MNTN, Inc. (MNTN) Earnings Call Transcript & Summary

Thank you, everyone, for joining. My name is Ron Josey. I cover the Internet sector here at Citi. And look, I'm excited to have with us today, Mark Douglas. Mark and I, we've known each other now for 3, 4, maybe 5 years or whatever. And so you're the Co-Founder, President of Mountain, MNTN. And we'll start this process here. Just a quick overview. MNTN Performance, we call it PTV, but Performance connected TV ad platform. 93% -- correct me if I'm wrong, Mark, 93% of the advertisers on MNTN are new to TV advertisers....

97% as of the end of Q2.

Perfect. 97%. And I believe the customer base grew by 85%.

Yes, year-over-year.

So to say there's demand is maybe an understatement, right? Like we're seeing lot of benefits. So with that, Mark, welcome. Thanks for coming. Excited to have you here.

Thank you. Sure.

So we're a few months post IPO, which is pretty exciting. What I wanted to do is maybe take a step back and...

You know our IPO was the weekend before Memorial Day.

That's funny.

Here we are the weekend after Labor Day.

I'll never forget that.

That's how you bookend things.

That's great. Well, let's talk to us about your background first and foremost, as we get into this. So I would love to hear more about your background, about the opportunity of Performance TV overall. And then when you think about the value prop for advertisers, how does MNTN differentiate itself?

Sure. So in terms of my personal background, I'm a self-taught programmer. I actually grew up in New York City, taught myself to code while I was growing up. And so within MNTN, I spend at least 70%, 80% of my time kind of on product and focusing on customer needs, product. The nice thing is anything that we think of talk about -- I don't have time to code it myself anymore, but I'm capable of coding it myself. So it kind of gives us kind of, I think, more ambition.

Makes you a little dangerous too. You know it can be done.

Yes, exactly. And so -- and I was at Oracle working with Marc Benioff, Larry Ellison in the early days, and I was -- they've done a series of start-ups was at eHarmony, when eHarmony kind of grew and it was Match.com and eHarmony back in those days. So I've been through a number of things. And MNTN, we're focused on Connected TV advertising, but specifically for performance advertisers. So essentially small, midsized e-commerce companies, travel brands, subscription service, basically the brands that previously did most of their marketing investment on search and social, but didn't have access to TV. And the interesting thing about -- to finish answering your question about television, I think that's like just -- I think it's intuitive, but people don't really think about. The largest consumer engagement platform in the world is television. So more people watch TV a day than use social media. The numbers, I think, for TV are about 5.5 billion daily users watch TV, social's in like 3.8 billion, yes. And so you have this incredibly large consumer engagement platform that has been really under-monetized because the large media companies, the Disneys and others, instead -- they focused almost entirely on about maybe 1,000 large global brands and have entirely ignored kind of the midsized brands, the smaller brands that are really the big growth drivers in the world and are going to drive the growth in this industry. So we saw connected television. So let's say, what was the reason for that? Well, it was really old technology. We brought literally broadcasting out of signal. With the advent of Connected TV, we saw an opportunity to say, okay, now this is a true digital platform. So we can -- instead of having this under-monetized media platform, which is television, we can now start to bring in thousands and then tens of thousands, eventually hundreds of thousands of smaller and midsized brands and really fully monetize that and build scale, and that's what the company is doing.

And so let's talk a little bit about the change in industry from the 1,000 advertisers to now the SMBs overall. The unlock event was the technology that allowed it, right? And so talk to us about where we are in that sort of transition, if you will. I don't know if you can call it transition anymore, just given I think streaming now has overtaken linear here in the U.S. So tell us where we think we are in the transition, not from a consumer perspective, but from an advertiser perspective.

Right. So the advertisers, they -- so -- well, we'll talk specifically about the SMB opportunity. So when we first entered the market, the first thing, you have -- when I say small, midsized, I'm talking like brands like ThirdLove or Western Governors University or the -- just tons of emerging or midsized brands that, again, we're entirely focused on search and social. And by the way, don't want to be. They don't want to be like have all the eggs in the Meta basket or the Google basket, they want their marketing to be diversified because they're relying on these platforms to help drive their growth. And so the ability to then bring TV in the mix. So what do they need? Well, one is the streaming a TV ad is the easiest part of what we do. The hardest part is determining who to stream it to, right? These are -- our customers, when they come on board on our platform, they average their initial spend averages. I think it's right now $28,000 a month. So they're not spend -- they're not coming on a platform spending millions. So that money has to be really super targeted at who their next customer is going to be. So we had to build out the entire targeting platform. 97% of our customers are first-time advertisers, they don't have TV ads when we meet them. So we had to build out a way for them to get TV commercials at a very reasonable costs and we call that QuickFrame. The -- we talked about on our last earnings call, we're about to launch some AI tools. Yes, they're compelling. It's incredible actually what the generative AI models are capable of doing right now. So we had to help them with the TV commercials. 97% of our -- now about 92% of our customers don't use an agency. So we had to give them a full self-serve platform that they can understand, that gives them kind of -- they can come on to, they don't -- we don't need a big services team to help support them that they can feel comfortable launching their first TV campaigns and then more campaigns and increasing their budget. So the self-serve platform, the creative tools, the targeting technology, all the reporting -- how do we measure what the impact of these campaigns are. So all of that plus more had to be built out, plus the actual bidding platform to actually stream its TV commercials, which I think most people tend to focus on, but ironically, is the easiest part of what we do is actually like streaming a TV ad. But even that is a significant scale. We have -- when we started, we saw about 100,000 TV commercials a second that we could buy that we could bid on as of this month, that will cross 4 million a second. So all the technology that basically, again, bid on it, decide when to bid, who to bid, how often -- how often should this consumer see the commercial? How are they responding? Should we -- should the customer -- it's just like a whole tech stack made this possible. I told you I spent a lot of time on tech. You shouldn't ask me -- I'll just keep going on and on.

I think that's what makes it differentiated to be completely honest here. So let's talk about that 4 billion number. Because I think...

4 million. Exactly. Per second.

4 million per second, right? That's a tremendous amount of supply that the system is seeing that needs to be targeted to where -- I want to understand about the inventory and supply that you have. And so I think MNTN works with about 150-plus or so networks directly. And it's 15- to 30-second spots, if I have that correct.

Yes. These are truly TV commercials while you're watching your favorite shows on television -- including live sports.

Including -- and also maybe Netflix later this...

Netflix is not really fully in the market in -- programmatically, but I think in Q1, Q2 or so, they'll be ready and we'll be ready.

Interesting. That's exciting. So I would love to hear more just about your content relationships. Specifically, how you created the -- how you built these relationships, these 150-plus networks and allow you to offer that type of inventory to your advertisers.

So there -- in terms of CTV, the way it works, there's 3 ways for -- to acquire inventory, meaning you're watching a TV show and there's a block of ads, 30 second -- generally 30-second commercials, how do those get bought? So one way is you're a very large brand, you have an agency and they go and negotiate a deal directly with the network. And people think of that as like an upfront. And even though this is now streaming rather than linear, that process remains largely unchanged. The second way is you can just buy an open market, meaning what there's 4 million ads a second available. I'm just going to jump in there through some type of DSP platform and go buy that. And that's a lot of what Trade Desk does. The third way is you do direct deals with the streaming networks, but to programmatically buy that inventory so you can do it with pinpoint accuracy. And that's how MNTN does it. So we have negotiated deals with pretty much every ad-supported streaming network in America. So that includes Disney, Warner Bros., HBO Max, Paramount, all of them. The -- and then we also have deals with the TV manufacturers, Samsung, LG, they all -- and then everyone's probably heard of FAST networks. We have deals with pretty much every FAST network. And in those deals, because $0.97 out of every dollar spent on our platform is net new revenue into the industry, we have negotiated deals that represent the volume we're bringing and that this is literally that network's growth channel. So we're essentially almost becoming like a walled garden around the entire TV industry where we are bringing new consumers in the market. I'd like to say that the -- this market is a lot like the job market -- like most of the jobs in America come from small business. Well, most of the new revenue in this industry is going to come from small business and MNTN is doing that scale. So that makes us almost like the growth channel for every streaming network. And those, again, are through negotiated deals at pricing that's very fair to both parties.

And are these negotiated deals, are these longer term in nature, shorter term in nature or...

They're not like an upfront like a guarantee. In other words, we forecast -- I mean, it's really easy, especially now because I just look at our numbers. But we say we're forecasting that we're going to grow -- we can grow our spend this much. And based on that, these are the terms that we're looking for, and the network agrees to that. There's no like if we didn't spend as much as we were forecasting, we get penalized or anything like that because the numbers just keep increasing. So there's no -- it's pretty friendly, but it's more of a nature of this pricing will likely generate this much demand from the customer base.

Understood. Yes. And we're going to get into the customer base in a second. While we're talking a little bit about the inventory and the tech, talk to us about the measurement tools, like the capabilities to really target myself or whomever that's watching live sports or whatever it is.

Yes. So for the targeting -- AI has helped obviously a lot. So when 2 years ago, our customers would come into our platform and they would describe who their customer is. And then we use that to kind of as a profile to then find that using a lot of data, a lot of retail media data at this point, third-party data. We use that in order to then say, okay, this is the consumer looking for, let's use all this data to find them. Now we tell them who their customer is who -- using generative AI. And so we give them a profile of who their consumer is often kind of -- it's unbiased, right? It's just like based on all publicly information -- public information about your branded products, this is who would buy it, and these are the other types of products they would likely buy. And that profile then goes in machine learning models against really vast pools of data. And in that regard, the all performance platforms do. In other words, Meta does the same thing, Google, especially Meta, Google a little less because they have search terms. And so that then helps us to find the consumer. Again, that's the critical piece of what we do. Then connecting with the TV ad, we actually call that MNTN Matched because I like to say we're matching consumers with brands, right? And then -- and the TV ad is the means to make that match. And then from there, we measure it. And so we measure it basically, you're watching TV, you're watching show in the ESPN, you pull out -- while you're watching, you get streamed 30-second commercial, you like what you see, you pull out your phone, tablet, computer and go visit that brand. We have tracking pixels live with our entire customer base in order to measure the ad streamed at 08:15. They visit your brand at 08:20. They went on to purchase a day later. We see all of that. And that -- and all performance platforms do that. I don't actually -- it's a differentiator in the TV industry because we're the first company to do this largest still because we're entirely focused on performance marketing, the largest still the only, but like all performance platforms measure what the -- yes, pixels to measure what -- how the consumer respond. And that's critical to these -- to our customers.

Yes. That makes a lot of sense. Let's talk about your customers here. 97%, right, that are first-time TV advertisers. You talked about SMBs. I would love to hear just what does the average advertiser look like on the platform. Walk me through the process, and then we have very specific -- I want to understand, we lowered minimums. I think we have some self-service here. There's a lot to go through. But talk to us just about the average advertiser...

Yes. So generally, the person is a marketer or VP of Digital Marketing or Director Digital marketing in an e-commerce brand. It's largely direct-to-consumer brands. We have started to work also with B2B brands, but it's almost -- it's more than, I think, 86%, it's direct-to-consumer brands. And they are looking for a way to expand their marketing beyond search and social. They use e-mail for retention marketing, meaning to get try -- you already bought from them and they wanted you to buy again, so they'll send you 20% off this -- literally this weekend, you probably got tons of e-mails.

Now you get them in text messages.

Yes, in texts and it's hard to stop them in text messages. They -- but the core of that -- they don't -- I think a lot of people think of the advertising business as people want to buy ads. And when you're a big global brand, that is the case. But when you're a direct-to-consumer brand, you don't want to buy an ad. What you're trying to buy is consumers that potentially are going to be interested in what you're offering, right? And so like you don't pick up the phone and say, Google, I want to buy ads from you. You say, I want to get traffic from you that's going to be interested in my product and then use keywords to describe what would -- they would be interested. So in MNTN, again, they're looking for that traffic, and it's that direct-to-consumer brand who, again, was cut off from television. It's like I don't have the budget, I don't have an agency, I don't have -- nor do I want an agency because they're slow and expensive. I don't have TV ads, but I really want to get my brand onto a bigger screen against not just user-generated content on like Instagram, but against professionally created content. Like I want to advertise on an NFL game. I want to -- I hear live sports constantly or I want to be on White Lotus on HBO Max for the people who have the ad-supported versions and stuff like that. So they -- but it's that same type of performance marketer within that direct-to-consumer brand that becomes a MNTN customer and adds us into their marketing mix.

And so talk to us about how this -- and so the direct to is a key part, I think, having a direct relationship with the brand. Talk to us about awareness of MNTN. So how does that marketer, the VP or someone who's in charge of digital marketing, how do they know about MNTN? Question one. And maybe a secondary question, post IPO, have you seen any benefits from just sort of, oh my god, I've heard about MNTN [ Next ] all over the place now and any benefits post IPO?

Yes. So about 77% of our revenue is inbound. So 3 years ago, roughly 3 years ago or 3.5 years ago, about 2% of our revenue was inbound. So 98% of our revenue was someone on our sales team sending you e-mail saying, "Hey, did you know you could -- your brand could be on all these TV networks and drive your next purchases and stuff like that." Now 77% come to us and that percentage is still growing. We think our goal -- my Head of Marketing is actually in the room. So his goal -- I'll say his goal, not my goal, is to get that to 99% is inbound. So how we do that is pretty simple. We actually use our own platform. So MNTN actually streams MNTN TV commercials into the homes of our future customers in front of marketers in the U.S. and just shows them what's possible on TV while they're watching TV. And then they go to our website, they can -- just like they can create a Google AdWords account or Meta ad platform account, they can create a MNTN Performance TV account and become a customer sales cycle averages 19 days from the time they see an ad, come to our website, and from time they come to our website, they're, on average, a customer within 19 days, and they go live within about 39 days. And within that 39-day cycle, the vast majority is just them getting a TV commercial. So that's -- we expect that to shorten also.