thing I might add is if you look back over the last couple of years and you look at where we’ve allocated capital primarily, we’ve allocated capital to our businesses that have gone through the transition post-acquisition of reaching a profitable core and are healthy businesses that are either achieving or on the precipice of growth. So we’ve invested in health, we’ve invested in connectivity, we’ve invested in gaming. As Vivek said on his prepared remarks, I think we’re starting to see that in our Martech business, our Moz, our email business is growing. So I think as our businesses reach the evolution of sort of structural stability and through that integration phase and start on their path to growth, they become stronger candidates internally for investment capital.
Kunal Madhukar: Got it. Thank you so much. My second question is on sort of, B2B tech space. You guys mentioned that on the call, just now that, you know, we might be at the bottom for, enterprise B2B space. And speaking of SpliceWorks, just curious, you know, is one of its competitor, TechTarget, recently announced a merger deal with another competitor? So I’m just curious how your current view, on the space has changed, after the news? Thank you.
Vivek Shah: Yes. No, obviously, we follow the space carefully and we’ve seen the merger that you described. Look, I think at the end of the day, the SpliceWorks business, we’ve got a plan in place, some new talent at the organization and we’re confident in their ability to execute against that plan. As you know, we did seek strategic alternatives for the business last year and it was a good process, probably not well timed given what was going on in the space. I think in our view, holding the asset made more sense given where it was. And I think we’re feeling good about that now because we sense that that might have been the bottom and maybe that’s not the best time to be considering those types of opportunities. The other thing I will say within the SpliceWorks business that sometimes you need to go through a process like this to better understand what you have is that there is interestingly inside of the SpliceWorks business software that we provide help desk software is what it’s most well-known for which is actually free to the user and is ad supportive.
And we’re as we look at where GenAI could potentially have the most impact, it might be actually encoding and software development. And so we may be moving into a time where software development supported by advertising which hasn’t really happened ad supported software in the enterprise or within the business has not really happened. We actually might be at a moment where that is going to happen. And if that’s true, SpliceWorks has an interesting position there with an existing help desk software and few other software tools for the SMB. So just another thing that came out that is a little unique and a little different that we’re going to lean into.
Operator: The next question is coming from Shyam Patil from SIG. Shyam, your line is live.
Shyam Patil: Good morning. This is Aaron on for Shyam. Thank you for taking our questions. I’ve got two. First, Vivek, you talked a lot about the AI use cases that you’re building and rolling out for users on your sites and apps. Could you please provide more of an update on how you’re thinking about AI use cases to improve internal operations or productivity across the portfolio?
Vivek Shah: Well, I can talk about, AI in the context of our data management platform, which is called Core. So Core is an internally built data management platform at the company that allows us to build essentially signals that emanate from every interaction between our audience and our content, our audience and our tools, our audience and our applications. And that dataset is really important in informing ad placement within our property. So there is contextual placement but even contextual plus a demographic data signal. And that combination has been really important for us over the years. I will tell you that AI being infused into our data management platform have made our signal capture and signal analysis a lot stronger.
And so the degree to which we can use AI to generate better ad performance, I think that’s an example of using AI to at least I guess I think you think productivity more in terms of margin and efficiency and that type of thing, but this is an example of where they just help us produce better revenue outcomes and better customer outcomes. The area where I could see efficiency from a cost point of view is in programming and encoding. And I sort of alluded to that in the SpliceWorks statement I just made to the previous question, but we are seeing success in using this from a coding point of view.
Shyam Patil: That’s helpful. Thank you. And then second, on the gaming ads business, I know this is levered to product releases in the space. For those of us who aren’t as close to gaming, could you just share your view on how the product release pipeline for 2024 is looking at this point?
Vivek Shah: Yes. So I mean it looks reasonably good. I think again there’s some back end waiting and there’s always — its kind of pushing into the year. I will say one thing because I want to make sure that I get this on the tape so to speak. As you may have all heard E3 was canceled in Los Angeles in June. That is the major industry gaming event. We announced a week or two ago the launch of IGN Live, which will take place in Los Angeles on the same date as E3 has and it’s been the response in the gaming industry amongst fans and publishers and members of the ecosystem has been incredible. And so just an example of IGN using its position and leadership position in the industry to really great effect. I think it’s going to be a great event. So I will leave it there.
Operator: The next question is coming from Rishi Jaluria from RBC. Rishi, your line is live.
Rishi Jaluria: Wonderful. Thanks guys for squeezing me in. Two questions from me. First, I wanted to go back and talk a little bit about the initiatives you’re seeing on the VPN side to drive growth. Can you dive a little bit deeper into what can be done to improve that business outside of obviously the macro environment and anything external? And then I wanted to go into AI. How is that gonna impact the actual P&L? What sort of impact are you thinking about either on the gross margin side with higher COGS of AI workloads or R&D as you build out some of these AI features and functionality? Thanks.
Vivek Shah: Yes. So just on the VPN side, the issue we had had on VPN was really a customer acquisition issue. We were getting priced out in the affiliate channels against competition who were willing to pay bounties and endure customer acquisition costs that were quite a bit higher than LTV, sort of an upside-down chase for subscriptions. That has started to mitigate and I think you can’t our competition really couldn’t continue that in perpetuity. So in 2023, I think our sign ups grew something like 15%, our new billings grew 33%. So as that starts to play itself out, we’re going to flip the equation and really turn to growth. I also think that the product has significantly improved. A lot’s been done product wise to improve its efficacy and its performance, which really helps drive retention.
So there’s a lot going on. We’ve also got some white label things that we do that are unique to us and we’ve got some interesting white label partnership opportunities in front of us. So all of that I think adds up to why we are feeling good about VPN coming back to growth in the second half of 2024, which is really important for our cybersecurity and Martech segment. Just to finish up on your last question, Rishi, I would say right now it doesn’t the AI is not showing up in the P&L from the point of view of a cost savings or a significant change in our CapEx. I think we are integrating it into our workflows. We’re finding ways to do it I think efficiently — we’re certainly hiring people but not in a way that has a radical impact on our level of capital expenditure or on our mid-30s EBITDA margins.
Operator: There are no other questions in queue at this time. I would now like to hand the call back to Bret Richter for any closing remarks.
Bret Richter: Thank you, Paul, and thank you everyone for joining us today as we wrap up 2023 and turn our attention to 2024. As we put out a release, we’ll be participating in conferences in the coming weeks and we hope to see some of you there and again on our Q1 call.
Operator: This concludes today’s conference. [Operator Closing Remarks].
