Viant Technology Inc. (DSP) Earnings Call Transcript & Summary

Are we on? All right. Awesome. So great. This is Stephen Ju with the UBS U.S. Internet team. Sitting to my left are Tim Vanderhook, who serves as the CEO of Viant. And to his left is Chris Vanderhook, who serves as the COO. So welcome to the both of you, and thank you for joining us in Arizona.

Yes. Great to be here, Stephen. Thanks for the invite.

Awesome. All right. So let's start at the very top, at a high level. How does Viant describe its position within the broader digital advertising landscape today? And how is that going to change and evolve over the next few years.

Yes. So for those of you that aren't familiar with Viant, we're known as a demand-side platform in programmatic advertising and what is that we represent demand or the buyer of ads. So our economic commercial relationships, we take a small fee to represent the buyer, and we're bidding electronically into available inventory supply to try and get the lowest price and drive the highest returns for the advertiser. Amongst our competitive set, there's really only 5 for advertisers to choose from. In terms of size and scale, we'll start at the top. Google has a product called DV360, which is the largest by market share, following them is the Trade Desk. You have the Yahoo! DSP, ourselves and a newest entrant is Amazon has created their DSP as well. But amongst that 5, there's only 2 of us that just represent advertisers. The other 3, Google, Yahoo! and Amazon represent inventory that they own and operate. So we think there's a large conflict of interest there to partner with those other 3. So if you're an advertiser looking for a buy side only player, it's either the Trade Desk or Viant are your selections.

Yes. And who are the advertisers for whom like that's becoming -- and that remains very important consideration and the underlying consideration for why you get invited to pitch?

It's every advertiser, yes. We think the conflict of interest is the biggest issue in programmatic advertising. So if you rely on Google, what ends up happening is they redirect all of your ad budget to YouTube. If you rely on Amazon DSP, they redirect lo and behold when you get to the end of the month, all your money gets spent on Prime video. And what does Google say? They say YouTube is much better than every other premium content owner out there. This is all by design, but advertisers have wised up as the years have gone on and realize there's no objectivity coming from these, we call them sell-side players, people trying to sell ads. Their goal is to sell every ad at the highest price. When you contrast to Viant, our goal is to buy just the ads in front of the audience you're interested in at the lowest possible price to drive your returns higher.

And if you look at just the incentives, if you're on the buy side, it's what we call on the buy side and the sell side. If you're only on the buy side, we make a small fee. So market rates on a DSP is somewhere around 15% to 20%, whatever the advertiser spends. Now in our case, that's what we make. We don't care where the money goes. We're looking, as Tim said, we want to get the lowest possible price for the audience on the content that they want to reach someone on. But we're trying to drive the highest returns for the advertiser. That's what we do. We go out and protect their interest in the market, but we make between 15% and 20% when we do that. If I also own content, well, I can make 15% to 20% by placing on somebody else's content or I make 100% by putting it online. If you just follow the incentives, it's natural. And again, it's not that these are bad people running those companies, but it just is what it is.

Right. So you shouldn't -- I mean, fairly obvious statement, but you shouldn't be handing the wallet to your kids and letting them go well with the credit card and making them -- letting them make the decision on where they spend the money?

Exactly. And I think over time, there was the Google Do No Evil mantra that started, and many advertisers trusted them in this space. But post the antitrust trials, there's been so much documentation of e-mails that have come out, data that's come out. So if you look at DV360, it reported more than 80% of the money through the Google DSP was running directly on YouTube. And so this is by design to drive the economic interest of Google. And that's really where advertisers are just so much more intelligent. Amazon has entered the market and offers this low fee. 1% is what they're claiming. But if you contrast that to where the money actually runs in Prime Video, they're making 100% margin there. So these are all just marketing tactics. I think they're all going to fall flat on their face. And this is why companies like the Trade Desk, Viant were growing so much.

Okay. So is it 1% on the entirety of the aspect or just the money that's going to external parties, is that 1% as well?

1% on programmatic guaranteed, they call it, which is to the third parties.

Okay. Got it. All right. I think you guys have talked about having a $250 million pipeline, right? And the majority of that pipeline is still TBD undecided, right? So what is your key value proposition to win these deals versus, say, the other ones that probably are not as conflicted?

Yes. I'll go ahead and start. So historically, we've always existed in what we call the mid-market. Mid-market for us, how we define that. That is a U.S.-based national advertiser, they spend between $50 million to $500 million a year in advertising. They're not a multinational, they're not buying global. It's more U.S.-based. We find these marketers are much more data-driven and results matter. And they -- when I say they're more data-driven, they're literally moving the money around to which audiences, which content are driving the highest returns for them. We find those marketers to be a better fit for us historically. And so we've always done really well. We dominate in that market sector. Whereas you look at Google and the Trade Desk, they're kind of in the Fortune 100, more brand-based advertising, I think P&G and Unilever harder to tell what works when you're selling toothpaste and toilet paper. You also don't need to be very data driven to do that. I don't -- I probably don't need to explain why. Everybody needs that. So if you look now in this new -- we talked about the $250 million pipeline. In and of itself, that's probably a smaller percentage of our total pipeline of our core business in the mid-market. But these are these large brands that are multinational brands that we typically stay away from, but we launched ViantAI about a year ago. And we started getting pulled in into these RFP processes, reaching out to us. We didn't have a sales force going after any of these companies. And so over the course of the last year, we just started getting brought into these RFP pitches, lo and behold, we're finalists in many of them. Molson Coors was one. And you asked what is it that we bring to the table? I'll just highlight what Molson Coors has already said publicly. One of the things they did was Molson Coors has a very large customer database. You'll hear marketers talk about they want to use their first-party data. That's their customer database, their CRM. And what they do is they want -- they want platforms like a DSP. They want to onboard that, they want to match it and then they want to reach those consumers of their customers across all their brands. We outflanked every one of the -- every one of those 5 that Tim mentioned were in this pitch, minus 1 Amazon. So we outflank them all. And what the customer said publicly is that Viant Household ID has the largest scale, and this is -- that was a big reason that they chose us, one. Two, with ViantAI. ViantAI is -- and we'll get to this, but it's an autonomous advertising platform, think full self-driving of a car, but that for a programmatic buying platform. We don't want -- DSPs historically have sees of traders that operate in them to pull all the levers to set up the campaigns to optimize them. It's very manually intensive. They're like Bloomberg terminals. ViantAI is a way to go out and automate this. So we can go to marketers like Molson Coors, who has -- who employs hundreds of people in the U.S. through ad agencies to bring down their fixed cost of advertising, should take less people to manage these campaigns. ViantAI was a big interest for them as well to be able to lower their total fixed cost of operations of their advertising.

And there's lot of videos online. Chris and I released that product. Last year, we talked about, but what is it? You give it 4 pieces of information, the URL of the advertiser product, your budget, the time frame you want the ad campaign to run and what your goal is. And from there, across the entire Internet, it assembles an ad campaign that should hit your target, in terms of the budget you want to spend, it automatically selects every website, mobile apps, CTV apps, streaming audio podcasts that are relevant based on your brand or product or service. So it has really brought AI into the advertising landscape. It's by far the best product in market because it's real, it's actionable. And once you see that media plan, it's also fully transparent, which is different than a Google. Google does have great AI technology, but they're constantly a black box. If you spend money through them, you don't get to know where your ad ran. Most advertisers are pretty uncomfortable with that proposition. Ours is fully transparent where you see every single location that your ad will actually execute in. And so that's a big, big advantage. One thing I just want to add, Chris talked about Household ID another really important data set that we have that's proprietary and unique to us is an acquisition we made last November of a company called IRIS.TV. And that gives us IRIS_ID, which basically tells us what you're watching in CTV, all the way down to the scene level. So Household ID tells us which home this is, IRIS_ID tells us what they're watching on the screen and the goal for marketers is to get down to the scene level targeting. I'll give you an example. If you're watching some show, it's a family show and the father dies. When the ad pod loads, that's a perfect time for health -- life insurance. If they're in a bar, that's a perfect time for a Coors Light ad. So the matching what's happening on the screen, who the household is and then modifying the ad delivery to drive attention. This is what -- where the future of advertising is going, and we have the proprietary data signals that enable all of this.

Contextual to CTV.

Contextual and CTV, it starts there, but it's exploding. Now new data sets by applying AI, computer vision on all of this, we generate -- what's the emotional sentiment of this content? Is it happy? Is it joyful? Is it sad? What is going on there? Certain brands have -- that's much appealing. So we're inventing new data for advertisers to explore and target celebrity identification. If you have a spokesperson like Shohei Ohtani for New Balance. If we recognize Shohei in a show, it's a clip about him. That's a great time for New Balance piggyback that type of content. So this is going to keep exploding brand suitability, contextual targeting, scene level targeting, emotional sentiment, these are all brand-new data sets that we are inventing in bringing to the market using our AI in the IRIS.TV asset.

There has to be a safety angle as well, right? There has to be...

Brand safety?

Yes.

Absolutely like -- nudity. Is there a nudity in the show? Is there not nudity in the show?

I mean, think of -- it's well documented. Many alcohol brands they get sued all the time for showing an alcohol ad it mistakenly ends up on kids' program. That was -- IRIS.TV was a big feather in our cap in that win with Molson Coors. Not only is Household ID important to them because they want to reach households 21 plus, they have to, they're regulated, but they also don't want to show up in content that is out of context with them.

Yes. So you're saving your clients' time, you're saving your clients' money, right? So...

Most importantly, we're driving the growth of their revenue. Remember, advertising stimulates consumer demand for that product or service. When you get advertising right, that's what drives growth for these organizations. Molson Coors, what do they need? Kids are drinking less alcohol today. It's the lowest percentage of society...

21-plus kids are drinking less alcohol.

Youth. The next generation, I should say. The younger generation is drinking less alcohol and it's -- that is the big challenge for these types of companies. And when you're able to find legal drinking age audiences, match with relevance and entertain them, it's a way to bring them into the fold. So to me, we view this as how you're going to drive growth for your business in the future is the application of buying AI, all of these signals and reaching these right audiences, hopefully, the beer market can grow again inside of the United States and not just contract. So that's our goal there is to drive growth for all of these advertisers, where if you look at a Google, if you look at Amazon, the only thing they care about is their own growth, which is show the Molson Coors ad to the wrong user, show the Molson Coors ad just to fill my ad supply. And advertisers have recognized this, and it's why big tech is in serious trouble representing advertisers as we go forward.

Okay. So saving time and money, they can either pocket that or they can redeploy those dollars and time into new campaigns or digital campaigns. So what are you seeing them doing? I would imagine they want to be pointed toward growth, but.

Yes. So if you look at -- I'm not giving anything proprietary here, but let's say, Molson Coors, they're eroding market share in the category in general is going down. Sales are down. Marketing is a percentage of sales. So one of the things that we use, and we use this with a lot of marketers, and I don't -- I'm guessing, but I always get the head nods in a meeting, which is, okay, so budgets might be going down, but I'll bet your CEO is still calling for growth. And the whole senior marketing organizations shaking their head, yes. And it's like, well, how are we going to do that? Well, one, our whole pitch is about driving growth for their business. And we feel that we're going to get fired if we don't drive growth for the business. Tough challenge with Molson, but we think that we have a great strategy to do that. The second thing we do, you talked about saving time and also saving money. When we -- as a buy-side representative only, we are like your inside man. We are in the industry -- we are actually in the industry. We know how everything works. And interestingly, for the last 70 years in advertising, advertisers, this is controversial -- advertisers are basically considered the sucker or the mark. Everyone else on the sell side is trying to extract the most dollars out of them, not really drive their returns. So we create products that, yes, save them time, but also money. So in CTV, nearly 50% of all money in our platform goes into CTV. We believe in that channel. We know that it drives growth. So what we did was create something called Direct Access. Direct Access traditionally a DSP bids into an SSP who represents a publisher, if you look, there's about 30 apps that represent 85% of the viewing in CTV. Why not just create direct integrations or connections to these content owners, and that's what we've done. In Direct Access, we skip the 15% to 20% of the sell side charges to represent the publisher. And so if you're a Molson Coors and the lion's share of your money is in TV, most of that is still linear. It's moving into CTV, but I'm going to save you 15% to 20% right off the bat. So you might have gotten a 4% decrease in marketing spend, how are you going to grow? Well, you're going to be able to do -- you need to do more with less. And so we did a calculation for them based on what the savings that we think that we're going to -- from a fee perspective. And we're going to get a ton more working media out in market so that even with less money, it's like they got a 20% budget increase.

Yes, but exactly as your question posed, what do they do with the savings? They redeploy it to reach more consumers to try and drive growth of the business, which then kicks up our revenue as well.

And that seems like it's a particularly important consideration as a lot of these brands, not just Molson, but we've all had to sit here and watch a lot of these companies deal with an increase to their input costs. So I would imagine the conversations right now are probably especially more acute in terms of what you can do for them?