Taboola.com Ltd. (TBLA) Earnings Call Transcript & Summary

Good morning. Welcome to the second day of Needham's Growth Conference now at its 24th year. My name is Laura Martin. I'm the senior media and Internet analyst at Needham & Company. Our format today is a 40-minute fireside chat. And as we talk, I would love it if you could put questions into the chat box. It takes about 3 minutes for them to get to me. So enter them as soon as you have them so I don't miss any at the end of the day. I'm happy to welcome to the stage the founder and CE of Taboola, Adam Singolda. Taboola is the leading recommendation engine for the open web with approximately $1.6 billion in annual revenue, $650 -- sorry, $655 million of ex-TAC gross profit and $200 million of adjusted EBITDA expected in 2022 by our estimates. Okay. Adam. So nice to be with you today. I stood up. I got off my chair because I knew this was going to be a really dynamic hour. Let's do an overview. For people who aren't as familiar as you and I are with Taboola, why don't you give us a quick overview of Taboola, where it fits in the adtech ecosystem. And why don't you give us some financial metrics off the top of your head.

Okay. So, hey everyone, hey Laura, always great to kick off the year with you as we're getting ready to rock and roll. So Taboola, I started Taboola 14 years ago, with a vision to help consumers discover things they may like but they never knew existed. Many of you listening in, have seen Taboola before. When you read an article on CNBC or ESPN or many amazing websites that you love, at the bottom of the article it says, "You may like, recommending you the site's own editorial content." So more from CNBC. And then below that or side by side to that, it will say, "From the web." So it's kind of like an Instagram feed of recommendations that you can see all across the open web. People click on Taboola and they discover something. Last year, it was about 30 billion times. So we have a tremendous amount of scale. We reach about 0.5 billion people every day. We have 9,000 publishers that work with us. And our vision is really to power recommendations for the open web. The open web is about $64 billion. So you have Google for search, Facebook for social. And then you have this open web. But there's no one company that kind of has access to all the open web and can give advertisers a way to be recommended or surface in open web at scale, and that's the company we are working hard at building. We're having a good time. Management has been together for about 10 years now. And we're growing and we're public for 6 months now, and Laura is working with us and all good stuff.

Okay, great. Let's do some industry insights here because you're a good thinker on the industry. Double-sided end-to-end. So you own both a DSP and an SSP, which makes you double-sided or end to end. And we hear from the largest open Internet players, CEOs that, no, no, no, that's not the right way to do it. That has conflicts of interest. You should either be a specialist SSP like Magnite or a specialist DSP like Trade Desk and [indiscernible] and AcuityAds. Can you talk about that, Adam, and how you think about why is end-to-end better in your mind than being a pure-play DSP or SSP?

I think it's much harder to do what we're doing. But when you're doing it and -- the dividend you can pay over time to your clients, partners and yourself is significant. So let's just unbundle the question. Taboola basically, we're like Apple with iPhone. We produce. It's an ecosystem that we operate internally. On the one side, we have publishers work with us exclusively, long term and globally. So if you think about any publisher working with us, they'll have a 3, 4, 5, NDTV just announced a 10-year partnership. I would be in my 50s when we renew that partner. And then -- so that's one side, which means that it's very predictable. We know we have a very unique access to data because we see everyone again and again and again. So if you go to USA Today today, we'll see you tomorrow. So there's a lot of predictability and great access to data. And on the advertiser side -- but 90% of our revenue comes from advertisers who work that's direct. We have a pixel on their page. We know our clients really well. That means the advantages this 2-sided marketplace that we operate gives us, which investors should care about, one, it's very predictable. If you think about advertising in general over the last 10 years, the biggest question mark was, can you be predictable like Google. Now why is Google and Facebook so predictable? They own the consumer relationship supply and they own the advertiser relationship demand. In many ways, we're trying to build the Google for the open web, and the way to do it is to benefit from the same things that make Google and Facebook so predictable. Because, again, they have both supply and demand, they're not dependent on anyone else to hopefully deliver something, right? So that's -- it's predictable. It's very product led. As an example, if we want to create a field product or we want to create a carousel experience, like Facebook has or Instagram has, or we want to launch a subscription unit, we can do whatever we want because we own that relationship. With the publisher, we can innovate. If we were to buy an IAB unit like a DSP would, we have no way to go outside of the borders of the box, right? We're limited by the box. Taboola is not limited by anything. So it gives us a product opportunity to innovate and come up with new ad experiences that a DSP couldn't do, but we can. It gives us data that we have that other companies may not have. And eventually, it results with higher yield, which means we can generate higher revenue to the open web and publishers, which is very important. It makes us more competitive. It makes us win and grow. And it's also open web friendly. Because it means there's not a bunch of fees between -- so when an advertiser pays us, we pay the publisher. There's no sequence of companies between the advertiser and the publisher that collects stuff. So it's also very friendly to the ecosystem because we're able to move more money to the -- those who need the money, which is journalism and publishers and so forth. So for those reasons, I really like it. It's just much harder to do because we operate both businesses internally. We have publisher organization and advertise organization. But I think it's much closer to companies like Facebook and Google, which is what investors, I think, are looking for.

Okay. Well, let's stay on the fee point. Because the open Internet, when you use the specialized SSPs and DSPs, take rates in total are about 50%. Your take rate, I think, is about 37%, if I remember it, 32%, 37%. So that is part of this next thematic topic I want to talk about, which is supply path optimization. So part of running an end-to-end or a 2-sided platform is that you have a lower take rate, a lower fee than the open Internet where they specialize. But one of the guys I was asking about supply path optimization today was talking about the number of people in the supply chain. People are cutting them out because they don't talk to each other. And frequency capping, they think of as part of supply path. So let's talk about this generally, this theme Wall Street is discussing, which is supply path optimization. What do you think? Are we going to get take rate pressure on the entire open Internet? And how do you see Taboola as positioned within the supply -- and supply chain optimization, which is a term in adtech really means fee pressure, take rate pressure, downward pressure on fees from advertisers or publishers.

Yes. I mean I think -- so we are already optimized because we're not buying inventory on the one side and most of our revenue is direct from the advertiser side. So I think some companies are speaking about mid-20s, mid-30s, supply path optimization. We are already there by the nature of the business that we've built with publishers and advertisers. And I think that also means we're able to, like I said earlier, pay more. We did give guidance that over time, we believe our margin will go up as we continue to grow the company. So right now, we're mid-30s. We believe that's going to be north of 40% over time. And again, the reason is it's very efficient to be in the Taboola ecosystem because you're one stop away from the advertiser. There's no -- for 90% of the revenue, right? So for the vast majority of our business, it's advertisers work with us directly. They're using Smart Bid, which is our AI, to help them succeed, which we can talk about that, too. And the publishers basically are very close to the client who pays them with us trying to optimize using AI so that they'll generate higher yield. So I think it's much friendlier to the publishers and to the advertiser because the advertiser has more buying power because they're very close to the publisher. It's almost direct. It's just Taboola between them optimizing using AI. So I think it's actually very important to measure that metric. And I think for us, we're already at -- what companies, I think, aspire to be, we're there now, which is a good thing. And again, I believe, for us, the opportunity with margins to go up, and we did say that publicly that we'll get to north of 40%.

Okay. So you're not going to be negative effect -- you don't think you're negatively affected by supply take -- supply path optimization or pressure on take rates. You're already below everybody?

Because we're already optimized. We are -- so when we think about the percentage of advertisers who work with us directly and the percentage of publishers that we work directly, it's all direct already.

Yes. Okay.

There's nothing to optimize. So I think that vision people are speaking about is Taboola's reality today. And from that perspective, we're comfortable with where we are financially as well as the opportunity to make it better.

Perfect. COVID-19, big topic of conversation across industries, not just in adtech. But can you talk about what trends accelerated during COVID, and what is here to stay and how that affects Taboola and their business?

Yes. So one, you have to remember that Taboola, even when you look at 2021, which was a good year for us, we finished with North of 30% growth over 2020. And that was when Taboola had a good 2020. So a lot of companies had a bad 2020, so 2021 looked good. We had a good 2020 and a great 2021. So which I think shows our, again, stability, predictability and ability to execute even when we're working from home and how we benefit from this growth. So let's talk about 2 things that happened in the pandemic that I think are interesting. One is you have about 100 million businesses in the world. Many of them are yet to advertise. And I think that through the pandemic, many of them have realized that it's such a huge opportunity to take part in the advertising ecosystem and to be a successful advertiser Because we can't rely anymore on brick-and-mortar and the opportunity to reach people online is just so great. So we're seeing this push of advertisers coming in. And I think there's a huge opportunity over years to come. In many ways, we're like in 2030. We're in the future because, look, what would have taken us 10 years, has taken us a year. And the second thing is that people have changed. We -- if you thought about before the pandemic, if I told you that people would go to the doctor on their iPhone, you would have thought that I'm crazy. But now telemedicine is such a huge category in health care, online is such a huge category. And it's almost ludicrous to imagine that I will wait to see a doctor before I go online and talk to someone now, right? But that happened through the pandemic because they couldn't see the doctor. Same for online education. Same for how we get food. Same for commerce, how we buy things. I can tell you something that we saw in Connexity, a company we acquired a few months ago. We saw through their data that, first of all, you all know that Black Friday went down 28%. People didn't go into brick-and-mortar. But what we saw in Connexity is that people are becoming better shoppers. So the value of a click for e-commerce became better through the pandemic, which means we were -- people -- the mass market consumers are becoming better shoppers online. They don't just click it and convert, they click and convert more. So I think this trend is interesting because people have changed. They're trusting, they're trying things online like never before. And for Taboola, it's great because there is no better place than open web to drive consideration with consumers. If I think about a new product, LEGO. If I want you to -- get you to consider buying LEGO, which obviously you know I'm a big fan, what's a better way of getting you to do that than sending you a sequence of articles that might spark your curiosity and excitement versus an ad that you might see on Facebook, or a banner that you might see on social. So the opportunity for the open web to build this trust with consumers and then get them to try a new service in the form of advertising is massive. So again, the market has changed macroeconomics and consumers change. So I think net-net, there's a positive opportunity for the open web for the next decades.

Okay. Let's do a little privacy and then we're going to go into Taboola. This is our last industry question. Cookies, IDFA, looking out to the 2023, a major topic is the loss of cookies from Google. How does cookies' deprecation impact Taboola? And can you make a case as to why Taboola is uniquely positioned to take advantage of this. And similarly, to date, what has been the impact on Taboola of the iOS upgrades 14.5 and 15.1?

Yes. I think this is one of those questions that it's best to answer the future by looking at the past, right, as a proxy for what's going to happen. So Apple started deprecating cookies back in 2017. In 2022, you're looking at Taboola's performance on Safari. It's public information. You can check it out. You've seen in our yield, which is our ability to monetize consumers in Safari within the Apple containers has went up as Apple continued to deprecate cookies. And when IDFA happened in the second half of last year, you saw that we raised our guidance and we finished 2021 strong. So overall, what you're seeing is that for the past 5 years, really, we're navigating this privacy dynamics well. And the reason is that Taboola because -- going back to your 2-sided marketplace, because we're not buying inventory and hope it's going to work out, but rather render our own experience, our own products on a publisher and have full visibility to everything on the page, we're able to not rely on third-party cookies. We are the publisher. We have our own first-party cookie. But more than that, we have access to the context of the page. And advertisers are buying from us this curiosity graph. People read about this. They also like to click on that. May also like to convert to that. And this has nothing to do with you as a person. It has a lot to do with you and the situation you're in. So I think that contextual is the new -- it's the new West Village, it's the new pink. And I think it's going to come in strong because users privacy is no longer something general counsels talk about. It's something consumers are aware. My mom doesn't want Facebook to track her. She doesn't like me targeting. And she's my mom, she's not a tech person. She's just a wonderful woman. And -- but she understands privacy now. This is new. Five years ago, if you invited me to this chat, privacy would be something lawyers talked about. It would be some policy page on a website. It's no longer that. People don't like to be tracked. They don't want to be followed. They want you to create a great advertising experience without freaking them out. And that's contextual. And that's why Taboola has a recommendation engine looking at what the page is about, and people who read this also doing that can benefit from or already are. So that's kind of what happened. And I think this can be a positive opportunity for us because it will affect the advertising industry one way or another. And I think for us, hopefully, that means more advertisers coming in and trying to succeed with us.

Super helpful, Adam. Thank you for spending 15 minutes on industry. We're now going to move to Taboola. I really love your thinking on these ideas. So helpful. Let's look 5 years out, talk about Taboola. How do you envision digital advertising changing over that time? And where is Taboola -- how does Taboola benefit from that macro change?

So we talked about some of them. So just 5 years looking ahead, I think when we talked about the pandemic and the changes that will bring. I think e-commerce will be banana stick. I think that -- I think the open web is going to drive the future. It's Amazon 2.0. Because we love buying online, and we're going to need someone to give us a good advice. I need all recipes to tell me which pan to buy for my kitchen. I need someone to tell me what to do. And it's not going to be a store, and it's not going to be Facebook. It's going to be a great website I love and trust, whether that's a local site that I love or a big one. I don't think it's only meant for the big publisher. It can also be a great niche or blog or weeks page or whatever that I love and I trust and I relate to. So I think there's going to be big e-commerce. I think 1/3, if not more, of the open web will be e-commerce. By the way, that means that I think if you don't have an e-commerce strategy, it's like a not having a mobile strategy in 1997 when mobile came up. I think we're going to go back to this fireside chat 5 years from now looking back and say we can't believe people didn't build e-commerce strategy knowing how big it's going to be. So that's the second thing. I think it's going to happen. And privacy will be making waves one way or another, which we've talked about, too. So that's kind of for Taboola. As we navigate those things, I like our position a lot. I mean, I think from a core perspective, we're taking a very product-led approach. We invest $100 million a year to build products and technologies that publishers and advertisers want and need so that we never become a vendor. I think publishers want to work with people in a deeper way. They want less vendors and more partners, and they want to do that for a long time. So when you choose who you're going to work with for the next 5 years or 10 years, it has to be someone you want your entire organization to use. It can't be about money. So this strategy has been really helpful. I mean, for us, you may have seen over the last 6 months, a new partnership is announced almost on a weekly basis globally. And I'm talking amazing stuff. I mean [indiscernible] just 10 days ago stand with Taboola, and I was telling my team, the reason I love that partnership more than others, is that I got a call from the Chief Editor on Thanksgiving. And she said, let's talk editorial technologies and data. That's amazing. I mean, to have the Chief Editor call you on a holiday. It's not about the check, it's not about the revenue. It's not about clicks. It's about value to the entire editorial organization. None of our competitors does that. I don't think anyone in the advertising ecosystem does that, invests so much in providing technologies to the editorial organization. So when you have the chief editor choose Taboola, that's a good thing for me. So in our core business, we're seeing great wins, NBC Sports, Future in the U.K., NDTV, just amazing publishers choosing Taboola. And that's a big market. We're guiding for $1.6 billion out of $64 million. So there's a lot of room for us to continue to go. So this platform strategy of providing a lot of technology is working for us. I think we also are able to generate higher yield than other companies, which means that the only way we lose the deal is if someone is losing money. 70% of Taboola is 120% of other companies, which is also a good place for us to be. Because short -- long term, nobody can lose so much money. I'm okay with people losing money if that's the only way to take our business. So that's in our core business. And over the next 5 years, we talked about what else can Taboola recommend. Commerce is already 15% of our business. Brands and agencies and video, which is high-impact placements, is already 15%. So you have this, like, 15%, 15% high-value revenue coming in and growing and improving our yield. And then the question is what else do we get into over the next 5 years, whether that's audio, games, what other segments we specialize in, so we can create value for those advertisers? And then the other side is where else can we be? You've seen our momentum with Taboola News, which is Taboola on Android device with Samsung and Xiaomi and others. But over the next 5 years, we launched this bidder technology with Microsoft, where else can we use that to get other access to other consumer touch points, connected TV perhaps, podcasts, so much. I'm shock that my Tesla doesn't have Taboola inside of it. That's what shocking to me. How can Elon sell cars without Taboola showing news and podcasting videos in my car. So I think over time, in the next 5 years, we should be in other places recommending news like we are for Samsung.

Okay. Let's...

That's kind of 5-year thinking.

5-year theme. You're going to have news in your Tesla. You're going to have the news feed in your Tesla. That's your goal.

Taboola in my Tesla, yes. I think that the fact I go in my car and I have spotify for music, so I can click Taboola and check local news here in Tenafly, New Jersey, it's crazy.

An open note to Elon Musk, "Call me."

I'm just saying, technically, radio was always great. But there's a better way of doing radio, which is Taboola, in the car. So we have all the news.

Well, one of the things you said in that prior answer, Adam, was that not to have an e-commerce strategy is like not having a mobile strategy 10 years ago. So let's -- it's been about -- in fairness, it's only been about a quarter since you closed Connexity, at which point, you've got a mobile strategy. So can you tell us how it's going? And remind us about how Connexity -- what Connexity does for the Taboola sort of empire, and synergies you see from the acquisition?

Yes, first of all, Laura, we have to keep getting you excited. We can't tell you all of our good things we have to come. So every quarter, I'm giving you a little bit. So Connexity, which is one of the largest open web commerce companies in the world, now part of Taboola is essentially doing something very similar to us. They operate a 2-sided marketplace with retailers on the one side, and on the other side, publishers, all of you get to know and love. And we've all seen this wired cutter strategy by The New York Times, whereby you have a great brand and you extend it to offer high intent content for consumers to consider making a purchase. So that strategy is happening, but in a smaller scale now. And with Connexity, we believe we can essentially expand that globally to all of our publishers and advertisers and help our publishers build the commerce strategy for the next 5 years. We've seen essentially Connexity, it's been a great momentum. They bid their numbers. They have seen publishers choosing Taboola based on the vision of what we do together with Connexity. I mean, the synergies will take us 4 years. But just speaking about synergies with the public market and publishers getting curious about it, just that vision alone is interesting enough for publishers to say, "We want to be in that, and a lot of our recent announcement included Connexity," which is great for us because we believe it's a differentiation. And again, I spoke about shoppers, users are becoming better shoppers. I think the trend will also be that the yield opportunity from commerce will go up. Beyond that, we started with the synergies, we're bringing our teams together. So in the U.K., they're already together. New York, it will happen in the first half of this year. Culture is a big deal for me and the management and the CEO, Bill, at Connexity. We're trying to make sure that in 3, 6 months, if you joined Taboola, you wouldn't know who came from where. So we want to make sure we're one. And so we're spending a lot of time in culture. And we started already focusing on using ad sales of Taboola. Connexity had 2 ad sales. We have 150 before -- I mean, Taboola before Connexity. So Connexity is to be owned by a private equity, which means they've built a very big business, almost $100 million of ex-TAC with 2 ad salespeople, right? So we started by having our ad salespeople now sell Connexity. And the next step is to turbocharge the publisher side of the business, which will start this year. So I'm very excited about it. One, because I believe it's going to be a big portion of the open web's future. And I think that consumers will need a trusted source to make a decision to make a purchase in times when they're are more home, more remote and actually prefer it. So we did say that we believe over the next 4 years, there's going to be synergies of about $100 million of ex-TAC. So we'll build another Connexity over the next 4 years. And we said about 1/3 of our business as well as our publishers will be commerce. So -- and then I think it's worth mentioning that, as you know, one of the competitive advantages of Taboola in the advertising space is our yield is stronger than others. As we merge Connexity into Taboola, which we're starting to do, Connexity is about 1 million purchases a month. We'll be able to have better data sets and the yield, we believe, will go up. That makes us even more competitive, even on our existing publisher base. So there's a lot of good stuff on that front. And I do believe that also listening to the market, everybody wants an e-commerce strategy. Everybody has seen great companies like Merideth and Condé and The New York Times, and they want to do that -- they want that, too. Red Ventures. Good companies are out there doing good things. But then the question is, "How can the entire open web to the same?"

Okay. Let's -- so you're doing a lot of work in moving your company like up to, like, what I would call premium space or premium ad, high-impact placements. So you said on your last call that brands and agencies are about 15% of your business. Connexity is also an additional 15% of your revenue. So added together, if my math is right, around 1/3 of your business is in higher value areas. Can you continue to mix -- like, mix up, and what I mean by that is go to premium products? And it seems like there's been quite a few high-impact placement announcements, which is like your mid article and your videos. How are you winning this supply from publishers like NBC Sports? And how do you -- and how -- what impact can that have on driving revenue growth?

Yes. So first of all, it's -- you're right, and it's interesting. Taboola is becoming a video company, e-commerce company. It's almost like when Google bought YouTube, that was their premium layer on top of search, which was very performance-driven, right? So in a similar fashion, we have this huge demand performance advertising business. And then you have this -- our YouTube strategy, our high-impact placement is where brands and agencies take premium placements, mid article, homepage and section fronts. And now with commerce, that's going to be another layer of our business. And the 2 of them are almost, as you said, a-third. So one, they'll grow and the more they grow, the blended yield of Taboola gets stronger, which means that all of our placements generate more revenue. So that is strategically important to us because it means, again, that it's irresponsible not to choose Taboola financially. And then scale matters in our space. So that's why I like it. And then I think over time, you may see other types of specialized segments in that mix. I mentioned maybe games, audio; and other things. So we'll always be continuing our journey on diversifying the mix of things we specialize, such as video and commerce. And that's part of our strategy, to recommend anything. So I think that's right. The reason we win it is that if you're a publisher, and you have -- usually, what do we replace, right? So mid article, usually, what they have there is a banner, an SSP, right? So on the homepage, mid article, usually, there's a better there. So what we say is you say we can replace that banner with a carousel that half of the recommendations will be your own content. So if you got NBC Sports and you see mid article, you see this carousel beautiful that shows NBC sports content and video, and we see sports content a performance suggestion. NBC Sports and an ad and so forth and so forth. So if you're a publisher, first of all, you're placing a banner with editorial stuff. I like it. Two, it tends to generate more revenue because we have video demand and all of our performance and Connexity fighting for that spot. And agencies love it because they want to be visible. They want to be isolated, brands and agencies as well. They want to create these environments that are kind of fully owned by the brand. So they like this mid article or homepage and are willing to pay a premium for it. So it also tends to generate significant more revenue to us and our publishers. So the publisher gets more revenue. They get editorial content surface, not only ad. It reminds when I started Taboola 14 years ago. At the bottom of the article, there used to be Google AdSense. Remember that product, it was these text ads by Google? And we call publishers and said, "Look, we're going to do half of it will present your own content and the other half is going to be paid recommendations, and we'll pay more." It's -- it was a no-brainer. So it's kind of like I'm reliving my life again. Only now instead of replacing text ads by Google, we're kind of replacing banners which is basically it's a huge market in the open web and it gives us new types of revenue with brands and agencies. And I think publishers also prefer to go deeper with Taboola. They trust us -- we're very aligned with publishers. We talked about supply path optimization. It's very tech-driven orientation. So I think publishers also appreciate doing more with us, which is vertical growth for Taboola as we continue to upgrade publishers to do more video with us.

I have tons and tons of questions. I want to ask the Microsoft question here first before we go to the 4 questions from the audience, and then we will call it quits. So let's talk about Microsoft first. Microsoft was about 20% of your revenue last year we estimate. Can you talk about your recent announcement where you extended the Microsoft contract through mid-2024. And how is the new relationship with Microsoft additive to Taboola?

Yes. So I mean this is quite exciting. We both -- you saw the quote by Taboola and by Microsoft in the press release. It's essentially a growth story for both Microsoft and Taboola. And what the thinking behind this is over the last few years, Microsoft has created inventory on the Microsoft ecosystem. Microsoft is not a traditional publisher. It was only available for bidders. So we, as part of that, we do not have access to that environment. So there's a lot of growth opportunity that was kind of kept out of Taboola. And Taboola was a good partner with Microsoft, and we had a good integration with them. So what we did was we worked with them to build this bidder that can essentially do 2 things -- for us, 3 things, but for Microsoft 2 things. And I'll explain that. So one, on our existing business, we worked with them to make sure that it's quality integration and we can sustain the revenue we have. So that was one thing. The second thing was to make sure this bidder can have access to inventory we never had before. That was the second thing, which we believe will grow the partnership. And the third one, for us, that's more for Taboola, repurpose that technology in the open web. So now we can bid on other types of inventory like display and social. So -- and as part of that, we announced that we also signed an agreement until July 2024, which many investors were curious about. So now we have this long-term agreement. The downside, we believe, is something we worked well on with Microsoft and there's an upside creation with more inventory we never had before. And we like the fact that Microsoft worked with us, that we announced it together. We believe that shows intimacy and good partnership.

Okay. So you don't think it's a net negative to the 20% -- you don't think it risks the 20% of revenue coming from Microsoft.

Microsoft actually is mid-teens now. So it's a smaller portion of our overall revenue. We believe it's a positive opportunity for both Microsoft and definitely, Taboola because we'll be using this also outside of Microsoft. So we think it's a growth opportunity within Microsoft for the reasons I mentioned, but we intend to do more with it.

Okay. So I got a bunch of questions over here. Let's see. Let's do this one first. Why going public via a SPAC rather than an IPO? What's your thinking there?

So when we did it -- first of all, the reason we did was because we really like the ION team. Gilad, who is the CEO, who joined our Board, I knew him before, we had relationship at the Board level. He's a great guy. And the firm is great. They're very leaned in, very partner-like. And as you think of the going public, for founders, it's a big deal. As you think about the next 20 years of your life running a public company and or more, and you really want to make sure that you surround yourselves with good people who have good motivations to do everything that's about to come. And Gilad came from the public market sector. So I thought it's going to be a great addition. I thought time, we were ready to be a public company and I guess, what happened was since that decision, 6 months after SPAC became less cool. But hopefully, right now, we're 2022, as we continue to beat the raise and grow this business to something investors really like. It's a $1.6 billion business, $20 million of adjusted EBITDA, we convert 60% of free cash flow. There's a lot of things investors, I think, have never -- haven't seen in a long time, outside of Google, Facebook, Amazon. So hopefully, as we build relationship with investors, it will be less about why SPAC and more about, it's a good public company and let's get close to it.

Okay. Can you talk about the synergies of $100 million of EBITDA with Connexity that you have mentioned? Is that all new revenue? Or are there any cost synergies on that?

It's new. So this is not a cost story where everybody stays on board. This is a growth story. So the $100 million is a growth story, new revenue, ex-TAC. Yes, and it's coming from primarily -- I mean, I can talk about it. It comes from -- you have advertising synergies, publisher synergies, data synergies and global. So currently it's more key markets, we're in 22 countries. So these are all growth, net growth synergies.

Okay. How long will you continue to provide Connexity's stand-alone revenue and EBITDA?

We're already now running -- the numbers are combined. So the numbers -- the guidance is for both companies combined.

So you're not going to -- you're going to stop now. Like, from now on, we're not going to get any stand-alone Connexity numbers, right?

Even in Q4, I think, it was already merged. But definitely, the 2022 guidance is for both companies combined.

Okay. So we're not going to be able to break them out apart at all. Okay. Skimlinks revenue, I don't know what that is, Adam. What is Skimlinks revenue?

It's a company Connexity has acquired. But again, we -- for us, it's connection to your publishers, connection for retailers. We don't really think of it in that way. But Skimlinks is the publisher front name that Connexity has for publishers. So publishers will know what Skimlinks is. So whoever asked that question probably is close to the publisher side. What you need to know is, what you think about this investor is commerce on the retail side as advertisers and commerce on the publisher side, which was a company Connexity bought called Skimlinks.

Okay. There is another question here is specifically regarding the Connexity, Adam, how much was CPA, which is cost per action, just for the audience. How much was CPM and -- which is cost per 1,000, which is sort of top of the funnel, and was there any CPC, so cost per click, business at Connexity is what they're asking.

So what we did say publicly, which is one of the reasons why I wanted to partner with Connexity in an M&A structure is more than 50% of the business is CPC, which is uniquely rare. Most of the commerce business in the world is via affiliate marketing, via CPA, which means there is no risk, and you only pay it for acquisition, like you said. Connexity has built a direct-to-retailer business, and many of them, more than 50%, pay them on a per click basis, and Connexity's technology is able to then optimize for the right conversion. So they're optimized for CPA, but they pay CPC, and then about 1/3 or so is CPA. So it's 1/3 CPA or so, and 2/3 CPC.

Okay. Going back to Microsoft -- that's super helpful. When does the new Microsoft deal start? When do you start bidding on the new inventory? And when can others start bidding on the inventory they had access to, I guess, once the new deal start?

I can't remember what we said publicly. But I mean 2022, we'll -- we've been working on it for a while now with them, but it's going to roll out in 2022. So most of our existing advertisers wouldn't know the difference because we've been testing this in any case. So we've been bidding one way or another for the past few years. So most of our existing business will not notice the status quo. What we hope they'll see is more inventory than they ever had before. So that's the experience the -- our advertisers new and existing should experience.

Okay. Perfect. We have 2 minutes remaining. So my last question to you, Adam, is when you think about what you want to accomplish in 2022, what is that? And then secondly, what do you think Wall Street is missing about the Taboola story that you want to highlight as we walk out the door here.

So 2022, I mean -- so I think for us, it's -- I mainly want to -- personally what I care the most about, because I'm feeling pretty good about the business, is that as we grow from 1,700 people to more than 2,000, we continue to scale our start-up in a way that's fun and we can continue to execute. And people want to do this forever because I think it doesn't matter who does anything first, it's only about who does it better. And I think Taboola has opportunities to continue to execute and have a good time doing it. So firstly, what I care the most about it is the culture and people, how they feel when they come to work, even though that's kind of a Disneyland geeks, Taboola. But that's what I care the most about. I think in terms of what people are missing, I don't think people are -- I think most people don't know us yet. And I'm very encouraged about the type of investors that are leaning in with us. I can tell you we're getting a really great time with them. People are coming in for product sessions like and I had. It's really nice to see investors spending so much time to get to know us. And I think it's just a matter of time as we continue to, one, show the market of our execution capabilities and surprise them with good news as we continue to scale Taboola, and on other side, just get people to know us. So it will take some time to -- as we continue to grow. But overall, I think it's mainly about being patient and execute and they are the good things.

And just getting awareness. It sounds like awareness is a key goal of yours.

Yes, we're still new. So I think the more people get to know us -- I'm actually surprised by how much time and how detailed people get to, which is really great to see because we have the team to showcase all the good things we're working on. So it's fun to spend some time, and we learn to as executives about what people care about and how they think of us.

I will call it there. Adam, any closing remarks before we leave? We have about 60 people watching you right now.

I really hope we'll do this next time in person.

Okay. Me too. Thank you, everybody, for being with us. Thank you, Adam, for taking the stage. Really lovely to talk to you. As always, really fun. Thank you so much. Bye, everybody.