DoubleVerify Holdings, Inc. (DV) Earnings Call Transcript & Summary

Good afternoon, and welcome to the third day of Needham's Growth Conference now in its 24th year. My name is Laura Martin, and I'm the senior media Internet analyst at Needham & Company. Our format today is a fireside chat. And if you'd like to ask questions, please feel free to put them into your question box and hit Submit, and it'll show up in my dashboard about 5 minutes later. So as soon as you think of them, send them off, so I can be sure to fast pass your questions to the front of the queue, and I get them answered for you. I'm happy to welcome to the virtual stage DoubleVerify CEO, Mark Zagorski; and CFO, Nicola Allais. Mark has been an ad tech leader for only 2 decades. Prior to joining DoubleVerify as CEO in 2020, Mark was the CEO of eXelate, which he sold to Nielsen, and went on to become the CEO of the public company, Telaria, which he merged with Rubicon to form the NASDAQ-listed company, Magnite, who was on our stage earlier today. Nicola joins DoubleVerify as CFO in 2017, having been the CFO of Penton and Downtown Music and a senior finance leader at Primedia, Brill Media Ventures and HBO. Lots of media in your background, Nicola.

Why don't we start, Mark? You often refer to DoubleVerify as a core utility within ad tech, which is a unique positioning. Can you tell us what you mean by that? And also maybe you could help our audience understand where DoubleVerify sits in the digital advertising ecosystem and what your value proposition is to advertisers.

Sure. Thanks for the question, Laura, and good seeing you again. All you virtual folks out there again, Happy New Year. When we talk about DV as a utility, I think it's important to understand that what we do is actually verify the quality of media transactions, digital media transactions. And so we believe that all media performance begins with media quality, right? The base measure of media quality is whether an ad is brand safe. It's viewable by human. It's delivered in a valid geography and that the transaction itself is free from fraud, right? These are baselines for any advertisers to have, right, if they want to buy an ad. And that means that when we engage with advertisers, they want to use us on every single impression they have. It's a utility, right? They don't pick or choose whether or not they want to start with media quality. They have to have it, right? It's a requirement to say, before I do anything, I need to make sure before I target, before I choose media, before I decide what the creative it is, I need to make sure this transaction is verifiable and safe. So when they work with us, they work with us basically on every impression they buy. And we provide our service, the verification service, on both direct buys, so when someone buys across YouTube or Roku, et cetera, as well as programmatic buys, so when they're buying through Trade Desk or through Amazon. And the way we get paid is every time they ping us to verify that transaction, we get paid. So the bottom line is you think about the value proposition here in the same way that Mastercard or Visa ensures that a retail purchase is safe and secure, right? We are doing the same for the digital advertising industry. We're ensuring that advertisers have a safe and secure transaction that they eliminate waste and ultimately, they drive better outcomes, right? And that's what this is all about. It's about driving a better outcome. And the base level of driving better outcomes is verifying the media that they're buying across.

Do you want to talk about your business model? Sort of unique in the ad tech ecosystem.

Yes. I mean, look, we are -- we like to call ourselves transactional SaaS, right? We don't make money buying or selling media, but we do get paid every time someone asks us to analyze a transaction. So every time someone buys an impression, that works with us across Roku, or buys an impression on Bloomberg or uses Trade Desk to buy programmatic impressions, they ping us. And we send a response back saying whether or not we believe that this transaction is fraud-free, brand safe. It's in the right geography, et cetera. Every time they do that, we charge them a fee for that. So it's not a percentage of media, it's a flat fee. It's a flat transaction fee. So every time they basically ping our database, we charge them a fee for that data returning back to them.

And I'll just put numbers behind that to make it a little easier to understand. We think -- we estimate that DoubleVerify gets $0.08 per 1,000 impressions. And normally, the impression is they're verifying between $2 and $20, but they get a straight -- when he says fixed fee, he doesn't mean like you get $100,000 a year, you get $0.08 per 1,000 impressions. So as long as there's impression growth, DoubleVerify grows.

Yes. Exactly. So we enjoy the growth of the digital space without having to feel the up and downs of a percentage of media model for the most part, right? So we grow when volume grows, and that's a good thing for us.

Fantastic. Let's talk about a couple of growth drivers. Specifically, let's start with social and connected television. Let's shorthand it to CTV. What are the growth prospects for social and your CTV business, particularly with the acquisition of OpenSlate, the announcement that Facebook is opening up its news feed to third-party verification and the expansion of tools that help advertisers better leverage CTV?

Yes. So I think the -- when I talked about our business, starting off on your first question, the 1 thing that is really important to know about us is although we work in the advertising technology space, right, we don't fight for share, for media share from Facebook or from YouTube, like other media companies. We're not taking a piece of the advertiser dollar, right? We're verifying everything. So when you talk about social and CTV, we're verifying transactions across both walled gardens like YouTube and like Facebook as well as proprietary platforms like Roku, Amazon, Hulu, et cetera. So part of our value prop is creating a single currency or a single validation currency across all of those different platforms, whether it's a walled garden, whether it's a programmatic transaction, et cetera. So starting off from there, what's so exciting about CTV, it started off CTE for us, is the fact that not only are so many dollars going there, but it's -- those dollars are increasingly becoming programmatic. And we know that programmatic is wonderful for driving optimization, but terrible for transparency, right? It's a universe in which there's not a lot of transparency. So a, we provide value in creating a more secure transaction on the CTV front by rooting out things like CTV fraud, which we see increasing, by leaning into areas like viewability. And I think someone would say, well, is all CTV viewable? It comes on a big screen? Well, what if someone pauses the ad in the middle before the first quartile gets through, right? Is that ad really delivered? Is it really viewable? So we look at things like viewability. And increasingly, we're looking at metrics like fully on screen, right? Was the ad fully delivered? Was the video ad, for example, that may be delivered both on a CTV perspective and a desktop remote perspective, was it fully on screen? So we look at CTV as being a huge growth opportunity. As more dollars move from linear to CTV, more of those dollars will be programmatic. More programmatic means less transparency. Less transparency means a greater value proposition for what we offer, which is stability and verification and more clarity of what happens in that. And that goes from everything from looking at fraud and CTV to looking at fully on screen and fully viewable in the CTV environment. So CTV, nice growth driver for us, lots of volume going there. Social is really -- obviously, so much focus on social. And we can talk about cookies, what happens in the open Internet later, but we know that more and more dollars continue to fall into walled gardens, right? And those walled gardens are very heavily owned by social media companies, right? And whether social is TikTok and Facebook or other social platforms, more and more dollars are going there. The big thing around social right now is the continued concern for -- around -- with advertisers around brand safety and brand sensitivity, right? And there's always been some pushback on socials where people are, socials where people spend money, socials where people spend time. But it's also very much the Wild West when it comes to content, right? We've seen this over the last several years. There's so many concerns about what happens to social media. And there's a lack of trust in a lot of the social media platforms to police themselves. So some of the platforms like TikTok and Twitter have really come out aggressively and said, "Look, we know that you're worried about these things. We're going to bring third parties in to allow you to have better confidence in what we're producing, to allow better understanding of brand safety and brand sensitivity." So that's really happened over the last kind of 8 to 12 months. What we saw most recently that you mentioned is Facebook made a public announcement that they're going to be enabling third parties to come in and for the first time, look at the news feed, right? And that is a really big opportunity for companies like DoubleVerify, who really have been excluded from the news feed, which is the crown jewel of Facebook. It's where all the transactions occur. And helping them create a better sense of safety, security and brand sensitivity around what happens in that news feed. So social is a big growing for us, particularly outside the U.S. where so many more dollars go into social really more than anywhere else because of just the options, that the protected options aren't as great. So CTV, a growth driver for us. Social, very big growth driver for us. OpenSlate, the acquisition of OpenSlate was really focused on both of those areas. OpenSlate has a, we call, precampaign brand sensitivity and brand safety tool set for YouTube, which is arguably the largest CTV solution out there, as well as very deep integrations into TikTok and other social platforms where their tool set does prebid or precampaign brand sensitivity there as well. So buying OpenSlate really enhanced our capabilities on what we call precampaign or prebid filtering for brand sensitivity and brand safety across social media and CTV.

So one of the things you just said that I just want to sort of focus on is you said that CTV is moving programmatic. And I just -- that actually has been sort of a bone of contention. So I want to see -- make sure I understand how you're using the word. A lot of CTV -- actually, the bulk of it is sold in private marketplaces, PMPs. And it isn't being sold programmatically. Probably less than 10% is being sold -- what I think of is in the open auction programmatic. When you say that CTV money is moving to programmatic, are you talking about just the open Internet portion, which I think there's actually -- [indiscernible] dynamic controversy about how fast that's going to happen? Or are you actually including like private marketplaces and private guarantees?

Yes. I'm including both. I mean, PMPs, if you think of PMPs, it's using programmatic as -- to reduce transactional friction, right? So if I'm going to buy on a group of publishers, right, I want to reduce transactional friction by using a programmatic platform to do that. So it's less the auction-based aspect of programmatic, but more friction release. However, because of the nature of the way programmatic works and server-side ad inclusion, so when you're buying programmatic, when you're buying CTV, there's a call out for that ad, right? It opens itself up to fraud, right? And that's the one thing that CTV is not immune to, like any other digital. It may have better transparency if you're buying a PMP, but PMPs can still be [indiscernible] by fraud, right? So that server-side ad inclusion can be opened up to fraud. So those are things that we do protect buyers from, are instances of fraud. And even in cases where advertisers feel that they're buying legitimate CTV inventory, we are still seeing cases of things like fake apps like URL spoofing. All of these things happen in both programmatic and open environment -- programmatic environments on the open auction side as well as PMP-type transactions. So there are still challenges even around PMP buying that demand the need for solutions like ours.

That's interesting. Let's stay on growth drivers. performance products. With regards to product-led growth, you've recently launched 2 performance products that directly benefit from cookie deprecation the loss of IDFA, which is Apple's version of cookies. These are DoubleVerify custom contextual and DV authentic attention. Could you help us understand how these solutions differentiate themselves in the market and the value they provide to advertisers?

Yes. So both solutions, we're super excited about. I mean custom contextual is kind of the evolution of taking our data for brand safety and brand sensitivity. So think of what we do on the programmatic or prebid side is we allow people to look at a transaction before they decide to bid on it and tell them whether or not it's brand safe, whether it's fraud free, it's viewable, et cetera. Contextual takes that 1 step further. So it adds another data element to it, and it allows us to say, okay, this is safe for you. So we just want to keep you away from bad stuff. What stuff should you be heading towards? So custom contextual takes the same data sets that we use to determining kind of what you should avoid and spins that into on a custom basis, on a per advertiser basis, what is working for them and what they should target against. So it is a customized version of traditional contextual targeting, which is what happens on a page, but done specifically for each brand based on their specific criteria for success. So custom contextual is a, what we call, a prebid or programmatic tool, which we launched last year. I think it takes advantage, as you noted, of the continued deprecation of cookies and identifiers. Because a lot of targeting that happens in the programmatic world is based on cookies or IDs, right? I want to target 18- to 24-year-old males, right, who are in the market for BMW. Well, all that data is captured through some type of behavioral activity that gets associated with an ID or a cookie. As that gets harder and harder to do, advertisers are looking for contextual proxies for those audiences that work just as well. So it goes back to everything that's old is new again. Why do people buy Monday night football in 1975? Because I wanted to reach men between the ages of 25 and 45 and I sell beer, and that's a great environment for that. So they bought that context. We're heading to a version of that, a much more hyperactive version of that today, which is what type of content would appeal to the people that are actually transacting -- that they're potentially transacting my product. So custom contextual lives that, and we think it's a great time for considering what's happening with IDFAs and cookies. Attention is something totally different. And I think it's probably the thing that we're most excited about moving ahead for the company, not just for this year but really as the basis for a long-term growth driver for us. It's an entirely new metric. So when you think about what advertisers have again, used for both measuring performance or creating proxies for performance, it's been things like who do I reach. And even like I just noted, where am I reaching context. Attention is kind of the third leg of that stool. It's the who did I reach and the where did I reach them. The third leg is, well, what did they do? Did they care about my ad where they engaged? So attention -- authentic attention is a measurement of combining engagement plus exposure, right, to give you a measure that goes beyond viewability. And if you do a little searching, you'll see that attention is really becoming a hot button for advertisers because there is so much distraction. People are looking at iPads, while they're watching television, while they're also answering text on their phone. So how do you know what is getting attention? Well, the way you do that is you measure how much screen share something has, how much viewable time it has. It looks at user-initiated events, right? Like user touches, screen orientation. Was there in control of parts of the player itself. All of those things relate into how much attention someone has for that. So we believe that attention has the potential to be the next authentic currency for us, right? It can be the basis both for a measurement solution like we have today, and I think down the road for a targeting solution. So advertisers wanting to seek specific types of media that have high levels of engagement and high levels of intention. So I think when we look at that, it's not just the evolution of a world that doesn't have cookies or identifiers. It's an evolution to queues that will drive better performance that moved beyond just who and where and to the how. How did something -- how did the consumer interact? And how did that add presented on a page? So attention is very exciting for us. We are the only company that's -- in our space that's engaged in attention right now, and we're super excited about the prospects for it.

And is the goal here to try to replace Nielsen now that Nielsen has been -- lost its accreditation from the Media Ratings Council?

Yes. I mean, look, I think there's no doubt that there are serious soft spots around the measurement world. Now Nielsen obviously has had less of an impact in the digital world than they've had in the TV world, right? But as TV all becomes digital, the strength that they had in linear television is kind of irrelevant anymore, right, as everything moves towards the digital realm. And I'm sure -- or you and I could fight over whether or not linear television will ever go away, and that will be a whole other discussion. But from an advertiser's perspective, everything is digital. And I think for us, that means there's going to be a series of metrics that will replace the traditional reach and frequency metrics that advertisers use to try to measure success. And what that means is, yes, we will be part of that dialogue, for sure. Will we be the only currency? Not tomorrow, but I think there's a great opportunity for companies like ours to be a greater part of that dialogue. And if you look at what most of the dialogue is around measurement today, it's no longer worrying about a single Nielsen metric. It's how do we combine things like attention and context and verification into creating what will drive a better outcome. There's just too much -- there's too many different platforms. There's too much disintermediation between a consumer and the media producer and the advertiser. And there's so much fragmentation. So I think there's going to be multiple currencies that are going to be put together to actually drive a better outcome. And I think we're going to have several of those currencies under our belt.

Okay. Well, let's stay with the competitive landscape since that's sort of where you left off that point you just made. The ad verification space is just 3 large players and a number of point solutions. How do you differentiate versus your competition? And what are the key elements of your competitive moat?

Yes. It's a great question. And as you noted, like Ad verification right now is really -- it's becoming more of a winner take most scenario, right? There's not a lot of companies there. The point solutions are continuing to be marginalized or purchased. Like we bought 1 of them, OpenSlate, which I think had some great technology, but was very limited. And it's -- part of it's because you can't be a small or limited verification company. At the end of the day, you can't just do brand safety on video or just fraud or just display-based geography, geographic targeting. Like advertisers want a complete list of prebid performance and postbid measurement solutions, right? So at the base level, like unless you're providing all of the key criteria to actually measure media quality, so all those things I mentioned, brand safety, viewability, fraud-free, in the right geographic alignment, you aren't even in the game. So a, the first way we distinguish ourselves is by the fact that no one has a broader way of accredited solutions across more platforms than DV. Nobody. So we see more -- we have more accredited solutions by the MRC. So they're basically someone judging us as being an independent arbiter of clean verification across more platforms and more different types of media, and that's really important. So versus our competitive set, more accreditations, more coverage means that an advertiser can come to us and feel incredibly confident that wherever they buy their media, we can be there to help verify it. So that's the first thing. The second thing is, is when we look at the granularity and scale, which we verify transactions versus our competitors, we look at every impression, and we do so via a single collection methodology, right? And that's important. So we collect everything through a single method of collecting data, which allows us to create a better and more accurate results by not having to normalize data. And I know this is like getting in the weeds, but at the end of the day, it basically means we collect, on a granular level, more data in a simpler way, which allows us to deliver more accurate results. And why that's important is when we go head-to-head against our competition, which is -- this is an RFP process. It's like selling SaaS, you go into an RFP, what usually comes out to you is a head-to-head competition versus our competitors, we deliver better results. We find more fraud. We provide more levels of granularity for providing brand safety and sensitivity. And what that allows us to is win more RFPs. So through Q3 of last year, we won 108 new clients. 64% of them were competitive takeaways, right? So we win against our competitors. We have not lost a top 100 client in the last 2 years, and that's because we deliver better results. And then the final thing, I would say, differentiates. So if it's, hey, we do a lot, we do it more granularly, the final thing is we just do it faster, right? We distinguish ourselves through innovation. We were the first to have the authentic ad, which is the definitive measure of media quality, which brings those 4 criteria together. We were the first to CTV -- have CTV solutions, and we're the leader in accreditation in CTV with tools like video complete, which is the only company that gives -- the only company that can filter ads at the last mile to make sure that they don't get delivered -- that are not delivered even if they make it through the local verification solution. We have -- we are the first to have things like fully on screen and viewability and CTV. We were the first to have programmatic solutions, which now makes up 50% of our revenue. And then we're the first major provider who's going beyond basic measures of quality and going into attention, which we are confident, like I noted, that's going to become the standard for verification. So we just move faster. We innovate faster and our clients appreciate that because they're moving to new media faster as well. So all of these things together, I think, differentiate ourselves versus our competitors, and they've allowed us to gain market share over the last few years, and that's a clear fact. We are gaining market share against our competitors in all the markets around the globe.

That's really interesting. Okay. So one of the things that you and I have talked about before is this issue of pricing power. So as you're moving into the CTV, your price hasn't changed, round numbers. It's like -- our estimate is like $0.08 per 1,000. And yet you're measuring more CTV impressions where their price of -- the value of the media is up 4x. So can you talk about pricing power and why you haven't been able to or decided to at least double your price when the CPM you're verifying is 4x more valuable?

Yes. I mean, look, it's a great question. When we initially started building our model and our transaction model, the idea was keep the transactional friction low, make it easy so that someone just turns us on and puts us on everywhere, right? So try not to differentiate. And that was -- look, that was before CTV became such a force. When the difference was between a dollar banner and a $3 or $4 mobile ad, the difference wasn't so great. Now we're looking at dollar banner ads and $40 CTV CPMs, right? There's a huge amount of difference there. I think we do have some level of pricing power because the value proposition we're delivering is really out of scale with what we're charging in some of those higher CPM environments. So I do think down the road as we continue to expand, we're going to look at opportunities for us to increase price. And we know that, look, although you have your various student bringing together kind of an average CPM, we know that the value proposition of our products, for example, on the programmatic side, when we come up with something unique like the authentic ad, is considerably higher. We charge considerably higher for that product than we do for measurement products post bid. So I think over time, we believe that there's factors that will press down fees. So as we move outside the U.S., CPMs are generally lower. As we become more of a global business right now, only about 20% of our revenue is outside the U.S. So as that becomes a higher number, that presses down pricing because just media is cheaper outside the U.S. However, as we get more into CTV, that presses up our ability to price. So there's going to be this balance over time. I think we'll have pricing power in higher-cost media like CTV. We'll have pricing pressure as we move outside of the U.S. Net-net, we look at our MTF or our media transaction fee as being relatively stable over time.

Okay. So is your idea that you have this very low, what I would call, entry price of the $0.08 and then you upsell like into these new solutions? Is that sort of the game plan here? Like sort of like the Fortnite model, that was called freemium. But I'm going to call your $0.08 per 1,000 impressions free. So your freemium model, like you're going to just be ubiquitous and then upsell once you have those client touch points? Is that sort of the strategy here?

Yes. I mean there's a pretty -- there's kind of like base level client progression, right? And it started off being -- if you think of how we -- we have 2 main product categories. There's prebid filtering, which we do in programmatic, which we call programmatic, right? We keep people from buying impressions that don't mean what they want. And then there's postbid measurement, right? So after you bought it, you did a direct buy on someone's platform, we can block that impression, for example, from being delivered, but you've already paid for it, right? So we're measuring it there, and we're allowing you to optimize over time. Those 2 things, we started off as purely initially a few years ago, so let's say, 2017, 2018, we were purely a postpaid company. We just did measurement, right? And that was our lower fee products. We started transitioning people to prebid, which were higher, more premium products, right? So a, that was our basic business cycle, get them in for measurement and then move them into prebid, right? Once we started doing that, we said, okay, we can start now selling -- let's start enhancing both of these products. So they would buy postbid fraud, for example, and we'd sell the prebid fraud. Then we started -- we launched the authentic ad, which was a combination of fraud, viewability, brand safety and then geography in measurement. We launched that into authentic brand safety, right, ABS, which is a very premium priced product, which now makes up half of our programmatic business. So we've upsold them there. Attention now is an upsell that we're able to get them. So let's add another metric onto that spoke. Contextual targeting is now another prebid solution. So we get them in with measurement, we have the clients continue to use us to measure, we push them into prebid targeting and filtering and then we add additional spokes to that prebid wheel to upsell them over time. So it really does become, hey, we get you to use the currency. Now we're going to get you to spend in that currency on lots of different things. Because all of this -- the cool part about this is and what is [indiscernible] about our business is like it all comes from the same dataset. Like we are spinning off new products off the same raw material. Think of like we see something come out of a transaction, and we see all of this data, and we're saying, oh, well, we can see like the geography of it, so we should add that. We can see the level of time that, that ad ran and where it sits on a page. So why don't we start building attention metrics on it? So like all of these new products spin out of the same raw material and then we can upsell them into more refined targeting solutions and more refined measurement solutions at a higher price.

Okay. What's Wall Street missing? All the stocks have been down. But on DoubleVerify, what do you think Wall Street needs to pay more attention to?

I think the first kind of misconception is like we're in ad tech, right? We are -- some part of this ecosystem that buys and sells media. So you're always going to be subject to whether or not Facebook or Google wants you in business and can squeeze you out. You -- and that's inherently not true, right? We work in the advertising space. That's the application of our technology. So you could say we're ad tech. But we don't sell media. We don't compete for market share or wallet share with any of the [indiscernible]. As a matter of fact, as you saw with Facebook, they're looking to welcome us more into actually analyzing. So we stand outside the industry, and we look to capitalize on that industry as it grows. Just like the [indiscernible] do, right? So I think that's one. The second is if you really look at our financial model, like it is not a media model. Like we are highly profitable. We have high gross margins. We have incredibly low capital costs and low cost per unit, right? So we have this ability to kind of spin up margins. And our growth rate, combined with our margins, puts us in high-growth software categorization. And in my position, I feel like we should be many multiples worth what we are today if you compared us to real software companies based on our growth trajectory, based on our size and based on the margins that we make. So I think that gets missed because we get lumped into this, oh, they do something with ad tech, with media kind of thing. I mean, Nicola, you're in the [indiscernible] space. What do you think? What am I missing there?

I think that's exactly right. I think, Laura, to get to what I think people are missing a little bit is the inherent profitability of the business combined with that revenue growth is pretty powerful. And that's not because we're not investing. Like we will have hired over 200 people this year. It is even with these investments that we continue to have a very profitable business model. Once you measure $3.2 trillion transactions, the cost of measuring 1 more is really de minimis for us, right? So that, combined with all the opportunities we have to continue to grow, we have no debt. We have over -- we had over $300 million of cash at the end of September. I mean we're in a really good position to continue to do M&A that will continue to accelerate our road map on our product.

No debt. We have no debt. None. I don't even let -- Nicola doesn't even run up a credit card tab. We are like clean as can be, and we kick off free cash flow. Yes, I love it.

It's fantastic. When you think of -- from an external point of view, what would you like investors to look at as data points of your -- like key metrics or data points that you want Wall Street to use to prove that you're sort of making progress towards adding value to shareholders?

Nicola, do you want to jump in on that one?

Yes. I would say the main KPIs, we haven't talked about this. The TAM that we're going after is enormous. And so I think...

You don't really control that. So that's not really a fair thing for you, for us to track your progress.

But the measures that we have in some of these areas that Mark just mentioned, such as social, for example, it's only 15% of our revenue. If Wall Street were to look at that and say 15% of our revenue comes from an area where advertisers are spending 70-plus percent of their ad spend, that gap alone should give Wall Street the good view of what the opportunity is for us to grow, right? There's a market there. It's for us to take. It's only 15% of our revenue. As we work with the social media networks, we should be able to grow that pretty fast. Same on -- outside of the U.S. It's only 20% of our revenue. That should be much bigger. That opportunity, if Wall Street understood how clear it is, what the opportunity is, I think that would get a sense for where the opportunity is. Obviously, there will be some accelerators, right? Like M&A will help us get there faster. But the opportunity is always there, right? It's just -- it's pretty clear where the opportunity is, and we're just going to go after it.

Mark, do you have things you want us to track from the outside that you guys are doing that prove to Wall Street that you're adding value in 2022?

Yes. I mean I think we've been pretty transparent over the last couple of calls around growth around social, as Nicola noted, growth around CTV and growth around kind of our prebid or programmatic business, right? And we look at those 3 sectors, they all are incredibly growing pieces of our business and also macro sectors, which are growing really fast as well. So I would take a look at that and which we've been transparent about. I would also look at as we grow globally, right, what percentage of our revenue starts coming outside of the U.S., right? So we've mentioned it's only around 20 percentage or so is outside the U.S. Some of the competitors in our space have close to 40 or more percent of their revenue outside the U.S. So again, a large opportunity outside the U.S., which we've just started investing in. We didn't have global offices until 2018, right? And we -- last year, over 50% of our head count is hired outside of the U.S. So I think we have a great opportunity there. So I would say look at our sector growth, look at our global growth and then as we move into new adjacencies, right, as we start moving into things that take advantage of cookie deprecation, that take advantage of weakness of traditional companies like Nielsen in measurement and targeting, I mean, look, Nielsen came out with a targeting solution last week, right? Who thought Nielsen would come out with a targeting solution? It came out with CTV optimization tool. They never would have done that. And why they're doing that, because they know that targeting and precampaign capabilities are what's driving outcomes. People don't care what happens after. They want to figure out before. So our capabilities in that space is something that investors should look at because that's what we do. That's our bread and butter, precampaign and driving better outcomes. So our ability to continue to take on companies that are struggling to figure out who they are and come into these spaces, I think, is going to be a key opportunity for us. And then finally, M&A, right? The ability for us to drive all 3 of those areas, not just through organic growth, but what we can do with that free cash and that leverage that we have down the road.

If something goes wrong, let's say we're sitting here a year from now and it all went bad, what happened.

I'll point to 1 data point we have, which is when everything went sideways in the second quarter of 2020, we still grew 20%. We are a must-have product. The advertisers are not going to turn us off. They just -- they didn't during the pandemic, and we're diversified enough that we can withstand that. We grew 20% in that quarter. So just a data point to tell you, I think it's a must-have product that is kind of -- it's proof that we will still be there and if it goes sideways, I think.

Mark, do you have an answer to if something was wrong, what was it?

It's a really good question. And I would say...

It is a good question. It's a hard question.

I would say -- I know. And it's a minefield, too, for a CEO to answer.

Yes. It sure is. But I guess 15 guys answer it, so I'm confident you can [indiscernible].

All right. So I would say, as Nicola noted, things -- I don't see things going bad for us. They could go less well, all right? And that's what we mean, because we're a utility, right? And the analogy I always use is kind of like when you buy a car, you have to have insurance, right? You may not want to buy it. You may not love it. And the insurance business goes up and down with the macro trend of people buying cars and not buying cars. But at the end of the day, the insurance business does really well because you have to have it. And I think where we're evolving to is -- it's incredible to have insurance, and it's a beautiful annuity. But as we move more towards performance and driving outcomes, it's that much more premium of a solution. So that is where our opportunity is to grow. I don't think from -- at the end of the day, just like insurance, like people aren't going to walk away from insurance. It may be less interesting of a business someday, but it certainly isn't going to be less of a business.

Okay. I know you have to run, Mark. I will ask Nicola my last question. Let me just -- actually, I have 1 question here. Snap called out IDFA changes impacting measurement is one of the main reasons for their shortfall last quarter. Does DV solution mitigate that at all?

The -- we don't mitigate it from a measurement perspective. We mitigate it from the ability to target and to optimize perspective. So there is an opportunity on platforms like Snap and others to leverage DV solutions. They're so mobile focused that the connectivity between what happens in Snap and then the actual transaction later is where the IDFA really starts to fall apart for them. We're really not in that space, which is kind of like, hey, the e-commerce transaction occur after something happened at Snap, and that's how they sell a lot there. So less for the measurement kind of leans into IDFA and more towards what we talked about earlier, which is how IDFAs and cookies are being used for targeting less for attribution.

Okay. Interesting. I'll ask Nicola the interest rate question. So if you need to run, Mark, a-okay. But thank you very much for joining us. Really fun.

All right. Thank you very much, everybody.

Thank you very much. Okay. Nicola, let's talk about rising interest rates. I think it's a consensus view of Wall Street that inflation and interest rates are going to be going up. With the prospect of interest rate hikes ahead of us, profitability and earnings are back and focused in technology, how does DoubleVerify's business model work? And what makes the company so profitable with no debt as we've established?

Well, that's where I was going to start. So we're obviously in an excellent position because we don't have debt. So the interest rate won't impact us there. In terms of the business model, as I said, the incremental cost of measuring 1 more transaction is very small, right? We measure 3.2 transactions. So 1 extra transaction doesn't cost us very much. And as Mark said, most of our products come out of the same data set, right? So that is what makes the model so profitable. It's like we have the same data. We have 1 measure, right? We don't do sampling. We don't do -- we have the authentic ad that works across all medias, all platforms. And that allows us basically for every dollar that we get on the revenue side to basically have a very profitable view of our model. And the one thing I will say is what you mentioned on pricing is correct, which is we also have that opportunity on the revenue side. Right now, we're trying to verify everywhere. Most of our growth has come from volume at a very profitable rate, but we also do have this revenue opportunity once we decide it's the right time to take it. I mean right now, we're trying to verify everywhere first and foremost. I think that gives us an advantage against a single point solutions for sure because they cannot do that and we'll continue down that path first and foremost.

Okay. So on a rising interest rate environment, you're not really -- you're saying you're less effective because, a, you don't have debt; b, you're free cash flow positive; 3, you're profitable from an EBITDA income statement point of view. Okay. I would say that often, when you have a rising interest rate environment, you do get negative pressure on ad spending because you need to -- some people do have debt, and they have to choose between going bankrupt or doing ad spending -- to cut ad spending. So that would negatively affect you, right?

It would less so than companies that are take rate models, right, because we will still be measuring the impressions, right, add the impression at a fixed rate per transaction. So we won't -- we shouldn't be subject to the same swings that are based on CPM variation.

Especially if what they're doing is spending the money but not spending it on $20 CPMs, spending on $2 CPMs.

Exactly. And it's kind of what we saw during the pandemic, right? Like CPMs varied widely, and our revenue was still very predictable.

Yes. Okay. Yes. No, that makes sense. Well, we're well over. So I want to thank you for sticking around, and thank you for going along. And I was really interested in the interest rate question because nobody else has addressed that, and I think it's super interesting. Anyway, thank you, Nicola.

Of course. Thanks for having us.

Thanks very much. Talk to you soon. Thanks. Bye.