Ziff Davis, Inc. (ZD) Earnings Call Transcript & Summary

[ Hanging ] in there, everyone. Last but certainly not least for us, this is the last session. Closing it off, the highest quality, Vivek Shah, Bret Richter, from Ziff Davis, and really excited to have guys here and talk about the story.

It's great to be here.

Thank you.

So thanks for joining.

I think always just a good place to start with Ziff Davis is just kind of give us a lay of the land, how things have evolved and kind of where you're at right now?

Yes. And maybe I'd just start a little bit with the origin story and then quickly get to where we are today. So this company essentially was created in 2010, when I or the private equity firm acquired PCMag. And so it started, it was a $22 million deal. We had a simple thesis at the time, which was digital transformation, platform shifts create great investment opportunities and that we thought we had an approach where we could identify really interesting companies to acquire. Business model innovation, develop technology and leverage technology platforms, bring in talent, operate these businesses for free cash flow and rinse and repeat. And in the ensuing decade that from that modest start, we did that. And the business grew on a compounded annual growth basis of in excess of 20%, operating at mid-30s margins. The business today is roughly $1.4 billion of revenue, a split between advertising and subscriptions. And so it's been this incredible run. The last couple of years have been a little different. We've been more treading water as a company, flattish from a revenue and EBITDA point of view. And there are a couple of things. One is the advertising portion of our business, which is a little more than half of the business, and the market has not been -- it's not been a benign market for the last couple of years, and so I think that's had some impact. But we've held up. I mean, I think on a TTM basis, the ad business is down 2% for the company. So considering some of the headwinds, I actually view that as being relatively good performance. And then on the subscription side of the business, that has been a steady grower for us and a low single-digit grower. And so the organic picture hasn't been right. Now we also believe that the big part of our model obviously is acquisitions. And the deal market in the M&A market for the last few years, could we have transacted, we could have, but we just felt that patience would be rewarded. And we believe we're now entering that period where at least that perspective is going to actually didn't, in fact, be rewarded. So look, I think the last couple of years, the business hasn't reflected what it was in the preceding decade. We feel pretty optimistic about where things are going in terms of improving organic as well as, I think, accelerating inorganic. And the thing that I would also say is we -- and I'm sure as we talk about it, we spent a lot of time with this company talking about the advertising business. But we have a $600 million subscription business. And that business has, as I said, has done really well, 3.4 million subscribers, ARPU of about 140-ish, $160 a year. So there's a diversification in here, too, that I think sometimes is missed when we talk about the company.

Got it. Right. Anything you want to add to that?

No. So I've been with the business, I'm coming up on my third anniversary, and it has all the things that Vivek described that we've experienced over the last 3 years. I don't need to repeat those. But just emphasize that what we have done, and I think we'll probably get into this, is we've really maintained, if not improved the health of our balance sheet. We've produced significant amounts of after-tax free cash flow, which accrues directly to the equity holders and the value of the equity. We've positioned ourselves to both execute the transactions that we've executed this year and in the prior year, while maintaining and creating tremendous amounts of capacity in the balance sheet to do more things. And as our various businesses jumped the hurdles that may have been in front of them in the last couple of years, I think we're well positioned to really act in the M&A market as we see deals that are attractive to us, like the one we recently signed, CNET, which we signed about 4 weeks ago, and we're excited about what's in front of us.

Okay. Great. Let's start with CNET, first major acquisition in a number of years. Talk about the attractiveness of that asset. Why it's the right place at Ziff Davis? It's moved around a bunch over the years. What is it about CNET? And how does it fit with you guys?

Yes. I mean, look, so obviously, the tech media vertical is one of our verticals, and CNET is easily the leadership brand within that vertical, has been for a while now. And so I think for us to be in a position to be in the leadership position, I think, matters a lot. Part of my view of where the advertising market is going is that fundamentally, most marketers are search, social, CTV and 1 to 2 endemics. And so by definition, you really want to be in a leadership position to get the direct ad programs. Otherwise, you're going to fall into the programmatic bucket. And as a company, we have stayed away from programmatic monetization for the most part. The yields aren't what they're going to be from a -- versus what you'd get from a direct ad sales, insertion order-based type business. And so for us to continue to succeed there, it felt important that we needed the anchor brand. So that's one thing. The other thing I would say is that when we look at the revenue mix and the composition of our tech media business, which is PCMag, Mashable, Lifehacker, Spiceworks versus the CNET and ZDNet, there's some complementarity there. And I think we can help accelerate some parts of their business. So I think there's some real revenue synergies in the equation. I'll also say that this is an example of where patience pays off, right? So this isn't the first time we looked at acquiring the asset. This is all in the public record, but this asset traded $400 million, $500 million a handful of years ago when we were looking at it. And while we felt all the things I said about why this made sense, were true at the time, there are limits, and we are a very disciplined buyer. And so look, we'll wait. We'll be patient. And so what I often tell shareholders is, look, if you're looking for that almost like clockwork formulaic deployment of capital for acquisition, this isn't the place because we are going to pick our time, and we're going to pick our spot. And so I'm thrilled that we have the asset, and I'm actually thrilled that we have the asset at a valuation that made sense for us which, as you know, it's very simple, we need to see IRRs in excess of 20%. And a big function of that is not just what you're going to do with the business, but what you're paying for the business. And so I think this is a -- this is center of the fairway when we think about the kinds of acquisitions we've historically done and the kinds of acquisitions we think we're going to be able to now do in this market environment.

Got it. Okay. So let's broaden that out a little bit. You've been patient. CNET was the first major one we've seen in a few years...

But still relatively small in the context, yes.

Still relatively small, right, but one of the largest one in the year.

Yes, almost more about what hasn't happened the last couple of years.

Yes, right. Exactly. So how is the world changing from here? And how is your appetite for M&A changing? Are you still being patient? Are you seeing more opportunities?

Well, we'll always be patient, right? So that -- but I think what's changed is as more time has passed since valuations of 2021, I think sellers and the bid-ask spread between buyers and sellers is down, right? So that's what we have here, right, which is, okay, we get it. What happened in '22, '23, this isn't -- this wasn't just temporary. We're in a cycle right now, particularly for digital media advertising-based assets. There are a lot of -- there's a bear case around content that exists, right? It affects our valuation today around what AI means and where search is going and the ad duopoly. We understand that. We see that. If what that means is we're going to be able to transact at prices that we find attractive, I guess we'll take the near-term hit there and be able to transact it, I think, at more attractive valuations. So I do think there is a recognition in the market that this is a little bit of a new reality. I think you have private equity-owned assets where there is a real demand for some liquidity. And so I think the recognition that transactions need to happen, that will be interesting. The public markets have been difficult for a lot of businesses like ours and ourselves included. So I think there are attractive valuations there. I think you've got some businesses that are potentially in venture portfolios and then owner-operator businesses and saying, okay, if this is the reality, I don't know if I want to continue to wait; and if there's an opportunity to do a transaction, we'll do it now. So I think the environment is right. I think the CNET acquisition supports that, but then the pipeline that we have right now further strengthens my conviction that we will be back to the kind of capital deployment we saw historically, which is almost about 100% of our free cash flow every year being put back into acquisitions.

Okay. We can get to that last comment in a second. Just first, any bias on public versus private in terms of what makes more sense in the M&A market? And areas of focus, publishing, specific verticals or on the subscription side and new businesses, how do you guys think about that?

Yes. I don't know if we have any preference as to who the owner is, right? And so to me, it's just, is the owner motivated to do a deal and are they serious about a transaction? And so I think in all those markets, that's what we look for. In terms of the spaces in which we want to acquire, I have always had a bias to buying against the existing verticals because the synergy cases are always stronger, right? And the risk profile is different, right? If you are acquiring in spaces in which we have existing assets, have an existing position and all we're doing is adding scale and extracting value through synergy, that's just more comfortable. The other piece of it, the reality in the way our organization is set up is that the sourcing of deals happens within each 1 of our 7 verticals. Each of them is competing for capital. So to some degree, Bret and I are always looking for ways to spread capital amongst the 7 and not do concentrated bets between the 7. But also, I just think that the bigger the transaction, and we're not against larger ones, we've done them, RetailMeNot, Everyday Health, which was public, I think in the end, the conviction level has to be super high, right? The bigger the purchase price, the higher that conviction level needs to be. So in my own, where I sit, I'd like to feed the 7 verticals. They're all very active right now in the marketplace, sourcing, evaluating and diligencing opportunities. And so I prefer to spread it around.

Okay. And anything to comment on like a pipeline? Or is that not the right way to look at it?

No, I mean, listen, I think it's -- there isn't a quantitative answer to that because you could still be seeing lots of opportunity. But if they're not actionable, I don't know how relevant that is. I think from the point of view of, are we going to get transactions done in the next 12 months, that will be at a pace reminiscent of what it was in the decade that preceded 2022. That's what I'm anticipating.

Okay. Great. Okay. Now back to the 100% of free cash flow. So you've stepped up on the buybacks in this current environment. I know your view on where your stock is trading and the valuation being undervalued. How are you thinking about buybacks versus M&A and maybe doing both and also just in the context of that valuation of stepping into your own stock versus buying something that might be -- you might be buying at a higher multiple?

Yes. No, it all comes down to first in core principles, right? So one, the framework of capital allocation is there's 4 pillars. We allocate capital to our business. We do that first. We do that for OpEx and CapEx. We make sure that we have a healthy balance sheet because capital allocation strategies are built on the back of a healthy balance sheet. And then it's a balance between external investment, which is M&A, and return the capital to shareholders either in the form of dividends, which we don't do, we used to do, or buybacks. And buybacks are also an investment decision. As you're indicating, I mean, essentially, what we're doing is we're making an investment in a company that looks exactly like Ziff Davis because it is. It's a fractional interest in Ziff Davis. And I think what's great about the buyback opportunity is the risk profile because we don't know any company that we diligence better than we know our own company. That said, historically and currently, our strong bias is to find opportunities to expand the breadth and scope of our businesses and enhance their ability to serve the marketplaces they serve by acquiring companies that increase their overall scale in the business, products and capabilities, technology and ideas and thought leadership. So M&As are biased. But with our stock at the level it's at, risk weighted, we have to allocate capital to the stock. We did it in the second quarter, we did some last year. We gave an indication we'll do it in the third quarter. The multiple is a factor, but really what we're looking at is enhancing intrinsic value per share. And you can measure intrinsic value per share by adjusted diluted EPS per share, by free cash flow per share. And if we can enhance what a fractional interest in Ziff Davis owns in terms of our current and future cash flows by buying back our stock, we weigh that against these M&A opportunities, and buying back stock has been attractive.

Okay. And to follow up, Bret, you've talked -- hit multiple times on the strength of the balance sheet. You're under 2x gross levered. You're generating a lot of cash. Do you think about leverage, whether that's both on the M&A side and/or the buyback side or the ability to do both at the same time?

Yes, we do. We think about it all the time. And in fact, I think it's maybe slightly under the radar, but important. In June, we expanded the size of our revolver by $0.25 billion. So we had a $100 million undrawn revolver. We now have a $350 million undrawn revolver, so sort of readily accessible capital to the extent we need that to support these capital allocation activities. It's floating rate debt. We're conscious that there's strong indications that we may be entering a declining interest rate environment, which will make that capital more attractive. We did an important transaction with our convertibles because they were -- these 1.75% converts were due in 2026, and we were able to do an exchange offer that reduced that maturity to about $150 million and extended the $263 million of the maturity out to 2028, slightly higher interest rate, a high conversion price, keeping it at $100 a share. We're actively managing the balance sheet because it's the balance sheet that supports the M&A strategy.

Okay. One more on sort of the broader business. Your -- historically, your target growth has been half from M&A, half from organic growth. Presumably that hasn't changed even though we've had a tough environment. Just talk about how investors should be thinking about that...

Yes, look, I think in the near term, which I'll define as sort of the next 12 months, you're probably going to see the ratio more to the inorganic side just given the activity that has -- that I've just discussed in terms of what we're looking to do. At the same time, the organic piece is going to continue to improve. The other thing I just should say on organic is we're a portfolio of businesses. There are businesses that are growing very strong organically. And there are businesses that, while may be in organic decline, could be in EBITDA growth mode because we are shrinking to grow and doing things to rightsize the business. It depends on where they are in their ownership cycle with us. We often look at businesses having a 12-, 18-, 24-month incubation period inside of a company like ours. And so if you are working to enhance profitability, and as you know, we are EPS-driven, really, that's our north star. And so if we can do things that are going to be accretive, may make the organic growth statistic that we report and may be negative to that, we're still going to do it because it's the right thing to do from a bottom line point of view. So I would just say the ratio is probably more inorganic than organic in the next 12 months. So -- but the long-term vision is that it is an equal amount from both. The other thing I will say, just back to -- we were talking about balance sheet, we were talking about our borrowing capacity, we were talking about the ongoing free cash flow, but there is an existing $0.75 billion of cash that sits on the balance sheet of the company. So in all of that in activity that we've been building the war chest. So when you start to add up all of that, right, the borrowing capacity, the free cash flow, the ongoing free cash flow, the existing cash, it's a fair amount of firepower. And so again, if you go and say, okay, if that can be deployed in the way in which it was deployed for a decade, which is what we're saying, then you translate that into a model, it becomes a very attractive model, notwithstanding what -- even if your organic is low single digits.

Got it. Right. So a lot to work with there.

A lot to work with.

Yes. Okay. Great. Let's talk about the ad business and some of the dynamics going on there. There's been some puts and takes across the verticals and the businesses. Maybe just a kind of state of the union on the ad business, in particular.

So just as a refresher, our ad business operates in 4 primary verticals: technology, video gaming and entertainment, retail shopping and health. So those are the 4 categories. So we're not in every category. We're a vertical player, not a horizontal player. Our ad business is, as I said, largely direct ad sales versus programmatic, right? So it's not a systematic monetization, it is sales force, working with clients to develop programs, heavy bias though towards performance-oriented programs. So things that drive a true ROAS, return on ad spend, mostly enterprise buyers of advertising. So we're talking a couple of thousand advertisers versus 1 million advertisers or 10 million advertisers. So there are differences between sort of our ad business and other ad businesses. It's always helpful to just think of it vertical by vertical. The tech vertical has been difficult. It has been the source of a majority of the organic headwinds in the business, as you know. That has a lot to do with the underlying health of the advertisers themselves. And so where big tech goes is kind of where we're going to go with that vertical. Within it, we have both marketers looking to reach consumers and marketers looking to reach business decision-makers. It's the business decision-maker piece that's been more problematic. The consumer piece has actually been growing. It is where CNET also operates, so we feel good about that. Gaming has been great. Gaming continues to grow, notwithstanding the fact that the video gaming industry is actually having some challenges. The business is continuing to grow, and that's good to see, and we feel optimistic about that. Health and wellness, it's largely pharmaceutical advertising as well as sort of because of our parenting and pregnancy business, marketers are looking to get to that audience. I'd say the DTC, direct-to-consumer pharma has been much stronger than the direct-to-provider pharma, and that has to do with the cycle of where drugs are and where do you feel you need to enhance the consumers' perception of drugs versus a provider's. But again, the pharma business, we think, is one of the best ad categories period within the advertising industry. And then retail, we have had headwinds there that I don't think our market, they're very specific to us relating to a commission challenge we have with one of our larger merchant partners as well as a distribution deal, that was a good distribution deal and incremental when we had it and it has gone away in some ways or is diminished, and so that's become a source of organic decline. But I don't -- I view that as we're going to lap that very soon, and that's not going to be something we have to worry about going forward. So a lot going on. What I would say is in the end, that I think we're only strengthening our position in each one of these verticals. And so RetailMeNot, now CNET, IGN, Everyday Health, these are #1 and 2 in these verticals. And these are great verticals that represent a significant chunk of the advertising industry.

Got it. So for you guys, it's very kind of vertical-specific. You don't see an overall umbrella...

No, I don't -- we don't have -- internally, we're not talking about ad trends. It's very specifically what's happening in this vertical, what's happening with these advertisers, are we losing share, are we gaining share, what does the market look like?

Got it. Okay. You've had a lot of views on Gen AI. I actually remember -- I don't know if you remember our first conversation was right when ChatGPT came on. And you were the first one who actually told about me about it. I haven't seen this ChatGPT. It's like the first few days that it was out. And so a lot has evolved there. Let's start with the licensing side, where you're starting to see some deals pick up between publishers and the AI providers. You've been a little bit more patient, in other area, you've been patient in. Can you talk about the philosophy there and your approach and kind of how you're seeing that play out?

I mean, listen, a lot of these deals have become public, so you know the terms. The dollars aren't really material. The terms are pretty short, and they're not going to renew. And so -- and what do you get in exchange? You get a little bit of cash. I have cash. We have cash right now, but you give up some rights. And I wouldn't want to give up those rights because I think fundamentally, and this is going to have to get litigated, is the input into these systems matters, which you're going to hear is, oh, it's all about the output. We didn't make a reproduction. So if we didn't make a reproduction, we're fine. We don't think that's correct. We believe that it is a violation of copyright. It is not fair use to ingest the entirety of our library of content without any compensation, in violation of our terms of service. We have major LLMs. We have robots.txt instructions to not crawl, and they're still crawling. We also know we are one of the largest providers of the original training for these large language models. So my view is it's not attractive enough right now from what we're seeing, and so I'd rather maintain my optionality.

Okay. But you haven't taken the litigation approach either as well, correct?

So I'm not going to get into where we are in a legal process, but I will say that I believe this will need to be resolved in the courts.

All right. We'll leave it there. One of the debates also has been, and you've talked about this, the quid pro quo of the Internet, right? The way search has always worked, it can take your content if it's driving traffic back to you. And there's been concern about what AI overviews and Gen AI search does for that exchange. I think in the past, you've talked about how you haven't seen -- well, actually, in the past, you talked about how it potentially is driving more traffic. So how is that going? Has that changed? What are you seeing there?

So look, the rate at which AI overviews appear across really all queries, but also the queries that's valuable to us is around 7%, 8%. So 90-plus percent of times, AI overviews aren't even appearing. Now you could say, well, why is that? And I think part of it is, does the AI overview contribute to the search engine result page or not? And I think there are queries for which it can and will, and there are queries for which it won't. And we're going to watch that. So as a rate of -- in terms of how often it's happening, it's actually not material. But when it does happen, because there are links built into it, there's an argument that that's actually good because those links have the highest value real estate on a search engine result page. They're up and sitting above the ads, right? And so the thing that you often hear publishers complain about is that the search engine result page has become dominated by advertising. And so the degree to which AI overviews actually elevates content and links the content above or adjacent or in a better position against the advertising, that's actually going to be good. So -- but again, who says that the AI overviews are always going to be presented there? So we don't know, it's early days. So I would say, I think a lot has been made of the incorporation of AI overviews into the search experience, and I don't see it as a harmful dynamic for publishers. There's a different question, and I think it's the probably more important question in some ways, which is, does Google's position in search somehow change because now they are competing engines? Up until AI, no one talked about competing search engines. Now we're talking about SearchGPT and Perplexity. And every day, there's a new -- there's now this view that we don't need an army of 5,000 engineers to manage an algorithm. We can have an AI actually perform the work of the algorithm, which is to present content, present the links to organize the Internet's information. So the cost to being in the search business has come down significantly. So I think there's going to be a lot of search companies...

Already a pretty good margin business.

It's a great margin business, but I think competition in search is good. I think that's good for every participant in the ecosystem. So I encourage competition. I also believe that one of the ways in which large language model owners can resolve the copyright conflict is deliver what Google delivers, which is a large quantum of profit. And you may find that LLMs will build search engines just to do that and not build an ad business because the economic -- the incentive is, okay, I can now go build my AI business, and I'm getting the ingesting of content that I need because I'm delivering the value exchange of traffic for content. So that will be interesting. And that could be an ultimate resolution, by the way, if they can get to any materiality. What I will say is that it is hard, right? I mean Google has a very strong position within search. And I will say this about Google that I firmly believe, yes, the algorithms change and publishers either benefit or don't benefit from the change, and it can have some difficulty trying to manage that. But Google as a platform versus other platforms, I think, has been far more reliable and thoughtful about content than pretty much anyone else. There have been other platforms that people have built entire businesses around, gone away, right? Algorithm changes. If you look at the social platforms, they no longer are drivers of traffic. The social platforms keep you within the experience.

Right. And that's the concern on search?

It is, but I don't think, in the end, search is doing the same thing. It's organizing the Internet's information that I think they're different. But again, I don't think Google is going to try to create a thing that people just come to and never leave. I don't know what ad business that's going to be for them. So look, I told this early on. I remember when Alexa and voice speakers came out, I literally had people saying, why would anyone do text-based search anymore? We're all going to do voice search. Voice search is the future.

Yes, I remember that, too.

You guys are done because there's no way of translating voice search into traffic. That has now.

If that quid pro quo stays and you'll see more AI overviews, and let's -- assuming it stays in this format, right, top of the page, above the ads, you're getting linked and it's driving traffic, does that satisfy your concerns on what you talked about legally? Or is it...

I don't have concerns with Google. My concerns are not with Google.

Okay. All right. The other side of Gen AI is on how you can utilize it to create content for yourself or help create content. What's your philosophy on that? Are you using it at all? And how is that...

No, we're not using it to produce content because fundamentally, that's a big chunk of what we do is to produce content that humans produce. And I think that's our value proposition, and we certainly don't want to threaten that in any meaningful way or in any way. Where I think it's very valuable is functionality, tools and actually software development. The role that AI is playing inside of our company in terms of speeding how we code and deploy features and functionality across both our content and software businesses is compelling. It is less talked about for some reason, but to me, it's an engineering code. It is a speeding of getting things, releases pushed and come to market. So that's where I'm most excited about leveraging AI inside of the company. But it also is helpful, I think, to some degree, in us better monetize it. So let's take our Ookla business, which is a data business, essentially. Leveraging AI within that data business to make that business better and to create better insights and get more actionable activity out of it, that's also there.

Is that happening today?

No, I mean we've got AI incorporated and AI enabled across the board. I think we have 75 different products right now that are -- or features, they might -- product might be [ too state ], but like functionality within our properties. So yes, that's all -- that's to me better user experience, better functionality, faster coding, but it's not content generation. We're not doing stories.

Okay. Last one on publishing and Google, just on the evolution around cookies and the debate about what it actually ends up looking like. But any thoughts or approaches to a post-cookie world? And...

But again, I mean, I think we -- I mean, I don't -- I can't tell how many rooms I've been in like this for the last few years where we were talking about this third-party cookie and outlook, right? Like I just -- my view is this, that in the end, you're talking about ad target. It doesn't matter the mechanism, there will always be ad targeting. There are too many smart people with too much of an incentive to ensure that the right ad gets in front of the right person at the right time. That will never change. So I never thought that the third-party cookie deprecation was going to be some [ popular ] kind of thing. I never thought that. In the context of our business, it wasn't even that germane, right? Because for us, our advertising is informed by context, what's on the page and our own first-party data. So what we are not is a company that is taking data from outside of our network and bringing it in to target our advertising or conversely, taking data from our network and monetizing it out of our network. That is not the business model we're in. There's some around the edges stuff that goes on, I'm sure, inside the company, but that's not our business. So even there, it wasn't that relevant. So all to say that I think we spent a lot of time as an industry talking about this, and Google is like, okay, we're not going to do that.

Yes. I want to see if there's any questions from the audience. Got one on the back here.

You mentioned that you think Gen AI deal rights won't renew. Can you maybe just elaborate on that, help us understand your thought process there?

I just -- my own experience, and there have been many of these over the years, you'll see some of the large social platforms all did content deals. And again, what they do in the near term is I think they quiet the noise enough, and then it gets to scale where they just don't need to do it. And if you look in the history of a lot of platforms, you're going to see -- maybe I've just been in the business too long, but in the 30 years I've been here, I've seen a bunch of these. And I think they would have signed longer-term contracts than 2 years, 3-year contracts, if this was long term. Again, these contracts are also not for rights. They're basically releases. API -- maybe I'd say, I'm getting an API access, but it's not a concession that they actually need to pay for the intellectual property. It's an important distinction. And so I could be wrong -- I'd like to be wrong. I'd like to believe that these are going to be larger and growing and have the kind of economics that could be material. But inside of a company like ours, 7-digit, 8-digit, $1.4 billion, it just doesn't -- of revenue, it just doesn't -- it's not going to move our needle. And I worry that the pressure for us to get real value goes away when it's like, look, we've done this, pipe down for 3 years, and 3 years is an eternity in the technology business. And so, look, my own view is it's just not worth it. Will there be, I think, ongoing data deals for data that cannot be otherwise accessed? Yes. But we're not about to pull our entire library off the Internet in support of that because even those deals aren't that big. So that's -- it's -- I don't know, no one knows, right? I can't really predict the future, but I don't know. I feel like I've seen enough of these and I get the tone. And obviously, we're in the room, right? So you sit there and you go, oh, I don't think the goal is to admit that they should have to pay. It's to continue to just -- let's shut some people up.

Good question. Good answer. Okay, we have a few minutes left. We...

I think we have a...

Oh, go ahead. Yes, sure.

I just wanted to ask about Reddit is public now, there's a lot of talk about them getting all this traffic from Google and the deal they did. So just a lot of the endemic advertisers that might be on CNET or PCMag, they might now be on Reddit as well or any of these other sort of forum-based that fill a need that's similar to what you do, it's very intent and all these sorts of things. So just wondering how you view competition from very professionally created content with more forum or sort of Reddit-like content that competes with you.

Well, you're asking the right question. So -- because I get a lot of the AI -- what AI overview is, I'm like, forget AI overviews, right, it's in the middle of the page now on every query. Like this has changed. My sense is it's this phase, and we'll see where it settles where I believe that Google saw how many people putting queries and putting the word Reddit next to it, which signals to them people want to know what the consumer comments. I think they can coexist. Look, I myself find myself on Reddit. I see value in it. I don't think it's -- I think when you're in any research, purchase process, decision process, you need to do something. You go into the Internet to figure things out, you want multiple sources, you want professional sources and you want user content, user comments. And so I think Reddit has become a really good commenting engine. I think where it ends up settling out in terms of the placement it gets, the frequency with which it gets placement in Google, I think, is going to be an evolution. I also think there's an opportunity for publishers to be on Reddit, Reddit as a platform. So Reddit is now emerging as a platform for publishers, and that could be also interesting. So it is early days. I actually would agree with you that I actually think the Reddit change within the SERP is actually more impactful and more interesting to watch than even the AI overviews.

Great. Okay. We have about a minute left. We hit on publishing and advertising a lot, mentioned Google on the subscription side, but we didn't get...

Yes. No, I told you never to get...

We didn't get to it much. Maybe just broadly, what part of that business excites you the most? I think it'll be interesting to hear from you and from Bret also.

Well, I'll let Bret go first.

Yes. I think it actually hits upon a word that we really didn't have an opportunity to speak about today, which is what we generate revenue in a lot of different ways. I think what's underappreciated is the diversity of our revenue. And in a period of time, particularly the last few years, and in 2022, when the ad market was under significant pressure, the fact that we generate 40-ish, 45% of our revenue from subscription and licensing differentiates us from a lot of different companies and a lot of different platforms. So in some ways, the flip side of the fact that we're in a number of different businesses, serving a number of different communities in a number of different ways, is the derisking element of the diversity and the recurring element of our subscription and licensing business, right?

Got 9 seconds, I can't improve upon that.

Yes, we got 4 seconds.

I would just say that I love the durability, I love the growth. I think I love the concept of subscription revenues more than anything else.

Got it. Great. Thanks, guys. Appreciate the time. Thanks, everyone, for joining.