Q4 2023 Outbrain Inc Earnings Call

Participants

David Kostman; Co-CEO & Director; Outbrain Inc

Yaron Galai; Chairman of the Board, Co-CEO, & Co-Founder; Outbrain Inc

Jason Kiviat; Chief Financial Officer; Outbrain Inc

Shweta Khajuria; Analyst; Evercore ISI

Andrew Boone; Analyst; JMP Securities LLC

Laura Martin; Analyst; Needham & Company LLC

Hugo Real; Analyst; Citigroup Inc

Presentation

Operator

Good day and welcome to Outbrain Inc. fourth quarter and full year 2023 earnings conference call.
(Operator Instructions) As a reminder, this conference is being recorded. I would like to turn the call over to Outbrain's Investor Relations. Please go ahead.

Good morning, and thank you for joining us on today's conference call to discuss our Outbrain's Fourth Quarter and Full Year 2023. Joining me on the call today, we have Outbrain's Co-Founder and co-CEO, Yaron Galai; Co-CEO, David Kostman; and CFO, Jason Kiviat.
During this conference call, management will make forward-looking statements based on current expectations and assumptions. These statements are subject to risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. These risk factors are discussed in detail in our Form 10-K filed for the year ended December 31st, 2022, as updated in our subsequent reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the call's original date, and we do not undertake any duty to update such statements.
Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the Company's fourth quarter earnings release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures. Our earnings release can be found on our IR website, investors.outbrain.com under news and events with let me turn the call over to David.

David Kostman

Thank you, Jackie, and good morning and thank you for joining us. Before going into the specifics of the year, I wanted to acknowledge the challenging events that faced us on a geopolitical level, the events of October seven and the ensuing war and devastating and continue to impact. So many of us, I want to take a moment to acknowledge our team in Israel and thank them for their unwavering commitment and our global team for their ongoing support. Over the past couple of years, there have been massive changes to how audiences consume content and how the advertising industry functions. As a result, we believe the unique foundational assets we own give us a strong opportunity to capitalize on these changes, we are looking at 2024 as a year of return to growth, expect margin expansion and investment in new growth areas. We believe this will result in growth this year as well as double digit growth and a 20% plus EBITDA margin in 2025.
With that said, we would like to update you on our long-term vision and strategic investment areas.
Before we dive into the details, I'm going to provide a perspective on the open Internet, which is estimated to be $100 billion advertising market and the opportunities it presents. The open Internet provides access to an increasingly valuable resource journalistic non user-generated editorial content. In addition, the open Internet also provides access to expand and emerging environments such as mobile apps, CTV and retail media. These environments create deep engagement and attention opportunities not found within walled gardens, and they provide unique value to advertisers. And while walled gardens continue to grow. Advertisers are seeking to diversify their ad spend across channels that can provide incremental audience moments and efficient reach. Our brand is well positioned to capitalize on this opportunity providing a single access point for advertisers. We have an excellent starting point due to our foundational business asset and core AI prediction technology, which has been developed over the last 17 years. First, we are one of the very few companies on the open Internet with a critical mass of exclusive code on page inventory across some 8,000 publishers. This yield valuable proprietary data around consumer interest and engagement. These data, coupled with our core prediction technology fuels, our successful performance advertising business, we've been able to develop new applications of our data and technology with offerings like Keystone, optimizing total publisher revenue initiatives, including subscriptions and eCommerce and Onex third party cookies decline. We believe that our approach to predicting consumer attention based on their editorial interest and the content will be a strong solution for a range of advertiser objectives.
Second, we are probably the true end-to-end supply chain and two-sided platform. Our owned-and-operated SSP DSP and native ad platform provide transparent direct access to our critical mass of inventory with tools tailored to a range of advertiser objectives. As the industry continues to focus on supply path optimization owning direct through unique consumer moments and inventory is more critical than ever. In addition, we believe that these tools give us unique bidding capabilities that drive robust for performance advertisers across the open Internet. This is especially differentiated in the programmatic ecosystem. So in 2024, we plan to lean on this core asset to expand in three strategic growth pillars. The first pillar is growing our share of wallet with advertisers. We plan to do so by First, expanding our programmatic branding solutions with Onex, and second, further developing our Performance Suite to serve a diverse range of advertisers. Onex has enabled us to grow business with enterprise brands and agencies significantly expanding our total demand addressable market. Onyx applies our prediction technology to maximize retention with video and high impact experiences across a dedicated environment of viewable in Article inventory in 2024, we will be focused on scaling our mix to directly address ecosystem opportunities around supply path optimization and programmatic media effectiveness with the pension, we have a strong foundation of working with enterprise brands to our performance offering with the client base that includes companies such as BMW, GSK, Paramount plus Colgate-Palmolive and others, spending more than $200 million with us in 2023. We believe this presents a large opportunity to tap into new branding budgets across our existing client base, driving impactful results across the funnel. We will also continue investing in our performance business, expanding the types of customers we can service with our two unique platforms investment into our proprietary DSPs and Mentor will enable us to provide advanced controls and bespoke service offerings for large scale advertisers seeking to drive engagement and rise across the open Internet. Total spend on our DSP in 2023 was approximately $125 million. Representing a CAGR of approximately 20% over the last two years. It is important to mention that we don't recognize this amount as part of our gross revenue that keep a service fee from that spend, which is part of our extra gross profit. We expect that our focus on driving strategic key accounts to leverage our DSP will result in significantly higher budgets from these advertisers through access to the new Open Internet supply beyond beyond, right, both of these strategies create incremental margin opportunities for us. At the same time, we believe that our proprietary native ad platform Amplify enables us to drive results for customers of all sizes. We will continue to focus on new uses of AI and automation to provide these customers with growth at scale, while AI. has been at the core of our prediction engine for over a decade this year, we have developed new users of generative AI in our native ad platform to reduce market legwork and improve creative performance with dynamic titles. We've seen great success with adoption of our key automated bidding product conversion bid strategy. Today, 73% of our native ad platform customers use conversion bid strategy through new uses of AI and automation Nipent to further grow our core performance customer base.
Second pillar is expanding our supply footprint to reach consumers across the entirety of the open Internet beyond traditional feeds as audience consumption habits shift, we're expanding our access to audiences. Beyond web publishing, we plan to continue bringing our core technology and demand offering to mobile apps, OEMs and platforms. We expected the engagement based building capabilities on our DSP will enable us to drive differentiated performance and outcomes across this new supply, providing a single access point to open Internet consumers by driving outcomes.
And Rob, in 2023 advertiser spend that was incremental to our core publisher feed inventory accounted for over 20% of the total advertiser spend with our brands. We plan to grow this supply in 2024 and beyond to expand advertisers access to engage audiences at scale.
Now to our third pillar, continuing to grow our premium publisher partnerships, bringing advertising dollars back to news by better exhibiting the value of these audiences is more critical than ever as authentic reporting is so essential to democracy, journalistic content will only become more valuable and differentiated. We're continuing to invest in enhancements to our core prediction engine in an effort to drive higher yield for our publisher partners. In 2023, we saw continued CTR improvements with double digit improvements in H2. This prediction engine underpins our core publisher and advertiser offerings with the goal of infusing publishers with sustainable year-round revenue and critical audience development solutions. As mentioned, Keystone remains a key area of investment, providing publishers with a customizable SaaS platform that optimizes total publisher revenue across subscription, e-commerce and more. And finally, Onyx also enables our publisher partners to benefit from a new demand offering monetizing new in article. We do inventory for us at the end of 2023, we secured access to more than 1,000 in Article placements, coupled with our existing performance offering, publishes cannot benefit from a total full-page monetization offering with one partner.
Let me now recap our Q4 performance. First, I am pleased that we achieved our guidance both on excellent gross profit and adjusted EBITDA. I want to refer to some of the highlights for Q4, which reflect the investments we have already made in each of the areas MENTIONED. We've seen great market reception to the launch of Onyx in June 2023 with more than 150 accounts running on the On-X platform in age to hit our initial expectations of $10 million to $20 million in Onex revenue, just six months after launching in the second half of the year, Onex enables us to expand our Demand offering for brands with solutions from brand building to performance. So your data is a good example of this opportunity. So you are the leveraged Onyx for the payload of its new Toyota CHR. model using Onex's contextual pre-roll video formats to drive incremental high attention moments, building stronger awareness and consideration with its target audience. So you got it then harness that top of funnel successes to fuel the performance campaigns they run via our Performance Suite with Onyx. Toyota achieved 82% viewability, 70% video completion rate and outperform and delight attention management by 41%. With our Performance Suite. Toyota managed to drive efficient qualified visits to tour that dedicated landing page advertising offers for the new car models. This is a true cross funnel opportunity. We also continued to secure strategic publisher partners, which is a testament to the value of our full-page monetization and our total revenue offering. In Q4, we continued our momentum of premium publishers switching from competitors securing a long-term partnership with News Corp. Australia. This marquee deal was signed early January. Additional wins from competition in Q4 include Huffington Post would be the US Spain, sport one, both the international and others. These Q4 with complement our premium publisher wins in the last two years, demonstrating the strategic value in our relative advantage in the market. We also renewed long-term partnerships with leading premium publishers including DoorDash, Meredith, for Chantal, probably via IT and digital and hundreds plus adoption of Keystone increased because our existing and new publisher base with launches on CNN entrepreneur and the Telegraph and was a key factor in our News Corp deal.
To sum it up, we are confident that our investment strategy started in H2 2023 and continuing into 24 we'll strengthen our strategic value as a leading cross-channel platform for the open Internet. We believe this will drive substantial growth and profitability in the coming years. As a result, we're also providing a high-level outlook for 2025, where we expect to achieve EBITDA growth of 10% to 15% and an EBITDA margin of at least 20%. I personally very excited about the decisions we've made in the speech speed in which we are executing them, as you may have seen in the release this morning.
Yes, Ron will be stepping down from the co-CEO role. I want to take this opportunity to thank her on a close personal friend and a truly amazing business partner. We have accomplished an incredible amount of our six years working together and a privilege to be part of the amazing company he founded.
With that, I'll turn it over to Yaron to talk about the future and what's next for Outbrain.

Yaron Galai

Thanks, David. I appreciate the kind words, 17 years ago, I recognized the consumers needed better personalization of their content and ad experiences. The publishers needed better ways to engage people and monetize and that advertisers need to create rollouts on the open Internet. That's one I decided together with or a lot of my co-founder to create operating and Pioneer many of the things that inspired other companies over the years since then, we've generated over $5 billion for our partners, which has been a crucial way for many of the world's best publishers to keep journalists editors. In fact, Checkers employed, which as we all know, are so crucial for our functioning democracies.
Now more than ever today, many of our friends innovations are taken for granted as this is obviously how things are done as a founder. I'm tremendously proud about that. It's every fact Founder's stream to move from untested widely touted IPOs to forming multibillion-dollar markets where their fundamentals are taken for granted.
Before I talk about the CEO transition, I want to acknowledge the assist in our industry and the opportunities they present to operating as the company evolves into its next chapter chapter advertisers are moving through paradigm shifts, both because of consumer habit changes and traditional ad targeting methods, which are evolving with the decline of third-party cookies. Accordingly, publishers on the open Internet are also challenged on both ad monetization and audience development. I strongly believe in the points that David has raised about our brand's ability to provide compelling solutions for both advertisers and publishers. Amid these industry changes through the combination of our brands, expanded performance suite and our entirely new branding platform, Onyx advertisers will be able to connect the steps of the consumer journey across the open Internet. This has the potential to create huge value for our publisher partners, giving them one reliable partner to provide sustainable year-round monetization from both brand and performance budgets.
As we look to the future, we're focused on utilizing the core protection technology that has enabled us to recommend relevant editorial and paid experience for over 17 years to new supply environments and new publisher revenue goals. Through Keystone, we enable partners to both diversify their revenues on top of that and to enhance their audience development at a time where search and social are no longer as reliable as they were in the past. And I believe our offering will only become a more critical partner for publishers as we use new solutions like Onyx to bring even more advertising dollars back to news but beyond product like Onyx and Keystone, what gives me the most confidence about our future as the incredible leadership team we've grown over the years, the average tenure of both our executive team as well as the key employees driving business each day is over 10 plus years, and that's a real rarity in tech. And for the past several years offerings management team has been receiving amongst the highest scores in our company-wide engagement survey of everything I've built over the years that our brand, it's our team of people at our frame that I am most proud of, and it's this incredible quality of talent, which gives me tremendous confidence and comfort in the future of our brands through this transition. So for all these reasons, I feel now is the right time to phase out of my role as co-CEO, it's clear that our brand is entering a new and exciting era, applying the best parts of our business to new areas as the industry around us changes as an entrepreneur of the times of change of times of opportunities for companies like outbreak. And therefore, I'm very excited about the Company's prospects through this CEO transitions can be difficult for companies, especially after a tenure as long as 17 years and efforts case, we've had the privilege of our next CEO, David Katzman, already operating as co-CEO, together with me for the past six years. David is greatly respected at all levels of the company, and it's deeply trusted by our customers and our shareholders. For all these reasons, I'm confident that our CEO transition will be smooth as can be on a personal note, I look forward to continuing as Chairman of the Board and serving as an adviser to the company I have no plans for a new or next company on departing airframe. And I look forward to this next chapter after 17 amazing years.
And with that for my last time, I'll hand it over to Jason to cover financials.

Jason Kiviat

Thank you, Ron. As David mentioned, we achieved our Q4 guidance for both extract gross profit and adjusted EBITDA from a demand perspective, I had mentioned last quarter that October has shown a flatter pattern than the seasonal lift. We historically see that time of year, which we believe was driven by transient factors delaying or reducing of budgets in the early part of the quarter, resulting from geopolitical and macro uncertainties, along with lower monetization from the war related news that dominated much of our large publisher partners content in October. We then saw recoveries in November, particularly around Black Friday and Cyber Monday. Despite the softer October, Q4 saw recovery of yields or RPM, which returned to year-over-year growth for the first quarter since Q1 2022. Notably, as demand levels remained soft relative to our supply levels, the yield growth was driven by higher click-through rates, benefiting from algorithm and optimization improvements. Revenue in Q4 was approximately 248 million, reflecting a decrease of 4% year over year. New media partners in the quarter contributed four percentage points or approximately 11 million of revenue growth year over year. Net revenue retention of our publishers was 91%, which reflects the continued headwind from the impact of the demand environment on pricing, which remains that consistent factor driving pressure on our revenue and on our net revenue retention, we did also experience a decline year over year of ad impressions Also contributing to the retention being below 100%, driven largely by paging volatility from certain supply sources and platforms as opposed to churn. Consistent with recent quarters, churn has remained at similarly low levels with logo retention of 96% for all partners that generated at least $10,000. And our five largest churns amounted to only three combined points of year-over-year headwind in Q4 into Q1, we have seen a slightly higher seasonal step down from Q4, while yields remain up year over year. Continuing the momentum from Q4 supply volatility from certain partners and platforms has driven ad impressions to be down year over year. Based on what we've experienced. We also see opportunity for growth from new sources into late Q1 and beyond. In our guidance, we applied a wider range of outcomes, reflecting volatility as tech gross profit was 63.8 million, an increase of 8% year over year, outpacing revenue for the third quarter in a row, driven primarily by improved yield performance on certain media partners and the net impact of revenue mix.
Moving to expenses, operating expenses decreased approximately 8% year over year to $47.5 million in the quarter as we continued to exercise discipline around spending. The largest component of this is compensation related expenses, which were down approximately 4 million or 11% year over year. We began 2024 with a headcount of approximately 870 FTEs, which is down about 11% from January 2023, as we have focused our attention on driving greater efficiency in our operations and now on redeploying resources towards higher competence growth areas that David mentioned as a result of our cost management and growth of XBright gross profit displaying the leverage in our model. Adjusted EBITDA was $14 million in Q4, approximately doubling year over year.
Moving to liquidity, free cash flow, which as a reminder, we define as cash from operating activities, less CapEx and capitalized software costs was approximately $21 million in the fourth quarter, benefiting from higher profitability and seasonal working capital benefits. While we are pleased to have such strong free cash flow in the quarter, we still see pressures in working capital, particularly around collections with elevated DSO levels remaining from Q2 into Q4.
Considering free cash flow for the full year 2023, we saw net use of cash of approximately $6 million, which excludes a $4 million benefit from our investment portfolio that benefits cash from investing activities as opposed to free cash flow. As a result, we ended the quarter with 231 million of cash, cash equivalents and investments and marketable securities on the balance sheet and $118 million of long-term convertible debt in December 2022, the Company's Board of Directors authorized a 30 million share repurchase program, incremental to the $30 million program fully executed in 2022 and 2023, we repurchased approximately 3.7 million shares for 17.8 million in total in 2022 and 2023. We have reduced our outstanding share count by approximately 12%. We continue to believe is an attractive way to enhance shareholder value under current market conditions.
Now turning to our outlook. As discussed today and in prior quarters, visibility to advertising budgets remains limited in our guidance. We assume that current macro conditions persist with no material deterioration or improvements and regular seasonality. With that context, we have provided the following guidance for Q1 and full year 2020. For Q1, we expect X-Tack gross profit of 50.5 million to 53.5 million, and we expect adjusted EBITDA of negative 1 million to positive 1 million for full year 2024. We expect ACTech gross profit of 238 million to 248 million, and we expect adjusted EBITDA of $30 million 35 million.
Provide additional context to how we see 2024. Our expectation is that we begin to see more meaningful year over year growth vector tech gross profit over the course of the year. While expenses increased slightly sequentially over the year for X-Tack, we expect mid single digit percentage growth year over year in Q2 and Q3, followed by double-digit growth in Q4, driven by returns from our focused investment areas.
David touched on expanding our supply beyond our traditional fields, growing enterprise brand and agency spend, growing performance, advertiser spend and growing and optimizing publisher revenues. Notably, many of the areas we're focused on are areas where we expect that we can drive excellent gross profit growth that outpaces revenue growth as we assume a flat macro environment with no material lift from pricing improvements seen growth over the course of the year is driven by our execution of these investment areas contributing more meaningfully in the second half of the year.
Now I'll turn it back to the operator for Q&A.

Question and Answer Session

Operator

(Operator Instructions) Shweta Khajuria, Evercore ISI.

Shweta Khajuria

Okay. Thank you for taking my questions. Could you please comment on your confidence of getting to 20% plus EBITDA margins next year for the year full year guide right now, if I did the math right, it implies low double-digit percentage margins. So that's a meaningful expansion. So could you please help us put that together and then Jason, and just your confidence in the back half weighted growth for us for top line, and you just mentioned some of the drivers, but how much visibility do you have in your ability to deliver accelerating growth in the back half of this year and then wishing you all the best your own. Thanks a ton. It's been great. I'm looking forward to seeing what you do next.

David Kostman

Okay. So thank you. And let me take the first. The first point on 25. I mean, the reason we're giving an outlook. I mean, you can see we're giving, in this call many more metrics than before. We're very excited about the future.
We're very excited about opportunities on the open Internet, both with our existing base and on other platforms. And you heard the strategic pillars of growth we're highlighting and we're looking at real expansion of share of wallet with advertisers, both on the sort of brand awareness side that we're doing with Onyx and much deeper into share of wallet with our performance advertisers, which has been the core of our business. So we've seen many segments there where we can grow significantly through the use of the cement conditioning technology and expanding the reach to third party supplies way beyond our publisher base. So that's the second one going beyond the publisher base and offering much larger supply base for them. And then a growing the premium publishing publisher partnerships that we have is something we announced News Corp.
We've had a string of major premium publisher wins. We think there's a lot of opportunity there to grow and it's coming through the offering that we give them that is very strategic combination of the feed and Keystone sort of looking at e-commerce optimization, subscriptions and other gives us a, we believe, a big advantage there and also the quality of Onex demand, and that may not be complacent. So we're becoming a more strategic partner there. So overall, and this is giving us and we made investments I mean, you can see it in our expenses. It's a little higher than probably what you expected. So we made some strategic investments. Second half, we do live in 24 and that's why we have really good confidence around the 25. And we gave that outlook of seeing double digit growth in 2025 and also very focused on the adjusted EBITDA margin of 20 and.

Jason Kiviat

Sure, it's Jason. I'll touch on the second question that you had to this versus how we build our guidance. It's our normal seasonality based model, of course, and we're considering the trends that we've seen into Q1, which is the continuation of Q4's growth in yield year over year, which again, like I mentioned on the call we haven't seen in quite a few quarters here. We're also considering the isolated supply volatility that I talked to on the call, which we think is temporary. But Rusty, no expanding our range and being cautious about it.
As far as the impact of these these these growth drivers over the course of the year, many of them are areas that we expect will grow margin. And so what you'll see is we're kind of doubling down on a lot of areas that we think can pay off and the balance of some of these items have more immediate payoff optimizations of our network, acceleration of our suppliers at the feed and partner specific performance, along with some that have probably little bit longer-term payoff side that are more back half weighted on the penetration of Onyx and the shift to more video formats we use. What you'll see in our guidance is a slightly more back-weighted than our 2023 or 2021, but not not more meaningfully from a top line perspective. And obviously, I think our costs are in our really headcount related as far as our investments go in, there are really evenly spaced throughout the year, which which skews EBITDA towards the back half, but consistent with our history. But I think we'll be able to kind of monitor results and control that has been.

Shweta Khajuria

Okay. Thanks, David. Thanks, Jason.

Operator

Andrew Boone, JMP Securities.

Andrew Boone

Good morning and thanks much for taking my questions. I wanted to ask a bigger picture question just on the health of the overall digital publisher. We've seen shutdowns in terms of buys both the just sort of complex. It just feels like it's very tough sledding out there for digital publishers. And can you just opine on the overall health of the industry and how that relates to our brand, how viable do you guys need digital journalism to be for our brand and work and grow revenue?
And then secondly, I want to ask about the second pillar of growth. You talked about earlier, expanding supply Type two is what does that look like? Help us better understand what additional source supplies could be? And then how that relates back to that kind of growth? Thanks so much.

Yaron Galai

And the answer I gave one or I can take no bad news. Okay. Thanks, Andrew. You run here. So I'll take first stab of the overall and then 60 will jump in with the second question.
So first of all, as we've said and as we've been executing, I think the view of just publishers for us is quite narrow. So we grow outside of the traditional publishers in three main ways. The first one is through our programmatic extensions through the DST. that we entered into we now have reached plenty of non-public or non-food inventory. The second is through our platform partnerships. So we've been from business with non-hub services such as Samsung phones and OEN.s and folks like that. And the third, which we also mentioned here is still small but growing as in-app presence, which some of it is upstairs, but much of it is into the future isn't necessarily so. But the way the way I think of this in an effort in terms of plus of the word publishers, they are obviously very important partners for us and and will be for the future. But it's not necessarily, I think of this more as concert content consumption time or campuses where consumption happens, that's still plenty big and moving maybe, you know, shifting between different different types of companies. But for us, the volumes of that kind of consumption and time spent happens, that's opportunity for us also with the publishers with some of the pressures, I think the offering is their number one best as partner of choice because we're both a reliable, solid monetization partner, growing the monetization opportunities through things like Onyx with code on page and the tremendous size of our footprint. We have a lot of first-party data, which makes us pretty resilient compared to other things publishers have.
And then on just the other pillars that are very important for these cultures, especially these days audience development, which they're not getting as much of from search and social operate as a fantastic partner for them on that and revenue diversification through Keystone. So all those things, I think become even more important for us for the publishers into the future.
And then just the last point in terms of growth open Internet is I'm not good with TAM, but call it the $60 million to $80 billion in TAM and growing within that we think is a big occupancy. So things like Onyx where both incremental growth on the types of budgets we bring in, but also on the real estate side with our partners, I think, is a big opportunity for us.

David Kostman

David, I think Yaron answered both questions, but I would just add that when you look at the traditional publishers, the most premium ones. If you look at the top top50 100, I mean page views and we analyze that all the time are pretty constant. We do believe that we bring strategic value to them. We're looking right now at the election year, which traditionally will increase pages. And generally, when you look at trends of consumption, we do believe that short-form video is sort of getting to some plateau that a lot of value in the journalism and value there. So again, I think what you hear my voice is on the longer tail of publishers than the bigger ones. But clearly, I mean, the industry is under pressure and our strategic role here is to again provide audience development and help them monetize on a variety of ad and other inorganic revenue sources like e-commerce. And as John said, I mean, we we do look at third party supply. We said it's about 20% of our business today, we see a big opportunity then sort of it's Euronext by doing that, increasing that third party supplied by our by our very strong leading technologies and also grow share of wallet on advertising.

Andrew Boone

Thank you.

Operator

Laura Martin, Needham & Company.

Laura Martin

Hi. So I'm going to build on Andrew's comment and ask you about the threat to the open Internet. More generally, connected television is growing faster, and that's sort of a collection of walled gardens and cookies, deprecation risk signal loss in the open Internet which may push ad spending, at least in the near term into walled gardens where there's no signal loss.
So could you speak to the health of the open Internet, which is where you participate and why you think it will have a robust it was three years forward?

Yaron Galai

Sure. So assuming first of all, you know, maybe we need to do around here things are I think we might need to start making distinctions between walled gardens, which in my mind, is basically where we have logged in or registered users versus the big tech companies. And I think the system of walled gardens is not that necessarily all that are all doom and gloom. We can see some of the best publishers back to Andrew's question the best publishers are in a way a wildcard, but maybe those companies are not necessarily the big techs, Google, Facebook type companies. And even though they have kind of a walled garden environment and first-party data and registrations and all that they need partners like the airframe to build out the third monetization and audience development capabilities. They're not going to be that each one of those is going to be building their own suite of SaaS and and all that like Google and Facebook and some of the big tech companies do in those terms, I think of walled gardens is a great partners for us because of the signal fidelity data facility is a higher. They'll only partner with usually one exclusive partner, a couple of of meaningful partners. The and I've got data synchronization and ability to better target. I think it's just going to it's just going to benefit from that. I think the other thing we should all be paying attention to is it's true. The growth of the big tech, the Googles and Facebooks thing has been tremendous. I do think we look at many governments around the world and the regulations that are coming and the limitations of they're trying to trying to place those are generally targeted at those big tech companies while trying to benefit the the open Internet or journalism based publishers or those types of categories and what's happening in Australia and Canada. I think with the in terms of getting giving some of the capabilities back to cultures. I think it's also an important dynamic. I don't think that's that world necessarily is becoming easier and easier for the big tech companies. I think the open Internet might be a beneficiary of that.

David Kostman

Perhaps one thing I want to add one point. I mean, we also notice that we were becoming as the company much more focused also on how do we serve much better a wide range of advertisers. From an advertiser perspective, the open Internet delivered incremental audiences. We have no endless number of cases showing that we could do something on YouTube, but we deliver to them incremental audiences that we can target in a better way using unique signal that we have talked about cookie deprecation but some of the contextual signals are supercritical here. We can develop audiences for them. So it's incremental.
And also there's a pricing question in terms of what do you get your incremental yield and the open Internet is there and delivering that so far for any advertiser, the open Internet is an important part of the overall spend, delivering incremental value and audiences and in many respects, it's better targeting. If you think you want to target someone on that interested in a certain vertical, we aggregate those publishers do that. So there's a lot more work more there. I mean, we estimate that market we checked and our colleagues about with the lot size about $100 billion advertising. And by the way, we're also expanding beyond boat, we call traditional publishing. So I think the combination of all that gives us a lot of optimism on the future.

Laura Martin

Okay. My second one and I have three my second one is about industry structure. So when we you guys came public, you sort of were direct competition with one other company. That company has really taken sort of a hard left or right, it's really pivoted away from what I would call your core business. My question is, does that make it easier for you to participate? Is your sort of world opening up as they sort of lead this space and move in really different direction.
New eCommerce, big brands Apple announced yesterday. Does that leave you more of an open greenfield to compete to price better and have less competition.

David Kostman

So I'm yes, I mean, I think the companies have taken different directions, and we are very focused around the demand side and offering across funnel offering for advertisers we launched on Exalytics is very differentiated. It is value that's delivered in a different environment, different experiences, video, high-impact display in certain placements of the page. And it really allows us I mean, we've been very focused on developing that cross funnel motion for advertisers on the traditional publisher side where we have that competitor. I mean, you've seen our our wins over the last two years have been I think we clearly differentiated around premium publisher wins coming from a combination of the strategic value that our offering brings to those publishers.
Going back to your earlier question, we still believe that's a big occupancy and business. So by delivering better value, higher monetization, better audience tools and a broader value proposition strategically with Keystone. We believe that on that side, I think, again, it's been demonstrated I think in terms of market share, you saw the names that we talked about major wins. So on that front, I think that's helping us that our competitor is looking at other things. Also, when you look at them right now, the issue of demands and cities coming a lot into play here with with that, being able to really focus on delivering our demand into existing and not having to really take the same level of demand and spreading it around.
You refer to the Apple News. I would urge you to look into the details of that. I mean, we don't know much about that and the you know. So we again, it's companies taking a different direction.

Laura Martin

I think it's actually a good thing on the back of my last one super quick, and you gave us really intriguing statistic about the kind of 73% of your clients were using in the conversion bid strategy?
And my quick question is, what kind of lift are you seeing in using those Gen-i tools that is getting 73% adoption, which is quite high.

Yaron Galai

So we haven't shared specifics, but we did see an increase from the deployment of CBS. And just to be clear, CVS or conversely, good strategies for our brands kind of equivalent stores into Google's Pemex, where the advertiser sets their goals, their business goals, the the sales they want to make the revenues Conversant they present, they want to make. And then there's no there's no bidding or costs that they need to set the feather out brings algorithms front that fall for them. So I think the best indication this has gone from non-existent a couple of years ago to over 70, as we've said, 73% of the campaigns running out to guests now. And I think that's the best indication with performance marketers, but that's where they're finding value to big values. First of all, there's a there's the simplicity of setting up. I suggest campaign you just need a lot less manual labor on the side of the advertiser campaign. Management cost management and all that. And the other is improved ROI just maximizes their return on ad spend. And so we don't breakout or haven't reached this quarter. The specific uplift that we're seeing. But I think just given the indication of so many of the anti switching to it, you can imagine that, that dynamic.

Laura Martin

Thanks very much.

Operator

Hugo Real, Citi. Please proceed.

Hugo Real

Hey, good morning, guys. Yes, maybe just looking to the 2020 for double digit growth outlook. Wonder if you could help us just kind of bridge that how much is maybe strengthening of the kind of current core business and how much that is driven by some of these new growth pillars you outlined, maybe specifically on OpEx on how you see that ramping in 2024 and 2025. I know you didn't some quantified the 4Q impact are the last six months, but maybe expect any patients were at 2024 and 2025?

Jason Kiviat

Sure. Thanks, Matt. It's Jason. I'll start on this and maybe, David, could I touch on the next part of the question. Yes. As far as just getting to growth mean maybe one number helpful data point in how we see the year growing, is that I mentioned I mentioned on the call just some some volatility in small pockets of supply. Without that, it's very isolated to a couple a couple of partners who have either changes that they made in the auction or technology or policy changes. And absent the volatility, we would have seen or we would expect to see, I should say it was growth of X-Tack in Q1 and the high single digit percentages. So it's not that we're far off from that double digit growth that we're guiding to there absent kind of this one-off, which we which we are cautious about. But I do view as temporary with some optimism around there and obviously optimism around all the areas that Dave talked about and optimism around just positive yield trends that we've started to see in Q4 and ramping in Q1. And so it kind of a combination of the things. I mean as far as maybe just giving you just the sense of magnitude of some of those investment areas?
I think the expansion, I think for 2020 for X-Tack, the expansion of supply beyond the traditional feeds and the performance of share of wallet increase are probably the top two contributors this year, but that we really see contributions from all four over the course of the year.

David Kostman

And then maybe David can touch on the enterprise brand and agency and on et cetera, your case on Onyx and generally brands and agencies, we said on the call, we have about a $200 million business that is brands and agencies that a lot of it is performance that we also now leveraging into into our next Onyx. It has delivered the better than expectations in the second half of last year. We're only talking about specific about half a year. So you can imagine that we assume that it will more than more than double in 2024. And the important thing here is that we are in a very different dialogue today with advertisers and agencies around this cross funnel notion and ability to really help them link it all together.
That's very unique. Two apps in the ecosystem in the open Internet. And I'm also very excited about the again, the other growth drivers that them that Jason referred to it in the new Keystone product than we have today. Keystone on about 15 publishes that also an important growth driver for us, and that's helping us on the pharmacy side. So but the brand side is a very exciting Onyx in terms of the acceptance in the market has been something that's been very successful. And we think that's going to be a big growth driver in the future, really focused around increasing our ability share of wallet from the demand side, both on the brand Xenonics and on the Okay.

Hugo Real

Okay, great. Thanks. Very helpful. And then maybe just one on cookie deprecation. Just how are you guys exposed? Maybe you didn't help as I think about your exposure to cookies I understand it's a lot recommendations, but how much exposure do you have to cookies? And with your exposure to news publishers, how do you see now with cookie fabricating, any impacts to their CPMs and flow through your business? And maybe it seems like some of your new products like Onyx and Keystone maybe puts you in a better position on helping them leverage 1P data on so that maybe the right way to think about it expensive rent here.

Yaron Galai

So with the with cookies First, it's important to make a distinction between as you could see between first-party cookies and third party of the independent third party cookies. That is data signals that we definitely use. We tried to use any data signals that we have but it's actually some of the the weakest are you go the less meaningful signals that we use. We have a tremendous amount of first-party data being the the engine powering the feeds on many of those publishers. And those are mutually exclusive partnerships where we're operating. It's the only ones telling that he had to say tremendous amount a bit. And that's just because could on stage and we're covering those ads, it feeds and on every one of the pages on web on their app. But it's also far beyond that because we're powering usually all of their internal or organic recommendations, which get much higher and feature rich, that and as ever do, and it gets a lot of first-party data and signals that we can use when you're trying to compare that to say anyone and AdTech, it's just a different kind of order of magnitude of data and first-party data that we have code on page on every one of those pages powering both the US and the non-U.S. And you're absolutely right that the things like Keystone giving us even more data signal on those places also mentioned of myself and the core of our team here at our brand and our previous company. We invented the space of contextual advertising about 20 some years ago. And so we kicked off our offering with a tremendous amount of expertise on contextual that obviously uses no cookies at all. That works at a button on any page. And we're I feel like we're the experts in that space in the world. And then on things like Onyx and video, the all the targeting signals are are are very different. We don't do retargeting across different sites. We're powering those experiences on those partners that we work with search the way to think of it.
Maybe maybe just the last point, could be third party cookies were dedicated on a bunch of environment a few years ago, three, four years ago on a Safari and Firefox. And we've been just going from strength to strength on the main indicators that we have, which is click-through rates ever sent. So if you take that as an indication of what's coming with the Google Chrome this year, I think we've done quite well, also, thanks.

Hugo Real

Appreciate the thoughts.

Operator

We have reached the end of our question-and-answer session, and I would like to turn the conference back over to management for closing remarks.

Yaron Galai

So thanks for joining us today. We're very excited about this new chapter for the company with exciting strategy pillars like the enterprise brands with Onyx, extending advertiser share of wallet with our performance marketing suites, extended our exclusive could on page through improved monetization and Keystone as well as the programmatic reach through our ESG event.
On a personal note, it's been the privilege of a lifetime to work with 1,000 or so incredible operators. I'm excited for the future of the companies that started a new chapter, and I'm confident that our fantastic group of people will continue carrying and building our unique company culture for many years to come. I look for forward to serving you all the offerings of shareholders as the company's chairman. Thank you.

Operator

This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.