Note About Forward-Looking Statements
This Annual Report on Form 10-K (this “Report”) contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements, may include, without limitation, statements generally relating to possible or assumed future results of our business, financial condition, results of operations, liquidity, plans and objectives. You can generally identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions that concern our expectations, strategy, plans or intentions or are not statements of historical facts. We have based these forward-looking statements largely on our expectations and projections regarding future events and trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors including but not limited to:
•overall advertising demand and traffic generated by our media partners;
•factors that affect advertising spending, such as economic downturns and unexpected events;
•any failure of our recommendation engine to accurately predict user engagement, any deterioration in the quality of our recommendations or failure to present interesting content to users or other factors which may cause us to experience a decline in user engagement or loss of media partners;
•limits on our ability to collect, use and disclose data to deliver advertisements;
•our ability to continue to innovate, and adoption by our advertisers and media partners of our expanding solutions;
•our ability to meet demands on our infrastructure and resources due to future growth or otherwise;
•our ability to extend our reach into evolving digital media platforms;
•our ability to maintain and scale our technology platform;
•our ability to grow our business and manage growth effectively;
•the success of our sales and marketing investments, which may require significant investments and may involve long sales cycles;
•the risk that our research and development efforts may not meet the demands of a rapidly evolving technology market;
•the loss of one or more of our large media partners, and our ability to expand our advertiser and media partner relationships;
•our ability to compete effectively against current and future competitors;
•failures or loss of the hardware, software and infrastructure on which we rely, or security breaches;
•our ability to maintain our revenues or profitability despite quarterly fluctuations in our results, whether due to seasonality, large cyclical events, or other causes;
•political and regulatory risks in the various markets in which we operate; the challenges of compliance with differing and changing regulatory requirements;
•the effects of the ongoing and evolving COVID-19 pandemic, including the resulting global economic uncertainty, and measures taken in response to the pandemic; and
•the risks described in the section entitled “Risk Factors” and elsewhere in this Report.
Accordingly, you should not rely upon forward-looking statements as an indication of future performance. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or will occur, and actual results, events or circumstances could differ materially from those projected in the forward-looking statements. The forward-looking statements made in this Report relate only to events as of the date on which the statements are made. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. We undertake no obligation and do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events or otherwise, except as required by law.
Item 1. Business
Outbrain Inc., together with our subsidiaries, (“Outbrain”, the “Company”, “we”, “our” or “us”) was incorporated in August 2006 in Delaware. The Company is headquartered in New York, New York and has wholly owned subsidiaries in Israel, Europe, Asia, Brazil and Australia.
On July 22, 2021, the Company’s registration statement on Form S-1 (File No. 333- 257525), filed on June 29, 2021, as amended, was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) in connection with the Company’s initial public offering (“IPO”) of the Company’s common stock, and its common stock began trading on The Nasdaq Stock Market LLC (“Nasdaq”) on July 23, 2021. On July 27, 2021, the Company closed its IPO and issued 8,000,000 shares of its common stock at an initial offering price of $20.00 per share, receiving aggregate net proceeds of $145.1 million, after deducting underwriting discounts, commissions and other offering costs.
Our mission is to help digital media owners thrive by recommending content, products and services that users love.
Outbrain is a leading recommendation platform powering the open web. Outbrain’s technology provides personalization, engagement and monetization solutions to thousands of digital media properties, including many of the world’s most prestigious publishers. Through powering discovery feeds on the open web, Outbrain helps over a billion unique users on a monthly basis discover content, offers, services and products they might be interested in. For tens of thousands of advertisers around the world, Outbrain helps attract new customers and grow their businesses, driving measurable results and return on investment.
Over the past decade, consumers have become increasingly accustomed to seeing highly curated digital content and ads that align with their unique interests. Similar to the way in which social media and search have simplified discovery by synthesizing billions of consumer data points to offer personalized feeds, we provide media partners with a platform that encompasses data at scale as well as prediction and recommendation capabilities, helping media partners deliver a discovery feed personalized to their users, based on context and each user’s interests and preferences.
Consumption of content continues to shift online, with over four billion consumers accessing the Internet primarily through mobile devices, where scrolling through a feed experience is habitually expected by consumers on every page. According to eMarketer, the average person in the United States is expected to spend more than eight hours a day consuming digital media in 2022. In addition, the estimated average use of U.S. consumer’s mobile device grew from 87 minutes per day in 2012 to 264 minutes per day in 2021, a 203% increase. According to the Reuters Institute for the Study of Journalism at Oxford University, 73% of people access news through side-doors, not through the homepages of publications. We believe this means discovery feeds on article pages are more important than ever to help users navigate what to read, watch, or buy next.
Our platform is built for user engagement and, as a mobile-first company, is designed to be highly effective on mobile devices. Outbrain’s technology is deployed on the mobile apps and websites of most of our media partners, generating 68% of our revenue in 2021.
Outbrain operates a two-sided marketplace, which means we have full exclusive control over all aspects of the user experiences, allowing us to quickly test and deploy new formats for our constituents. Since inception, we have been guided by the same core principles pertaining to our three constituents: media partners, users, and advertisers.
Media Partners. We are committed to the long-term success of our media partners. Consistent with this philosophy, we focus on establishing a true win-win partnership. We strive to develop trusted, transparent, multi-year contracts with media partners, which are typically exclusive with us. Our media partners include both traditional publishers and companies in new and rapidly evolving categories such as mobile device manufacturers and web browsers.
Users. We believe that by focusing on improving the user experience we are able to cultivate user behavior patterns that compound engagement over time, delivering superior long-term monetization for ourselves and for our media partners.
Advertisers. We strive to grow our advertising business by increasing overall user engagement, rather than price per engagement. Our emphasis on user engagement helps us improve advertisers’ return on ad spend (“ROAS”) thus unlocking more advertising spend and attracting more advertisers. In turn this enables us to better match ads to users and further grow user engagement and overall monetization.
We have delivered nearly $4 billion in direct revenue to our media partners, since inception. We partner with thousands of the world’s most trusted digital media owners for which we believe we are an important technology partner. Some key media partners with which we have longstanding relationships across our various regions include Asahi Shimbun, CNN, Der Spiegel, Le Monde, MSN, Sky News and Sky Sports, and The Washington Post. The average tenure of our top 20 media partners, based on our 2021 revenue, is over seven years.
Through our direct, usually exclusive, integrations with media partners, we have become one of the largest online advertising platforms on the open web. In 2021, we provided personalized feeds and ads to over 1 billion monthly unique users, delivering on average over 10 billion recommendations to content, services and products per day, with over 24,000 advertisers directly using our platform.
Our platform is user engagement focused. A significant proportion of the engagement created by our platform is with the content of the media partner for which we are providing the platform, which we refer to as ‘organic recommendations.’ Outbrain is trusted to power organic recommendations across all publisher media types, including written editorial, video and audio content. This provides the user with a personalized content experience, while increasing time spent and engagement on the media partner’s digital properties. We believe this is crucial to increasing long-term loyalty and retention of users for media partners, while increasing the depth and value of user visits in the short term. Powering a feed of both organic recommendations and targeted ads creates significant proprietary, first-party data that enables us to continuously refine our prediction algorithms, supporting our efforts to further increase engagement.
Advertisers use our platform to reach consumers efficiently through various ad formats across thousands of premium digital media properties around the world. Our platform provides access to a significant volume of exclusive ad inventory within the content feeds of these premium digital media properties. Advertisers primarily use our platform for performance driven campaigns, with measurable outcomes. Our ability to drive value and ROAS for advertisers, at scale, is highlighted in the growth of ad spend through our platform. In 2021, we invested significant R&D resources to automate and optimize the ROAS for our advertisers, which expanded the variety of content experiences and ad experiences we serve our audience. We now support native recommendations (image + text) formats, standard display formats and a wide variety of video formats, providing full funnel opportunities for our advertising clients, from driving awareness through direct response and driving conversions.