People Incorporated (PPLI) Earnings Call Transcript & Summary

All right. I think we'll get started here. My pleasure of having People Inc. this year at the conference, Neil Vogel, CEO.

Thank you for having us.

I have a brief bio. Hopefully, I don't embarrass you too much. But Neil Vogel, the CEO of People Inc., owner of People, America's largest publisher, holder of a significant minority stake in MGM Resorts and Turo, a leading car rental marketplace. In addition to serving as CEO, Mr. Vogel continues to lead the strategic direction and day-to-day operations of the People Inc. subsidiary, which under his leadership, has grown from what was IAC's acquisition of About.com to the largest digital and print publisher in the U.S., featuring 40-plus iconic brands. So with that out of the way...

That's correct.

Great. Glad I got it right. Thanks for being part of the conference this year.

Thank you for having us.

I want to start big picture. Obviously, the company has been undergoing a pretty significant reorg over the last several months. And so -- but you've been part of this for a very long time. So for those investors that are getting reacquainted to the story, how would you frame People Inc.'s investment narrative and some of the reorg that's been going on?

Yes, I'll say -- I'll keep it simple because we'll probably get into more detail later. So we're really doing 3 things. We are focused on executing at a very high level at People Inc. And I think we've done a pretty good job as of late, 11 straight quarters of revenue growth, all kinds of things we talk about. The second thing we're doing is focusing on the assets that matter most to us and investing behind our assets, which is People Inc. and which is MGM Grand, which we're very excited about. And obviously, there's a lot going on around there that we can maybe talk a little bit about. And the third thing we're doing is we're taking a look at the rest of our portfolio and trying to rationalize the rest of the things, turn some things into cash, continue the integration and some saving of some corporate costs. And with all of it, we hopefully, once we're able to be buying back a bunch of shares, too. So there should be -- there's a real clear path to value creation. It's executing People Inc., investing in the 2 big businesses we believe in, getting liquidity out of the rest of things we do, and just being opportunistic as we always have been.

Pretty significant shift away from the old IAC model. And so would you...

It is. I think it's definitely a little bit less of a holding company. But again, if you look at MGM and you look at People Inc., it continues the vision of what Barry likes, exceptional businesses in markets that are big and growing and exciting. And in the case of what we're doing now with a real focus on brands and real-life experiences, things that are hard to disintermediate in a world where everything is trying to disintermediate you.

Yes. That makes a lot of sense. I want to dig into some of those growth drivers. So you mentioned People as a subsidiary has shown really impressive growth. What have been sort of the key drivers of that growth? And how would you sort of frame the opportunity to continue that?

Well, the easiest way to understand People Inc. is you take a step back. And we -- 5 years ago, we put together what was Dotdash, which was our media business with Meredith, which was a combination of Time Inc. and Meredith. And at the time, we were very, very good at sort of like in media, the print to digital transition. And this was a play on, let's get ourselves these iconic brands that Meredith owned, People, Food & Wine, Travel + Leisure, Southern Living, all these things. And let's take the expertise we've learned on the Internet and let's build great businesses. And back then, all your traffic came from Google. We were very, very good at Google. And we kind of go to like the first phase of Internet media, which was print to digital transition. And then we very quickly, because we were very focused on Google, saw very early that Google was changing. And Google was beginning, it was even before AI, to send out less and less traffic. And we were like, well, this is going to be a problem. So what we did is we focused and we very quietly invested in our own e-mails, TikTok, Instagram, YouTube. And because we have these wonderful brands, we had the power to build audiences in all these other places. So a year or 2 later, when AI, really commercial AI comes around and you're like, uh oh, we were -- we actually saw Sam Altman present ChatGPT about a month before the commercial launch. And I walked out of there with my CFO, and we just looked at each other like the world going forward is going to be different. Let's analyze the problems and the opportunities. The problem is this is going to really accelerate the search disintermediation. It's a good thing we started doing these things, but we got to hit the gas on doing these new things because search is going to be very challenged. And there's going to be opportunities that we can talk about, of how to make our business better. So what we were able to do is build all these new businesses because our brands are great. So what we call -- we went from sort of like the print era to the digital era, we're in what we now call the brand era. And the brand era is using the power of our brands and the ability that we have to do all of these things in all these different places and arenas to grow a business, and that's what we've done. So the -- zooming out 5 years ago, our business was primarily a web business, 70-plus percent of the audience came from Google. Now, more than 40-plus percent to 43% of our business is not based on sessions. Only 20% of our web audience comes from Google, and we've grown 11 straight quarters. So we've really managed to make this transition. And in many ways, we're out the other side. The Google Risk is out of the business. It's down to 20% of our just web audience, and we've built these really diverse audiences and really diverse revenue streams across some of the best brands in the world, and we're a very strong and healthy business where we sit right now.

That's great. I definitely want to touch on some of those non-session revenue streams and those opportunities going forward. But real quick on sort of search and the distribution landscape, how that's evolved. What have been some of the key channels for you outside of Google and outside of search that have been impactful for you?

So we look at our business in 2 ways. If you follow our earnings, there's sessions-based revenue and non-sessions-based revenue. Let's do the sessions first. It's easy. That is people come to the website and we sell ads or do some commerce or do something. That was 70% Google, now it's 20% Google. That business in terms of volume in the last quarter was down 20-plus percent year-over-year, but revenue was flat because our brands are great, our ad execution is great. We're really good at that. That was going to be the stable part of our business. The other part of our business is non-session-based revenue, the new things that you talked about that we refer to, that's growing 15% to 20% a quarter. And that is events, and it's all the things we're doing on social media across TikTok, Instagram, YouTube that is online video. We have now about 47 episodic shows that we run across different platforms, including something called The Intern and some of the biggest shows on the Internet we've created and we own and we're monetizing. D/Cipher, some of the ad tech that allows us to use our incredible data to target ads around the web, and licensing, which for us is a 3-pronged thing, which for us, it's content licensing like Apple News and giving our content to other people. Our content is exceptional. AI licensing, which I'm sure we'll talk about, which is OpenAI and Microsoft and Meta, as well as like real product licensing, like Better Homes & Gardens is one of, if not the biggest licensees inside of Walmart, and Southern Living is a very big licensee inside of Dillard's. So this business is taking advantage of the power of our brands to touch people in new ways, whether it's an event, whether it's watching something on YouTube, it could be any number of things, but that business has real energy in it, and it is just new ways for our brands to connect to their audiences. And I think the interesting thing is a lot of people -- this is not new to us. Like we've been doing this very quietly for a while. So when the world changed, we were ready. And we've got a lot of things wrong, but this is probably the thing we've done most right.

That's great. Maybe touch on a little bit in more detail some of those revenue opportunities on the non-session side and non-advertising side. So you talked about consumer-facing subscriptions in the past, obviously, live events and things like that.

So events are a big deal for us. We'll run 50 events. That's in that bucket over 50 events across all of our brands that we're really excited about. You just mentioned one other thing, subscriptions. We have launched 2, and we're launching a third major subscription efforts. So subscriptions are new to us. We still have print magazines, about 11 million print subscribers. It's a smaller part of the business, but important. We've launched a subscription recipe product around something called MyRecipes, a 5 million member recipe locker business that we launched on the web. So we launched a value-added app that people can pay for. We're about to launch something called PEOPLE VIP, a way to get more out of your relationship with People and get content early and get all kinds of stuff, and a super fan club for fans of Southern Living with big recipe lockers and all kinds of things. Southern Living has this incredibly loyal active audience. So between events, between what we're doing on social, between what we're doing with video, between what we're doing with subscriptions, between with what we can do with D/Cipher, the opportunities are really, really broad, and it's a really big focus for us. If you followed us on earnings, Barry calls these things inversion projects, taking the typical brand relationship we've had with people and inverting it. Like why can't we launch a sweet tea at Southern Living, which we're actually going to launch because we've been making it in our test kitchen for 50 years, and it's so good, we now want to sell it to people. And we're doing all of these things because if you look at marketing, and we spend a lot of time looking at marketing, there are 3 things you need to do to market something. You have to have a list, you have to have an offer and you have to have some creative. The offer and the creative, you can make. The lists are incredibly hard to find. That's why people have to buy media. But we have the list. Like that's what we do. We have millions -- we send out 3 billion or 4 billion e-mails a month just to people who want e-mails from us. And that's just the tip of the iceberg. So our ability to market these things we're really excited about.

That's great. What are some of the gating factors to launching some of those things? And what are the investment areas? Is it go-to-market and awareness? Is it more on the development side?

I think it's like anything, new things are hard. And we're at a place where -- one of the things our organization has done is we've navigated change really well. Like this -- we are an entirely different company than we were 2 years ago and a different company than we were 2 years before that. And I think we do one thing in particular that really anchors people and helps us do these things. And new things are hard and expanding old things is hard and new events are hard, is with everything changing around us, we really focus people on our brands. Like the promise of People Magazine is the promise of People magazine, however it's delivered. And if you look at People and you look at the woman who runs the editorial, Charlotte Triggs, she's amazing. People is -- ordinary people doing extraordinary things, extraordinary people doing ordinary things, focus on Royals, celebrity, gossips, beauty, style, whatever, whatever. Her job is to figure out how that manifests itself across TikTok, Instagram, events, red carpets, you name it, the 15 things that we do. But the trick is the brand is constant. And when people are anchored in the brand, it makes it feel less stressful to do these new things because you always have this thing to fall back on. So we're always saying to ourselves, make it nice, like make it nice. If you're doing a new thing, it's impossible to know something is going to work or not, but make something you want to use, throw an event you want to go to, make an app that you're willing to pay for. If you can do that, we're halfway home, and we have the privilege of having these incredible brands to work with, and that's like really fun. So it's got to be fun. It's got to be fun. It's got to be brand-based, and you have to have people that embrace this stuff, and then you can solve these problems. Now every business I outlined before has opportunities and has problems and we can get super micro, but that'll be very boring. So I'll just keep it at the level where we were now.

I would think in a world of increasing AI and low-quality content and things like that, that the brand value and especially live events as well would...

So the unexpected thing of what is going on in the world, and we can talk a lot about AI, is the incredible expansion of crappy content and mediocre things created by and around AI has helped us immensely. So people -- if you're cooking dinner for your family on holiday, you want a food and wine or call it recipe. If you're like redecorating your bathroom, you want that article on maybe Southern Living or maybe on Better Homes & Gardens. Like the brand promise of our brands has shined through, and you can see it in things like our ad rates. Like one of the things is we noticed, if you go back to our revenue, our simple, our session-based revenue, we're down more than 20% in sessions, but revenue is flat. That's simply because of ad rates because the content is great. People are paying a premium for brands because they know it's real, brands like it and humans like it. So this -- there's been a true like flight to quality in the market, and we've seen a lot of it, and it's benefited us remarkably. And it's also going back to your last question, it's the thing -- it's the thread that runs through everything we're doing. We make more content than anybody in our space by magnitudes. It is all made by people. Now we use AI to help processes. But like this human created -- when we make a recipe, you can watch the video, you can see the thing, you can read the comments, you can get all those. Like it's an incredible advantage we have. And we don't have an advantage in everything, but we have to lean in where we have advantages, and the humanity of what we do is a huge advantage.

Yes. That's great. I definitely want to touch on the advertising side of things. But just on that point, how do you balance the halo effect around the brands and increasing those consumer touch points and not extracting value, but monetizing those touch points with maintaining that level of brand quality, right, especially as you go into data licensing and content licensing partnerships.

We actually -- I actually think that's a false trade. Like the thing that makes us appealing for things like content licensing is the fact that our content is so good. The world doesn't need any more mediocre stuff. So let's talk about content licensing, right? And we do a lot of content licensing like we put content. We're a huge partner of Apple News and all these other -- like AOL and whoever, you name it. But let's talk about it in the context of AI, which is what everybody wants to talk about, is our content is in great demand because we grew up with search, what we have content on is the most commercial stuff that people need. It's accurate, it's created, it's super high quality. And we know from crawling rates that we are among the most crawled websites in the world. We are a top crawled by Google, by -- you name how it works. So the content is good. Now what we've been able to do is turn that into value. And part of how you turn that into value is you make it scarce. And we now have the ability to block this content for almost everyone. And what that does is that it has brought people to the table who are willing to pay for our content. If you're making an AI model, call it just like a foundational model, you need 3 things. You need power, you need engineers in the model and you need inputs, where the inputs. We are incredibly important inputs to people because we are factually correct. We're great for grounding. We're great for RAG. We make more new content every day than any other publisher. And whether it's what Kim Kardashian did or the latest diabetes thing that just came out yesterday or all these trending avocado recipes, we are what people need. So we've been able to get deals done with the foundational models, which are very much sort of like all-you-can-eat deals. And increasingly, there's a lot of interest on pay-as-you-go models, like we have a deal with Microsoft and a couple of the smaller guys who are trying to put this together. But one of the most surprising things for us was when AI started, in quotes, or everyone saying, content is worthless, content is worthless. All of the content in the world has been crawled and it has made our content incredibly valuable because the new stuff we make that is on these super commercial topics that is very accurate is incredibly valuable for both RAG and training. And in a consumer way, at least, AI is going to be search replacement, we're in the exact right spot. We're the answer. And so it's been a really interesting time for us to be focused, exactly what you said, like make it nice. Everything has got to be nice. Like the world doesn't need mediocre -- we're not mediocre. Our brands are premium. What we do is premium, and we're getting premium pricing. Now we have a different issue with Google because they use one crawler for search and for their -- all their AI, the search AI, and we can't block them, so we don't have any leverage with them, but that's going to resolve itself in some way.

Yes, I was going to say there might be some updates on the regulatory front...

Yes. There's -- I mean, for those of you who don't know, Google uses one crawler for search and for AI. And if you opt out of it, you will lose search. And we're -- 20% of our web traffic is still from Google. So we can't really opt out of it yet. But they will come a point we can, but I don't want to get that way. I want to get to an economic deal with them or whether it's on their own or whether it's something forced them to, we'd like to get that solved.

I think you bring up a really interesting point. There's been this realization of where the value is in terms of these content licensing partnerships, whether it's for the back-end backlog for training purposes, but really most of the value going for that inference, that new type of content.

Yes. It's a really interesting thing. In the pre-AI era, our most valuable content is not what our most valuable content is now. Now it is in some cases. In health content, it was incredibly valuable then and it's incredibly valuable now. But things like longer-tail finance content was very -- was worth a lot prior, isn't worth much now, and where that Kim Kardashian, what she did last night article probably didn't have that much worth in a prior world, that's now incredibly valuable. And doing these things at scale on topics that humans are interested in is very valuable, and doing it at high quality and doing it like we do where we make thousands of pieces of content a day, it could be a very valuable thing. We'll see.