Fluent, Inc.

This business description should be read in conjunction with our audited consolidated financial statements and accompanying notes thereto appearing elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K"), which are incorporated herein by this reference.

Company Overview

Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company") is a commerce media solutions provider connecting top-tier brands with highly engaged consumers. Leveraging diverse ad inventory, robust first-party data, and proprietary machine learning, Fluent unlocks additional revenue streams for partners and empowers advertisers to acquire their most valuable customers at scale. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach.

We access these consumers through both our commerce media solutions marketplace ("Commerce Media Solutions"), and our owned and operated digital media properties ("O&O Sites"). Since the beginning of 2024, we have delivered data and performance-based customer acquisition services for over 500 consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.

We operate our Commerce Media Solutions on partner sites and mobile apps where we embed our proprietary ad-serving technology to identify and acquire consumers for our advertiser clients. Our technology is integrated at key moments in the consumer experience to capitalize on high engagement and improve conversion. For example, our post-transaction solution connects our advertisers to consumers on e-commerce websites and apps after a purchase or similar transaction. These syndicated Commerce Media Solutions generate meaningful income for our media partners, while driving high-quality customer acquisition for our advertiser clients. We sign agreements with our media partners with one to five year terms, typically remunerating them on a revenue share and/or impression basis.

We also attract consumers at scale to our O&O Sites primarily through promotional offerings, through which consumers are rewarded for completing activities on our sites. When registering on our sites, consumers provide their name, contact information, and opt-in permission for telemarketing and email marketing. Approximately 90% of these users engage with our media on their mobile devices or tablets.

Once users have registered on our sites, we integrate our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and other experiences, through which we learn about their lifestyles, preferences, and purchasing histories, among other matters. Based on these insights, we serve users targeted, relevant offers on behalf of our clients. As new users register and engage with our sites and existing registrants re-engage, the enrichment of our database expands our addressable advertiser client base and improves the effectiveness of our performance-based campaigns.

Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences. We solicit our users' consent to be contacted by us and/or our advertisers via various contact methods including email, telephone, SMS/text, and push messaging. We then leverage their self-declared data in our array of performance offerings primarily in two ways: (1) to serve advertisements that we believe will be relevant to users based on the information they provide when they engage on our O&O Sites or other partner sites through our commerce media marketplace and (2) to provide our clients with users' contact information so that such clients may communicate with them directly. We may also leverage our existing technology and database to drive new revenue streams, including utilization-based models (e.g., programmatic advertising).

Additionally, we operate a call center-supported performance marketplace ("Call Solutions") that provides live, call-based performance campaigns to help clients increase engagement. In some cases, we have sold products and services directly on behalf of our clients. The Call Solutions business serves clients across an array of industries but has had a heavy focus on the health insurance sector.

We generate revenue by delivering measurable marketing results to our clients. We differentiate ourselves from other marketing alternatives by our ability to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the money spent on ads, and to manage highly targeted and highly fragmented online media sources. We are predominantly paid on a negotiated or market-driven "per click," "per lead," or other "per action" basis that aligns with the customer acquisition cost targets of our clients. For our O&O Sites and Call Solutions business, we bear the responsibility and cost of acquiring consumers from media partners that ultimately generate qualified clicks, leads, calls, app downloads, or customers for our clients. Our Commerce Media Solutions business does not bear media inventory risk.

Through AdParlor, LLC ("AdParlor"), our wholly-owned subsidiary, we conduct our non-core business which offers advertiser clients a managed service for creator marketing and media buying on different social platforms.

Market Opportunity

According to eMarketer reports, digital ad spending in the US is expected to grow 12.5% to $347.8 billion in 2025, and will reach $460.5 billion by 2028, surpassing $1 trillion globally. The landscape is undergoing a major shift with the rise of commerce media, which leverages e-commerce transactions and first-party customer data to enable smarter ad placements across retailers' e-commerce platforms and broader retail media networks ("RMNs"). Through commerce media, retailers can deliver a unified, data-driven approach to advertising that spans on-site, off-site, and in-store touchpoints.

According to McKinsey & Company (“McKinsey”), commerce media is expected to generate more than $1.3 trillion in enterprise value in the U.S. by 2026, with over $100 billion in advertising spend on RMNs alone. By 2027, PubMatic expects global commerce media advertising spend to reach $220 billion, representing more than 20% of global advertising revenues.

The industry is undergoing further transformations as publishers increasingly invest in proprietary media networks (i.e., a collection of digital channels owned by a retail company), foster direct engagements with brands, and emphasize the value of their first-party data. This shift is particularly noteworthy considering growing concerns about data privacy. As the use of cookies continues to become more limited, marketers and businesses must realign their operations with this evolving landscape.

Commerce media meets advertiser demand for a scalable, measurable, and brand-safe channel to connect with engaged consumers. It also offers an opportunity for non-endemic brands (i.e. those that do not sell their products through a retailer’s platform) to tap into a retailer’s first-party data to reach highly targeted audiences at the top or middle of the purchase funnel. According to eMarketer, 53% of US brands have taken advantage of data or a retail media network offering at a retailer where they are not an endemic brand, highlighting growing interest from non-retail advertisers to maximize the potential of this channel.

Key Challenges Facing our Clients

In today’s rapidly evolving digital landscape, advertisers face mounting challenges in proving return on investment ("ROI"), adapting to artificial intelligence ("AI") advancements, and keeping pace with shifting consumer behaviors — all while navigating economic uncertainty. According to McKinsey, with global digital ad spending continuing to climb, brands must contend with increasingly fragmented customer journeys that complicate attribution, while rising ad costs and privacy restrictions limit data-driven insights. At the same time, according to PwC, AI-driven automation is reshaping media strategies, requiring constant adaptation to stay competitive. According to Deloitte, as consumer expectations evolve, brands must strike a delicate balance—delivering highly personalized, yet privacy-conscious experiences that align with shifting media consumption habits.

ROI & Attribution– Proving ad effectiveness is harder than ever with fragmented customer journeys and privacy restrictions limiting data tracking. According to eMarketer, 45% of marketing professionals worldwide say the decline in the ability to measure campaign effectiveness on tech platforms and the open web is their largest area of concern for media and marketing initiatives.

Keeping Up with AI & Technology– Rapid advancements in AI-driven automation and analytics require constant adaptation to stay competitive. According to an October 2024 eMarketer survey, attribution and measurement (47%) and AI technologies (29%) are the two leading investment priorities for US brand and agency marketers in 2025. To keep up with the evolution, marketers are leveraging AI to enhance campaign optimizations (43%), audience targeting (41%), and data analysis (30%).

Economic Uncertainty – Rising ad costs and shifting budgets force advertisers to maximize efficiency while balancing short-term and long-term goals. For several years, growth in the retail industry has been stagnant (with a compound annual growth rate of 1.5% to 3.5%, depending on the sector), and margins have been squeezed by competition and consumer demands for convenient omnichannel experiences. According to Deloitte's Industry Outlook, digital adoption costs are creating an urgency for innovative ways to address efficiency, build partnerships, and develop alternative revenue streams to compete in the immediate future.

Evolving Consumer Behavior – Users demand personalized yet non-intrusive ads, while shifting media habits require brands to rethink engagement strategies. According to McKinsey, 71% of consumers expect companies to deliver personalized interactions, and 76% get frustrated when this does not happen. This needs to be balanced with changing consumption of media and privacy awareness due to continued data privacy concerns.

Our Offerings and Solutions to Clients

We primarily provide performance marketing solutions to our clients based on their desired outcomes, or specific actions in their marketing funnels, including a completed transaction, the submission of a registration form, or an app installation. Our commerce media platform is integrated into dozens of top retailers and digital media sites, including Bath & Body Works, Fanatics, Belk, Vivid Seats, Life360 and PCH. We believe our solutions are well-aligned with the needs and objectives of our clients, notably due to our ability to provide them with ROAS, scalability, and flexibility within our O&O Sites and Commerce Media Solutions. By using the consumer data in our proprietary first-party database, our advertiser clients are able to reach the precise audiences they are targeting through the modes of contact these consumers prefer and at the times they are most receptive to being contacted.

•Performance Campaigns

For clients who seek the completion of certain actions by consumers, such as a trial subscription of a good or service, the submission of a registration form, or the installation of a mobile app, we provide performance campaigns that meet the criteria specified by the client.

We bear the cost of paying some media partners in our commerce media platform and media sources to generate consumer traffic to our owned and operated digital media properties, without the assurance of a subsequent revenue-generating event from such activity. By leveraging the scale of our media network and expertise in acquiring consumer traffic, we work with our clients to define billable events and pricing tolerances that meet both our and our clients' profitability objectives.

•Consumer Data

Through our O&O Sites, we generate revenue by providing clients with qualifying data of consumers who have opted to be marketed to directly via means such as direct mail, email, telephone, messaging, and other channels. Our clients then use this customer data to conduct their own marketing campaigns.

The data records we provide contain varying depths of user profiles depending on what consumers self-declare to us, ranging from basic contact information to detailed preferences and behaviors. Because consumers directly provide us with their information, we believe the scale and depth of information captured on our websites and reflected in our data profiles is a competitive advantage within the industry. Many other providers of consumer data offer data or information that is inferred from a consumer’s behavior but not directly observed or provided by a consumer. We believe our first-party data is more reliable and reflective of consumers' current interests and preferences.

•Programmatic Data Offerings

Since 2018, we have been offering modeled data sets pertaining to certain audience segments in programmatic environments, thereby enabling advertisers, such as those in the healthcare industry, to leverage the modeled data in an anonymized, privacy-minded manner to target high-intent prospects for their offerings. The programmatic data offering has grown considerably since its inception. Although representing a small percentage of our overall revenue, we believe it represents a strategically significant and incremental revenue stream.

•Call Solutions Marketplace

Through our Call Solutions service, we maintain a call center operation and a marketplace for call-ready data records, which serves as a marketplace to connect consumers we have sourced with our advertising clients. We offer clients a high-value source of live call transfers of phone verified prospective customers for their businesses or in some cases direct sales transactions. Through this capability, we provide a positive and high-quality consumer experience enabling us to capture greater value from the leads we initially source.

•*** Social Media Campaigns***

Through AdParlor, we conduct our non-core business which offers advertiser clients a managed service for creator marketing and media buying on different social platforms.

Our Competitive Strengths

We believe our competitive strengths will continue to enable us to provide a compelling value proposition to our clients and drive differentiation of our offerings in the marketplace.

•Proprietary and Innovative Technology Platform- Our internally developed technology platforms are unique in the industry, having been purpose-built for performance marketing and developed with a mobile-first user experience in mind. Our platforms use our robust consumer data and proprietary machine-learning capabilities to optimize the performance of our digital marketing campaigns for our advertisers.

•Database of First-Party Consumer Information*-*We attract hundreds of thousands of consumers to our O&O Sites on a daily basis and collect demographic, behavioral and other data as they engage with our direct marketing experiences. This data is generated in real-time, as consumers respond to dynamically populated survey questions, thereby enabling targeted ads to be served in response. This consumer data is also stored and analyzed and can be further enhanced as consumers return to our sites and declare and exhibit preferences and behaviors through additional surveying, allowing for the development of deeper insights and additional monetization opportunities. For example, this enhanced data is used by our Commerce Media platform to optimize ad serving when a Commerce Media consumer is in our database.

•Scale and Experience in Purchasing Media and Creating Content - Our ability to effectively access, at scale, channels and sources of media that supply consumer traffic and build meaningful experiences and relationships with those consumers has been critical to our growth. Since our inception, we have deployed more than $2 billion in media spend to our O&O Sites and those of our clients. Our team has gained significant knowledge and experience in creating content that allows us to generate higher levels of profitability from given media sources, thereby enabling us to acquire media more competitively than others. This capability allows us to run thousands of campaigns simultaneously and cost-effectively for our clients, at acceptable media costs and margins to us.

Our Growth Strategy

We believe that the performance marketing industry has significant opportunities for growth. Elements of our strategy include:

•Expanding our Network through Development of Commerce Media Solutions. Our commerce media platform utilizes our existing technology to extend our ad network for our clients. Commerce Media Solutions affords our advertiser clients exposure to a pool of users with strong buying power who, having just completed a transaction, are in "purchase mode". We deploy our 'ad modals', which are overlay ad units delivered electronically primarily on the transaction confirmation page of the e-commerce and digital media websites that display a series of curated offers to consumers. We compensate our media partners by either sharing revenue proceeds or by remunerating them on an impression basis. Commerce Media Solutions has been operating since the first quarter of 2023, with year-over-year growth in every quarter in 2024. We intend to continue to invest into the growth of this network in 2025 and beyond.

•Increasing Monetization of Our Media Network. By presenting consumers with a broad array of offers curated to their preferences, as informed by their responses to our surveys and our platform’s ad serving logic, we seek to facilitate transactions that are beneficial for the advertiser, the consumer, and our media partners. As we continue to improve consumer engagement on our platforms, we will continue to strengthen our relationships with existing advertisers and build relationships with new advertisers. We continuously seek to enhance our product offerings for consumers and targeting capabilities for advertisers to ensure we are optimizing the value of our network.

***•***Higher Quality Traffic to Our O&O Sites. As our business has grown, we have attracted larger and more sophisticated clients to our platform. To further increase our value proposition to clients and to fortify our leadership position in relation to the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative ("TQI") in 2020 to remove lower quality consumer traffic, including traffic that did not consistently meet regulatory standards from our marketplaces. By improving the quality of consumer traffic sourced to our media properties, we have increased user participation and conversion rates, ultimately, increased revenue from more "name brand" advertiser clients and created a more sustainable foundation for our business.

In an effort to source more high-quality traffic, we have also built out an influencer marketing platform. This platform allows us to diversify our current media buys on social media platforms and capture available scale in the influencer market. According to eMarketer, marketing spend in the sector is rising quickly year-over-year. It is expected that influencer marketing spending in the US will reach $9.3 billion in 2025, up 14.2% year-over-year, outpacing both digital and social’s ad spend growth in the US. By operating our own influencer marketing platform, we can ensure compliant operations, effectively manage our media spend by eliminating middlemen, and offer our clients direct access to our network of influencers.

•Developing and Enhancing Products to Increase the Quality of Our Solutions. Our product development efforts are intended to attract consumers, increase monetization and increase media partner opportunities. For example, our product development team is currently focused on designing new consumer-facing creative concepts, enhancing site experiences, developing mobile app products to expand our media footprint beyond our mobile web presence, and improving the reputation of our domains.

In connection to our Commerce Media solutions, we are working with a third-party data provider to make significant enhancements to our proprietary identity graph. Additionally, we are upgrading our ranking and bidding system to more accurately predict conversion, supported by a more efficient and dynamic system backed by machine learning.

Sales and Marketing

We generate new client and media partner sales primarily through our in-house sales team. We service established clients and partners through our in-house account directors and managers, who seek to optimize results for and expand our business with these clients and partners.

Our Competition

Our competitors to the owned and operated business have been digital marketing and database marketing services providers, online and traditional media companies, and advertising agencies. Within commerce media, we compete against an array of ad technology companies that provide non-endemic advertising offerings. Specifically, we compete against one private US company for post transaction e-commerce inventory. Some of our competitors have substantially greater financial, technical, sales and marketing resources, better name recognition and a larger customer base than us. While we believe the competitive landscape is changing and becoming more complex, we believe our data and our ad serving and customer acquisition technologies enable our clients to better target, engage, qualify, and communicate with relevant consumers, in a more measurable and profitable manner than our competitors.

Client Concentration

We have an extensive list of clients across a wide range of industries. For the year ended December 31, 2024, there was no individual advertiser client of the Company that accounted for more than 10% of the consolidated revenue or net accounts receivable. For the year ended December 31, 2023, a single long-standing advertiser client of the Company accounted for 18.1% of consolidated revenue.

Intellectual Property

We rely on trade secrets, trademark and copyright law, confidentiality agreements, and technical measures to protect our intellectual property rights. We maintain a portfolio of perpetual common law and federally registered trademark rights across several brands and domains relating to our business units, products, services, and solutions. We claim copyright protection in our original content that is published on our websites and included in our marketing materials.

Regulatory Matters

Our business is subject to a significant number of federal, state, local and international laws, rules, and regulations applicable to online or digital advertising, commercial email marketing, telemarketing, and text messaging. We are also subject to laws, rules, and regulations regarding data collection, privacy and data security, intellectual property ownership and infringement, and promotions and taxation, among others. Some of our clients operate in regulated industries, such as financial services, credit repair, gambling, consumer and mortgage lending, secondary education, healthcare and medical services, and health insurance including Medicare Advantage and related Medicare insurance plans (collectively, "Health Plans") and Affordable Care Act ("ACA") plans. To the extent applicable, we must comply with the laws, rules, and regulations applicable to marketing activities in those industries. Outside of the United States, we own and operate consumer facing websites in the United Kingdom (the "UK"), Canada, and Australia and are subject to the laws, rules, and regulations of those countries as they impact our operations.

These laws, rules, and regulations are generally designed to regulate and prevent deceptive practices in advertising, online marketing, and telemarketing, protect individual privacy rights and prevent the misuse and unauthorized disclosure of personal information. They are complex, change frequently and have tended to become more stringent over time. This trend may have begun to reverse with the change in presidential administration. Recently, for example, the Federal Communications Commission ("FCC") proposed more stringent rules (the "Proposed FCC Rules") on obtaining prior express written consent for purposes of the Telephone Consumer Protection Act ("TCPA"). The Proposed FCC Rules would have limited the use of a user’s consent to only one seller ("one-to-one consent"). The Proposed FCC Rules were set to take effect on January 25, 2025, but the FCC delayed their implementation until at least January 26, 2026. In addition, recently appointed chairpersons and senior staff of the Federal Trade Commission ("FTC") and the FCC seem to have been taking a more pro-business approach to some of the more stringent rules affecting our business. In contrast, the marketing rules applicable to Health Plans promulgated by the Centers for Medicare & Medicaid Services ("CMS Rules"), which also contained the one-to-one consent rule included in of the Proposed FCC Rules, have yet to be changed so there are two sets of telemarketing consent rules: one applicable to Health Plans and another applicable to marketing non-Health Plans.

We were involved in investigations with federal and state regulators over our practices including the FTC and the Pennsylvania Office of the Attorney General ("PAAG"). These investigations and claims have all been settled as of December 31, 2023. As part of the FTC settlement, we have made and continue to make additional changes to our business practices that have adversely affected our results of operations for the years ended December 31, 2024 and 2023. See Item 1A. Risk Factors - Risks Relating to Legal and Regulatory Matters and Item 3. Legal Proceedings for further discussion of the impacts of these proceedings and various laws, rules, and regulations on our business.

Human Capital

Fluent is dedicated to certain core principles and values which include continuous learning, efficiency, collaboration, and high performance. Fluent is committed to providing our employees with opportunities to grow and develop in their careers, supported by competitive compensation and comprehensive medical and wellness benefits. We embrace challenges and welcome opportunities to make improvements in our corporate culture and employee benefits. We are proud to have been the recipients of many awards for our corporate culture including regularly being listed onCrain’s Best Places to Work.

As of December 31, 2024, we had 210 employees, of which 208 were full-time employees. This represents a decrease of 24% over the number of employees as of December 31, 2023. None of our employees are represented by a labor organization, and none are party to any collective bargaining agreement with us. We have not experienced any work stoppages and strive to maintain a positive relationship with our team. In 2020, we transitioned to a work-from-home model, and we continue to operate under a hybrid strategy based around flexibility and collaboration.

Competition in the recruitment of top talent within our industry remains constant and our future success will depend in part on our continued ability to hire, motivate, and retain exceptional colleagues across the business. As the business evolves, we continue to source talent to complement the existing team with different strengths, experience, and ideas. See Item 1A. Risk Factors –— "Our failure to recruit or the loss of management and highly trained and qualified personnel could adversely affect our business." for further information about the risks of our hybrid work model.

Investing in our People

As a performance-based organization, Fluent offers competitive salaries and bonus/commission plans to both attract, reward, and retain our employees. We match up to 4% of employees’ contributions in their 401(k) to help our employees plan for their futures. We also prioritize the health and well-being of our employees, offering multiple health insurance plan options, and various mental health resources. To ensure our people take time to recharge, we offer discretionary time off that provides vacation days throughout the year in addition to our 13 paid company holidays. Our goal is to create a flexible work environment that fuels creativity and results.

We encourage curiosity and provide our people with the tools and resources to learn and grow. From internal Fluent University courses to company-wide workshops and memberships to corporate networking organizations, such as She Runs It, we offer continuous opportunities for personal and professional development. In 2024, we created approximately 1,000 hours of learning for our employees through these courses. Additionally, over the past few years, we have worked to support internal mobility for those who have excelled in their roles and are looking to gain new experience in other areas of the business that align with their individual career goals. We reward positive performance and celebrate our employees for their persistent drive to succeed.

We are constantly striving to make Fluent a more inclusive and compassionate place to work. We make a concerted effort to post roles and source top candidates to present a diverse candidate slate for our hiring teams, and our dedicated Diversity, Equity, & Inclusion ("DEI") team is designed to create opportunities for connection, education, and service. Fluent continues to invest in our colleagues by providing DEI trainings and creating opportunities to connect to discuss current events. In 2024, we held our third year of the mentorship program with healthy participation and are planning to continue this program in 2025. We are proud to foster a learning and coaching culture to support the development and growth for all of our employees.

Available Information

Fluent’s principal executive offices are located at 300 Vesey Street, 9th Floor, New York, New York 10282, and our telephone number is (646) 669-7272. Our internet website is www.fluentco.com. The website address provided in this 2024 Form 10-K is not intended to function as a hyperlink and information obtained on the website is not and should not be considered part of this 2024 Form 10-K and is not incorporated by reference in this 2024 Form 10-K or any filing with SEC. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available, free of charge, on our Investor Relations website at investors.fluentco.com/ as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our periodic reports are filed or furnished electronically with the SEC under SEC File Number 001-37893 and can be accessed at the SEC’s website at www.sec.gov, and specifically at www.sec.gov/edgar/browse/?CIK=1460329.