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Outbrain (OB 0.42%)
Q4 2022 Earnings Call
Mar 02, 2023, 8:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good morning and welcome to the Outbrain Inc. fourth quarter and fiscal-year 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. Now, I'd like to turn the call over to your Outbrain management team.

Unknown speaker

Good morning and thank you for joining us on today's conference call to discuss Outbrain's fourth-quarter and fiscal year-end 2022 results. Joining me on the call today, we have Outbrain's co-founder and co-CEO, Yaron Galai; co-CEO David Kostman; and CFO Jason Kiviat. During this conference call, management will make forward-looking statements based on current expectations and assumptions. These statements are subject to risks and uncertainties that may cause actual results to differ materially from our forward-looking statements.

These risk factors are discussed in detail in our Form 10-K filed for the year ended December 31st, 2021, as updated in our Form 10-Q and other reports, and in subsequent reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the call's original date, and we do not undertake any duty to update any such statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company's fourth-quarter earnings release for definitional information and reconciliations of non-GAAP measures to the comparable GAAP financial measures. Our earnings release can be found on our IR website, investors.outbrain.com under News and Events.

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With that, let me turn the call over to David.

David Kostman -- Co-Chief Executive Officer

Thank you, Steve. I'm pleased to report that, in Q4, we exceeded the guidance we provided for adjusted EBITDA, and we were at the high end of our guidance for ex-TAC gross profit, delivering $7 million of adjusted EBITDA and $59 million of ex-TAC gross profit. For the full-year '22, our revenue was $992 million, which reflects growth of 2% on a constant-currency basis. Our ex-TAC gross profit was 235 million and our adjusted EBITDA was 26 million.

Throughout the macroeconomic, political, and industry-specific challenges in 2022, we were driven by the principles of discipline and focus on the core business. We gained significant market share on the premium end of the market, developed strategic drivers that we expect to deliver growth in the coming years, and make measured investments in our business while staying disciplined on costs. We believe that some of the regulatory actions, like the DOJ seeking to break up monopolies and the focus on privacy, strengthen our competitive position as one of the largest contextual digital advertising companies on the open web. 2022 was a record year of signing new multiyear partnerships with premium publishers, which is the segment we focus on.

To give you some relevant numbers. We won from direct competition business worth more than $100 million annually, which is twice the amount we let go. These market share gains were mainly from the largest and most important anchor publishers in the market, such as Axel Springer in Germany, Fox News in the U.S., Daily Mail in the U.K., and JEDI in Italy. New business contributed $46 million just for Q4.

This positions us with commanding market shares with the top 5 to 10 news publishers in many markets globally. Most exciting for us is that we are told by partners that our monetization and engagement metrics are higher and that they choose us for our superior ad quality, technology, and products. This proves that our laser focus on the core is paying off. Consistent with our management approach, we're very disciplined about terms of deals, including the use of any cash prepayments and avoiding dilution to our shareholders in order to gain business.

The acquisition of video intelligence also allowed us to broaden our video and top-of-article presence with our publisher partners. We added vi to more than 40 of our existing publishers. We're very excited about the potential growth in the video business in 2023 and beyond as it also fits well with our strategy for offering full-funnel advertiser solutions, which I will turn on now. In total, we currently have close to 1,000 in-article integrations, whether to header bidding or code on page, which will support primarily our enterprise brand strategy.

To the advertiser side, we see a great opportunity to broaden our TAM as enterprise brands are also increasingly looking for more meaningful, measurable results from their awareness and consideration budgets, seeking primarily attention and engagement metrics. Predicting engagement is the cornerstone of our value proposition to performance and direct response advertisers. So a natural extension is leveraging our core AI-based prediction capabilities to be relevant for enterprise brands. Our attractiveness to these advertisers is also driven by the access we can give them to our exclusive premium supply in a direct way.

We are, in essence, supply path optimized by design. As one example of our approach to enterprise brands, Audi recently leveraged our brand studio to deliver premium and innovative advertising experiences to maximize the potential of user engagement or interactions users actively had with the creative like swipe, watching the video, enabling audio, and clicking through to the Audi side. The campaign resulted in a more than three times higher engagement versus comparable format. So, just to close the loop on this flywheel premium, global supply drives more premium brand high-quality advertising, which in turn drives a better user experience.

This expansion of our advertiser base was one of the areas of investment in 2022, and you will hear more about that throughout 2023. For performance advertisers, our focus is twofold: increase automation and improve CPA by helping advertisers adopt the right automated optimization strategy. As a reminder, we've been implementing things like the ability to set target CPA, cost per acquisition, drive for maximum conversions, and allow for full automation of the CPC billing for a while. And we see continuous improvement in the performance of our advertisers.

We believe that the focus we had on this direction gives us a significant competitive advantage. As a result, in the quarter, we saw double-digit increase in advertisers choosing our fully automated CBS mode, shifting from the semi-automatic mode. And currently, we have overall conversion bid strategy adoption of 70% from our advertisers. In '22, we worked with a record number of advertisers, which includes a diversified demand mix across marketer types, vertical ad formats, and goals.

The direct relationship we have with these advertisers is critical in times of economic uncertainty as we work closely to understand client goals and optimize their campaigns accordingly. However, needless to say, 2022 was a tough year, primarily from advertiser softness in pricing and reduction of campaign budgets. The average prices that we've seen in our marketplace have declined by double-digit percentages versus 2021 and, as of the end of the year, are still approximately 10% below even 2019 levels. Therefore, throughout the year, we were also acutely aware of the need to drive efficiencies and act in a disciplined way, the same way we acted in 2020 and 2021 when, despite the strong growth, we managed our expenses conservatively and grew our team carefully.

Similarly, as soon as we noticed the telltale signs of headwinds in Q1 2022, we moved quickly to cut costs and headcount; restructured some of our teams, including folding our video intelligence and demand teams into our core business; and reduced our originally planned operating expenses for 2022 by more than $50 million, resulting in positive free cash flow in Q4. We are continuously looking to improve our cost structure in 2023 and are accelerating our move of positions to lower-cost geographies, implementing optimizations in our serving infrastructure, and we initiated several internal automation projects across our operations. As to the outlook for 2023, Jason will provide our guidance, but I want to highlight a few of the key assumptions. We assume no meaningful improvement in the macro environment.

We believe that our consistent focus on the core that led to our record market share gains in record page views in Q4, combined with the investment made in video full-funnel offering for advertisers and optimizations in our bidding algorithms and the continuing focus on efficiency, will support the growth, profitability, and free cash flow we expect in 2023 and beyond. I'll now hand it over to Yaron.

Yaron Galai -- Co-Founder and Co-Chief Executive Officer

Thanks, David. As David alluded to, 2022 was a challenging year for our industry, which has caused the demand for advertisers side of our business to perform more radically than any year in the past decade-plus of our business. Our focus this year was on balancing disciplined cost management while investing in technologies that we believe will serve us well into the future based on the spring-loaded supply wins we mentioned. Here are a few of these areas.

As I said last quarter, it's clear that revenue diversification is one of the top priorities for many of the best publishers around the world, including some of the publishers we brought into our marketplace in 2022. And they need technology to enable that diverse revenue growth at scale. This is why we introduced Keystone, which takes the best of the optimization technologies we've built at Outbrain for the last 15 years and builds upon them a platform that enables publishers to grow the entirety of their businesses, e-commerce, subscriptions, newsletters, affiliates, etcetera, via technologies. We've now added three premium publishers in Spain, Germany, and Japan, who have deployed the Keystone technology on their sites.

Switching gears, AI has been a recent point of interest for many thanks to the advances in technologies like ChatGPT. Before I outline some of the ways we've built AI into the Outbrain stack over the years, I'd like to start with a word of caution as it's almost guaranteed that all companies in the near future will be hyping themselves as huge benefactors of AI. I believe the AI story is a bit more nuanced. The AI revolution is, at the same time, real, overhyped, not entirely new, and partially commoditized.

It's real in that there are fascinating breakthroughs happening which will allow for massive ad creation, smarter prediction algorithms, cost reductions, and more. It's also overhyped as it's being presented as an immediate magical solution that will replace all humans on all tasks. I think we'll find that the leap from a cool consumer user experience to industrial-grade solutions will require more R&D, more time, and more human support for that last mile of deliverables. It's not entirely new in that many of these technologies have been bubbling up in the past five years or so.

I'll speak shortly about how we've built AI into our core prediction algorithms starting in 2019. Lastly, much of AI is likely going to be quickly commoditized. For example, everyone will likely integrate ChatGPT-like capabilities into their ad creative generation, which means it'll be a commodity for everyone. All that said, Outbrain has been the leader in AI in the recommendation space for several years.

And here are a few ways we leverage AI and machine learning, or ML, in our business. First, we've been using AI technology for ad creative suggestions since 2021. This has been helping us and our advertisers in two ways. The first way is creating a large number of ad variations to quickly find those that are best performing.

Second way is reducing the cost of human labor needed for extensive ad creatives. Close to 10% of new marketers on our platform are now using the AI creative generator in their Outbrain campaigns. We are now lab testing the use of ChatGPT for ad creatives and expect to make that available to our advertisers soon as an enhancement to our existing AI technology. Second, at the core of our service, we use machine learning, or ML, to predict user interest and propensity to convert.

These are technologies we've built and deployed starting in 2019, and our systems make around 1 billion such predictions every second, making it one of the biggest AI ML systems in our space. Third, more recently, we've started extending these AI-based prediction algorithms into the programmatic space. This means that advertisers looking to buy our brands through programmatic channels such as DSPs and SSPs can now benefit from the ability to target users who we predict will have high propensity to engage with the advertiser and convert for them. We believe this will be specifically interesting for enterprise brands who are looking to more smartly advertise to those users who are more likely to pay attention to them.

These specialized technologies are largely homegrown by Outbrain's R&D team, and we've open-sourced components that enable us to keep evolving our AI and ML capabilities in a cost-efficient way. One of the biggest long-term levers in our business is the continuous improvement of our algorithms and the data set our algorithms learn from. I'll start with the data that feeds our algorithms. The more data points we have, the better our CTR predictions and the yield potential has become.

In 2021, we processed an average of 4.6 billion data points per minute. In 2022, we've grown that approximately 50% year over year to about 7 billion data points per minute. When we pursue supply partnerships like the ones we mentioned earlier, it's not only the immediate financial value that we consider, but also the value of the data we obtain that we use to improve our AI algorithms. On the algorithmic side, last year, our R&D team released into production several algorithmic breakthroughs, including the AI technologies I just mentioned, which, according to our internal A/B testing, have improved our CTR and resulting RPM yield potentials by approximately 9.5%.

While these improvements are not yet apparent in the results we reported due to the unique macro challenges, we expect them to deliver value when advertising demand springs back from the macro slump. Now on to Jason Kiviat, our CFO, to discuss the financials.

Jason Kiviat -- Chief Financial Officer

Thanks, Yaron. As David mentioned, we beat our Q4 guidance for adjusted EBITDA and achieved our guidance for ex-TAC gross profit. Last quarter, I mentioned the continued volatility of advertising budgets warranting a cautious approach to our Q4 guidance. This proved to be prudent as we did see a softer second half of Q4 than we would typically expect from our historical seasonality in terms of the level of advertising demand.

However, along the same lines, demand has been seasonally stronger than expected in January and into February, and both the U.S. and Europe showing signs of stability. Revenue in Q4 was approximately 258 million, a decrease of 7% year over year on a constant-currency basis, and 11% on an as-reported basis. The decrease year over year was driven by lower yields, owing largely to the headwinds on advertising demand affecting our industry.

These headwinds were partially offset by growing our supply from winning new, quality, long-term partnerships. These new media partners in the quarter contributed 16 percentage points, or approximately 46 million, of revenue growth year over year, by far, our largest contribution of new partner revenue and page views on record and far greater than the 7 points of growth we had averaged in 2020 and 2021. Further, this growth comes in a period of demand headwinds, which means that the supply growth would likely have contributed even larger revenues in a more normal macro environment. Net revenue retention was 74%, reflecting the continued impact of the demand environment on pricing, which drove the majority of the decline year over year.

Our logo retention was far higher at 96% for all partners that generated at least $10,000 in Q4 2021. As an additional data point, our net revenue retention for full-year 2022 was 86%, with essentially the entire 14% decline on existing partners driven by the impact of the demand environment on pricing as our ad impressions were flat year over year, implying 100% in net retention of ad impressions on a same-store-sales basis. Additionally, FX rates remained a headwind on revenue. As a reminder, more than 60% of our revenue is generated outside of the U.S., largely in European markets.

Ex-TAC gross profit was 59.2 million, a decrease of 21% year over year on a constant-currency basis and 23% as reported. Consistent with what we've seen in the past several quarters, the steeper decline of ex-TAC gross profit year over year versus revenue was driven by a few factors: one, an unfavorable mix of revenue or, in other words, a higher percentage of our revenue is from partners or segments with lower take rates; two, lower performance on certain media partners, driven in part by the demand headwinds we're seeing, which impacts a portion of our take rates with certain partners; and three, the impact of onboarding and optimizing significant new supply partners, which is challenged by the weaker-than-normal demand environment. As we said on the prior call, we expect to grow out of this headwind in the coming quarters, assuming no further deterioration in the macro environment. Moving to expenses.

Operating expenses decreased approximately 6.6 million year over year to 51.8 million in the fourth quarter. The majority of the decrease is due to higher one-time expense items incurred in the prior year. The rest of the decrease is due to lower personnel-related costs driven by lower variable compensation and favorability of FX rates, offset partially by the impact of increased headcount, mainly due to our vi acquisition in January. As mentioned in previous quarters, we implemented a series of cost-reduction efforts to adjust the current business headwinds.

We began 2023 with a headcount of approximately 980 FTEs, which is down 7% from June and down 2% from January 2022, as we continue to focus our attention on driving greater efficiencies in our operations. We are planning to maintain headcount, which accounts for around 70% of our operating expenses, to stay essentially flat for 2023. As a result, adjusted EBITDA was approximately $7.1 million in the quarter. Moving to liquidity.

Free cash flow, which we define as cash provided from operating activities, less capex and capitalized software cost, was approximately 11.5 million in Q4. For full-year 2022, we saw a net use of cash of approximately 22 million. This was primarily driven by lower profitability. In total, we ended the quarter with 351 million of cash, cash equivalents, and investments in marketable securities on the balance sheet and 236 million of long-term convertible debt.

We announced previously that in February 2022, our board authorized a $30 million share repurchase program. In November, we completed repurchasing the full amount authorized, which resulted in the repurchase of approximately 6.4 million shares. In December, the company's board of directors authorized a new and incremental $30 million share repurchase program, which we began executing in Q1. We continue to believe it is an attractive way to enhance shareholder value under current market conditions while still investing in growth opportunities.

Now turning to our outlook. As discussed today and in prior quarters, visibility to advertising budgets remains limited. In our guidance, we assume that current macro conditions persist with no material deterioration or improvements and regular seasonality. With that context, we have provided the following guidance.

For Q1, we expect ex-TAC gross profit of $50 million to $52 million, and we expect adjusted EBITDA of -$2.5 million to breakeven. For full-year 2023, we expect ex-TAC gross profit of at least $237 million, and we expect adjusted EBITDA of at least $28 million. To provide additional context to how we see 2023, our expectation is that we return to year-over-year growth in Q3 as we begin to lapse the deterioration of the macro environment we saw throughout H1 2022, and we drive growth from areas that we have invested in over the past year, scaling our new supply, growing advertiser spend and improving yields through product and algorithm innovations, expanding the deployment of our video and full-funnel offering, and growing our relationships with existing and attracting new publishers and non-publisher platforms. As we assume a flat macro environment, our assumed growth over the course of the year is driven by our execution of these investment areas contributing more meaningfully in the second half of the year.

Our guidance also assumes that expenses are roughly flat to where they have been for the past year or so. We plan to achieve this through operating our core more efficiently and strict prioritization of investment areas. However, we will monitor results and the environment closely with a focus on profitability and cash flow generation. Now I'll turn it back to the operator for Q&A.

Questions & Answers:


Thank you. We'll now be conducting a question-and-answer session. [Operator instructions] Thank you. Our first question is from Ross Sandler with Barclays.

Please proceed with your question.

Ross Sandler -- Barclays -- Analyst

Hey, guys. Good morning. Maybe just starting with the macro. Dickie, maybe you could answer this one, and then one for Jason after that.

But the guidance, you said normal seasonality for 2023. You said growth rates will be positive in 3Q. That all sounds pretty good. You're one of the few companies that's reporting a little bit later than the rest.

So, you know, we're in the first stage of easy comps lapping the Ukraine conflict in March. What are you guys seeing right now across categories and geos as far as the overall environment? And then, what does it take to get to that positive growth rate in the back half? Is that just a function of easy comps or an improving environment? And then, Jason, can you just talk over the next couple of years, without giving specifics, what's the path on the ex-TAC margin, the GP ex-TAC margin? And what does it take to get back to the kind of previous cadence or range that that number is normally in? Thanks a lot.

David Kostman -- Co-Chief Executive Officer

Hey, Ross. [Inaudible].

Jason Kiviat -- Chief Financial Officer

OK. Do you want to start?

David Kostman -- Co-Chief Executive Officer

OK, so I'll start here. So, generally, we've been saying we see stability in the markets. But we saw rates of decline that started in the end of Q1 into Q2, and then those rates of decline have stabilized. And we assume that that's what we're going to see going into next year.

So, no major improvement but relative stability. And we had -- I think Jason mentioned, I mean, second half of December was softer, but then January and February are definitely looking OK. We don't see any major differences currently between Europe, which is a big part of our business, and the U.S. So, generally, the trends are pretty similar.

And when we talk about the second half, I mean, it's driven not just by easier comps but really by many of our efforts and growth drivers coming more to bear fruit in Q4 and -- in Q3 and Q4. And maybe I'll turn to Jason on that.

Jason Kiviat -- Chief Financial Officer

So -- yeah, so the trends we saw really in the course of the year, our biggest -- just as a reminder, our biggest step-down for us that we saw were in Q2, and we saw a much more normal seasonality into the second half. And as Dickie said, you know, December was softer, as we heard from a lot of our peers as well, with relative strength in January and into February. For March, we've got positive indications from the market. And so, cautiously, we're expecting a normal -- I would call it normal seasonal uptick in March.

So, visibility obviously remains limited. But again, our diversity of our advertiser mix, and without any reliance on any specific vertical, is certainly an asset for us. Just from verticals perspective, I think you might have asked, in Q4, you know, we saw positive signs. Again, we don't overly rely on any one of these, but positive signs from automotive, travel, and retail, while finance and entertainment were actually weaker in Q4 than Q3, which is unusual.

In political, it was minimal. We didn't expect much, so not very disappointed by that. But that was it. And then, you know, for 2023, I think we started to say this, but we're really using our normal process for forecasting, which we've been using for several years, you know, which is expecting using the trends that we see into Q1: flat macro, normal seasonality.

And then -- and to get that growth, it's really coming from, yes, lapping, you know, and the things we've done really in the last couple of quarters that will start to pay off. I think, you know, really more into the second half of this year. And just to expand briefly on those, you know, like I said, we've added a ton of supply and premium supply at that. And we're traditionally a land-and-expand model is how we view ourselves.

That's why we report the net revenue retention and why it's been over 100% historically, you know, this year notwithstanding. But we drive that growth on this -- on our existing and our recently won partners through technology, learning the audience, driving optimizations, expansions, getting, you know -- really finding out how to best monetize for each partner, which is, you know, largely through our technology discovering that over -- it takes a couple of quarters from our history and what we tend to do. So, you know, I think we'll also grow, you know, in our model through, again, adding new partners and that's both traditional publishers and what we call the platforms, you know, or the non-publisher partners. So, that's the original equipment manufacturers, browsers, minus 1 screens, you know, that's more than 10% of our revenue at this point.

And, you know, don't expect another year of 16% new growth, but certainly, the 7% that we came to kind of see every single time is probably more in the ballpark of what to expect there, though not guiding specifically to that. And, yeah, we continue to invest in our algorithms and optimizations. Yaron mentioned on the call, we actually saw really, really big gains in our predictions. We just, you know -- with the supply and demand imbalance, we haven't been able to see it come through our overall results yet.

But, you know, more coming there. And we're obviously cautious about how we put it in just based on what we've seen this year. And then, I would just say expansion of video and our full-funnel offerings of article placements, different types of -- and other formats and placements. And we'll probably talk more about that in the coming quarters as an area of focus.

And then, at the same time, keeping expenses flat, which is what we assume in our guidance for the year and we plan to -- I mean, we've been flat if you kind of look back at the last year and a half, by the way. But by operating our core more efficiently and really, really, you know, focusing on prioritization of how we can invest smartly and repurpose resources to expand our core. So that's really the story for the year. As far as -- I think your second question was just about the margin.

You know, the things that I mentioned have brought the margin down are actually the same types of things that will bring it up. So, just what those are again, mix. So, it's always going to be a factor. We've got thousands and thousands of partners, and they all have different kind of take rates.

And it depends where kind of the mix of the revenue is generated. You know, just to give an example, you know, we're not talking to any specific publishers, but we're not obsessed with the number, you know, when we're adding a new partner, you know, if it's at a lower-than-average rate, but we still see the dollars are attractive and profitable. There's more to it as well. I mean, the reach and the audience that it brings us for our advertisers that might convert well for certain types of advertisers and open share of wallet is also what we look at, as well as the data that it adds.

I think Yaron mentioned just how much -- how many more data points we're adding now with adding all these partners. And we view that as growing from yields across our entire network when we improve our data as well. You know, the other -- that's mix, you know. Demand headwinds really and the supply demand imbalance, it's probably the biggest thing, if I had to pick one, that's driven it down.

And macro improvement will certainly be the biggest thing that drives it back up. But I think there's some things that we can certainly do ourselves to drive it back up through just, again, better yields, better click-through rates, etc. to find some leverage there as well. And then, ramping up, again, on these new partners, we find that it takes several quarters to drive the yields higher.

In a lot of these deals, that means higher take rates as well. So, again, the things that brought it down are the things that will bring it back up.

Ross Sandler -- Barclays -- Analyst

Thanks. That was the longest answer in the history of conference call. So, congratulations [Inaudible].

David Kostman -- Co-Chief Executive Officer

I wanted to add something, but it was long enough. So, we leave that. I think the one thing I actually do see on the -- I talked in the prepared remarks about the flywheel. I mean, the wins of premium supply and the investments we're making into mid-article video and really driving more share of wallet, increasing our time by getting into awareness and consideration dollars from brands, also important drivers.

And we will see those, I think, materializing in the second half of the year in a more meaningful way. We expect that.


Thank you. Our next question is from Andrew Boone with JMP Securities. Please proceed with your question.

Andrew Boone -- JMP Securities -- Analyst

Good morning and thanks so much for taking my questions. I wanted to start off just on the competitive environment. Yaron talked about the importance of just data. And so, to that angle, can you talk about what the competitive environment now looks like that the Taboola and Yahoo deal closed? How much of an advantage is scale? And does this change the competitive dynamic as you guys speak with publishers and advertisers?

David Kostman -- Co-Chief Executive Officer

And I'll take that. So, I think the Yahoo deal is an interesting supply deal that gives scale. But the way we look at it, it's a big opportunity for us in the next couple of years. I mean, obviously, it's very distracting.

It will take a long time. And, you know, we see a big opportunity to take market share on the demand side. I mean, Gemini shutting down gives us an opportunity. Gemini, by the way, had, you know, a few third-party large supply partners.

We took the largest one, which is a U.S. publisher, in the summer. And I think they are also exiting other very, very large third-party supply deals. So, we see opportunity there in the demand.

And it's also a focus -- by the way, I have to admit, I still look at Yahoo Finance and track all my stocks there. So, I love it. And it's still a deal that will take a lot of time to materialize at the end. It does give more data, but it's also, --when we look at sort of market segments and where we're focusing on this, is a pure native deal.

I mean, native is great, but we're expanding much more into -- as I said, into full funnel and other areas of publishers in mid-article video consideration awareness. So, again, this is very, very native-focused. And I think it's a great financial deal for Apollo. Obviously, you know, dilution to shareholders of a competitor, but I think it's a, you know, great financial deal for Apollo.

But at the end, I think, once it materializes, I think it will give -- again, it's another publisher deal. I mean, it's not more than getting more data from publishers at scale. And I think that they will be able to, you know, gain the scale from additional user data. It's not very clear, I mean, how much of the Yahoo data will be able to use there rather than just, you know, first-party data from clicks that all of us have from publishers.

So, that's not clear, but definitely deal at scale. I think we've heard some -- you know, from some publishers some concern about sort of such a large stake of a major publisher in a competitor. So, it's, you know, balance. I think in the next two years, for us, we see there's an opportunity.

And, you know, congratulations to them. I mean, it does give them, you know, a larger scale longer term on some of the user data. But generally, you asked about competitive environment. I know we're getting a lot of questions on ex-TAC margins and all that.

So, just maybe want to use that. I mean, it's really not comparable when comparing the ex-TAC margins. We do hear from sort of the publishers we won that -- you know, we did large surveys also with a lot of publishers that, you know, when we win, it's because of ad quality monetization, insights that we provide. And when you compare the numbers of the ex-TAC, obviously, you know, the competitor you're referring to has a lot of other things in there.

I mean, there's connectivity that's accounted. And, you know, we estimate it could account for a few hundred basis points. There's other, you know, fees and data fees in owned and operated sites like [Inaudible]. And so, it's very difficult to compare at this point in terms of when -- sort of the analytics to get the ex-TAC margin.

Andrew Boone -- JMP Securities -- Analyst

It makes sense. Thanks. And then, I wanted to touch back on Keystone. I'd love to hear more about what publishers are telling you.

And then just how do you guys feel about the pipeline for 2023? Thanks so much.

Yaron Galai -- Co-Founder and Co-Chief Executive Officer

Hey, Andrew. Thanks. Yaron here. So, we formally announced Keystone in the middle of Q4, so it's very recent.

And we mentioned at the time that we're doing it with four design partners in the U.S. and Europe. Now, I just mentioned that we're -- we have three new publishers with code on page. And two of those in Europe, and one in Japan. So, it's also expanding to other countries.

The -- what's important to remember is we launch this into markets that's not very favorable in terms of paying for technologies. The Keystone is a SaaS platform, and these are paid partnerships. But we're using this in the short term, especially in these market conditions, as a product differentiator, as a way to establish a stronger moat with those publishers that we work with. That's, to us, more important than the short-term financials.

That said, we mentioned, last year, we did about a couple of million dollars in revenue from Keystone, and we expect that to accelerate this year faster, outpace the growth of revenue. But again, it's still small compared to the around billion dollars of our core business.

Andrew Boone -- JMP Securities -- Analyst

Thank you so much.


Thank you. Our next question is from Shweta Khajuria with Evercore ISI. Please proceed with your question.

Shweta Khajuria -- Evercore ISI -- Analyst

OK. Thank you. David, you mentioned that -- and when you were talking about the publisher wins, you mentioned a few things: why you -- what allowed you to gain share, superior ad quality, tech, and product, etc. Can you provide more color in terms of what exactly is driving share gains in these publisher wins? And then, Jason, how did -- I guess, how should we think about just the seasonality from Q1 to Q2? Understood that you expect growth to start in Q3.

Could you please help with that? Thank you.

David Kostman -- Co-Chief Executive Officer

Thanks, Shweta. So, on the competitive wins -- and they were very significant this year, obviously -- we gained significant market share around premium publishers, which is, again, the area we are focused on. And it's been a record year of those wins. And it's driven by a combination of technology, product, and superior monetization and optimization that we bring customer service.

It's really a combination and the vision. I think, people do connect with sort of our long-term vision for the publishing industry. I think Keystone is an important types -- not part of those deals necessarily, but it's a very important factor in terms of the narrative and sort of how we look sort of in the next few years into how we can partner with publishers. These are typically very long-term deals.

I mean, some of them actually are beyond five years. You know, most of them are, you know, three to five years. So, we're very excited about those. I think that when we also do these deals, we're trying to also increase our presence into mid-article.

And we have, you know, very nice success with sort of leveraging those to implement vi. We want to leverage some of the other placements in mid-article and other placements to grow our sort of enterprise brand strategy that I talked about. So, it's a combination of those. And the financial terms matter to, I said, we are, you know, more disciplined around prepayments and cash.

We also didn't give any equity to get those supply deals. So, overall, we're very comfortable. Great year, need to focus in 2023 on growing those. As Jason said, a big driver for this year is sort of these deals being more and more optimized, driving better yields, you know, with some recovery in the ad market.

Obviously, that's, as Yaron put it, spring-loaded supply. Again, the CPCs are still low, in the 10% versus 2019. So, we had record page views in Q4. So, once demand recovers a little bit, and obviously, we continue to improve internally, we don't just hope for market recovery but algorithmic improvements and others, I think we will see that reflected in the financial results.

Jason Kiviat -- Chief Financial Officer

Hey, Shweta. This is Jason. I'll take the second one, right? So, I mean, like I said, normal seasonality is what we expect with layering on some of these growth drivers on top. You know, as you can see, Q1 fully feeling the effects of lapping the tough comp.

And really what happened last year was we saw advertising budgets reset at the beginning of Q2 and then, again, you know, each kind of month of Q2. So, it's still dealing with a partial tough comp easing up over the period to be kind of an easier comp into Q3, right? And so, with that in mind, I would expect, you know, directionally, not any hard numbers here, but to go from the implied year-over-year decline that we're giving in our Q1 guidance, which is clearly double digits down to be, in Q2, probably down single digits. I'd say mid to high single digits down in Q2 and then really scaling again over the second half of the year if that helps with the modeling.

Shweta Khajuria -- Evercore ISI -- Analyst

That's very helpful. Thanks, Jason. Thanks, David.


Thank you. Our next question is from Ygal Arounian with Citigroup. Please proceed with your question.

Ygal Arounian -- Citi -- Analyst

Hey, good morning, guys. I guess, first, I just want to maybe get a little bit more color on some of the things we have talked about. First, on onboarding of new supply. So, sounds like that will normalize over the next couple of quarters, but anything more we could add about where we are with that, what's left? And same thing on the move of funnel.

We're talking about video and the mid-article. You know, just kind of technically, again, David, you said that that's going to start contributing more over the course of the year. But where are you in conversations with advertisers and publishers? What needs to get done to get that -- to those stages?

David Kostman -- Co-Chief Executive Officer

So, I'll take the first part -- thanks, Ygal -- the first part on the ramp-up. And we're following here a traditional pattern we've seen for more than a decade in terms of -- and when you ramp up those big partners, I mean, it takes a few months. So, it's gradually, we see yields improving on those deals. And it's really following the patterns we've seen before.

Again, the challenges that there is softness in demand and the depth of demand resulting in lower CPCs is definitely not ideal when you're ramping up so much supply. We talked about winning more than $100 million of new business. That's a lot for a year. But we are confident that, you know, they're following our models and following the traditional patterns of ramping up.

And again, the record page views we had in Q4 will yield better financial performance once we ramp those deals also up. And we see potentially some improvement in CPCs. In terms of the sort of our strategy around getting more, I mean, we have a big business today with enterprise brands already. In many of the European countries, most of our business is with agencies and brands.

But what we've seen that there's a huge opportunity when these brands are shifting to desire and request more accountability, real measurements, real outcomes. That is where we excel. I mean, we -- our company is based on the ability to predict engagements. Those brands today are looking for very clear attention metrics, engagement metrics.

And we believe we can drive those better than many others and really create a unique selling proposition, which goes back to why we're focused on the premium supply. I mean, these brands want to be on premium supply. So, if you look at -- in the most of the large geographies, we have controlling market share among the top five or top 10 publishers, which are the names that these advertisers have to be on. So, what we need to do, I mean, we're doing certain product improvements around that.

We're getting more share in header bidding and mid-article, which is very important behind the hundred. I mean, we've been doing this, by the way, for a long time. I mean, we -- when we're out here and talk about the acquisition of Zemanta and the bidding technology that we've continuously improved over the years, has served us very well, both on our large partner, Microsoft, which we've been working for a long time on this bidding and with them and in hundreds of other properties. So, that is helping us in terms of our ability to be very competitive on mid-article.

The vi acquisition folds perfectly into that with in-stream video that is more of a awareness-type campaign format that advertisers are looking at. So, it's all coming together. And, you know, you'll hear more about it in '23 in a bigger way, but we're very excited about that direction. And again, it works within, we are very focused.

I mean, this premium supply, premium quality demand, better user experience, that's where we are in the market.

Ygal Arounian -- Citi -- Analyst

Thanks. And I think I will stick with you on this next one. You mentioned the DOJ and Google. And obviously, it's been a big topic, especially this earnings, from open web advertiser companies.

Just maybe want to get your expanded thoughts on what that means, what you think it might mean for Google, and if there's more specifics to how it impacts Outbrain, and the benefits that that will drive. Thank you.

Yaron Galai -- Co-Founder and Co-Chief Executive Officer

Yeah. Hi, Ygal. Yaron here. I'll take that one.

The Google lawsuit doesn't have any direct impact on us currently, but it's, I think, obviously, one of the most meaningful things happening to the whole industry. Google, needless to say, is the most dominant player in online advertising and competes with everyone, us included, both on the -- on the publisher supply side and the demand side. The DOJ is, I think, pretty clear wanting to reduce Google's monopolistic hold on online advertising. They succeed, you know, I'd have to think that helps all players -- benefits all players in the space.

But I think, also, it's Microsoft is any new learning experience. I think also, in the interim, while DOJ is looking to break Google's ad business, say, I think we might stand to benefit as publishers specifically might be more cautious in giving the majority of their business to someone that's now dealing with antitrust. And I think it'll really benefit us and others in the space that are deep with publishers and advertisers and being able to really run faster on product and partnerships in this space.

Ygal Arounian -- Citi -- Analyst

Thanks, guys.


Thank you. Our next question is from Laura Martin with Needham and Co. Please proceed with your question.

Laura Martin -- Needham and Company -- Analyst

Good morning. My first one is on guarantees. I think, Jason, you guys used to give us the percent of the tax that was guaranteed, and I'm interested in that number. As well as when you're signing these new deals, that unprecedented level of supply, what was your -- how -- percent of those are guarantees? That's my first question.

Jason Kiviat -- Chief Financial Officer

Sure. So yeah, we've shared, I think, the percentage of revenue that's subject to the guarantees, which, we said in the past, is around 20%. And it still is, by the way, around that 20% level. It hasn't changed meaningfully.

On the new deals, you know, not going to specifically talk to any terms on any specific deal, but it has been a combination. So, there have been some of our 16 points of growth this year from adding new. There's been a combination of both guarantee and non-guarantee or just rev share type of deals.

Laura Martin -- Needham and Company -- Analyst

OK, great. Thank you, Jason. And then, David, early on in your prepared comments, you said that you got $100 million of new business, two times more than you lost. So, the way I heard those words, it meant that you lost $50 million worth of business.

And I didn't understand whether does that mean you lost 50 million to a competitor or just the spending was lower or delayed? Could you clarify that, please?

Jason Kiviat -- Chief Financial Officer

Dickie, you're muted. I thought you want to --

David Kostman -- Co-Chief Executive Officer

Sorry. Sorry.

Laura Martin -- Needham and Company -- Analyst

Can you hear me?

David Kostman -- Co-Chief Executive Officer

Hi. Yeah.

Laura Martin -- Needham and Company -- Analyst


David Kostman -- Co-Chief Executive Officer

So, we're talking about the -- again, the wins of market share. So, we did win well north of 100 million -- and it would be cautious -- but it was well north of 100 million of new business. And we did move away from about half of that last year.

Laura Martin -- Needham and Company -- Analyst

And I'm just asking you to expand on that. You moved away from it. What does that mean? You lost half of that number or something?

David Kostman -- Co-Chief Executive Officer

That means that we lost some of it to competitors, some of it to other solutions.

Laura Martin -- Needham and Company -- Analyst

OK. And that's a little higher than normal, right?

David Kostman -- Co-Chief Executive Officer

I wouldn't say so. I mean, the -- I think the general shift you've seen, I mean, we reported new business of $46 million for Q4. That's much higher than we've had. You know, it's 30% higher than competition.

So, we feel good about those market share positions, again, especially focusing on the premium high end of the market, which is where we focus on. So, we're getting those anchor deals done. And, you know, we feel that, you know, relative market mean -- in market share gains, I think this is a very strong year.

Laura Martin -- Needham and Company -- Analyst

OK. Thank you.


Thank you. There are no further questions at this time. I'd like to hand the call back over to Yaron Galai for any closing comments.

Yaron Galai -- Co-Founder and Co-Chief Executive Officer

Thanks, operator. And thank you all for joining us today for our 2022 year-end earnings. Before we wrap up, I want to take this opportunity to welcome Nithya Das to the Outbrain Board of Directors. Nithya brings significant industry expertise as the top executive at AppNexus among the pioneers of programmatic advertising, and Olo.

We're very excited to have her depth of experience on our board. Last year was a challenging one for us given the significant macro headwinds. But whether macro is challenging or accommodating, at Outbrain, we are committed to staying focused on our core and being very disciplined in our priorities and our costs. We look forward to seeing you in our Q1 earnings call.


[Operator signoff]

Duration: 0 minutes

Call participants:

Unknown speaker

David Kostman -- Co-Chief Executive Officer

Yaron Galai -- Co-Founder and Co-Chief Executive Officer

Jason Kiviat -- Chief Financial Officer

Ross Sandler -- Barclays -- Analyst

Andrew Boone -- JMP Securities -- Analyst

Shweta Khajuria -- Evercore ISI -- Analyst

Ygal Arounian -- Citi -- Analyst

Laura Martin -- Needham and Company -- Analyst

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