Outbrain Inc

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 with various wholly-owned subsidiaries, including in Israel, Europe and Asia.

On July 22, 2021, our 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 our initial public offering (“IPO”) of our common stock, and our common stock began trading on The Nasdaq Stock Market LLC (“Nasdaq”) on July 23, 2021. On July 27, 2021, we closed our IPO and issued 8,000,000 shares of our 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 connect businesses with engaged audiences.

Outbrain is a leading technology platform that drives business results by connecting media owners and advertisers with engaged audiences to drive business outcomes, reaching over a billion unique consumers around the world. Outbrain’s artificial intelligence (“AI”) prediction engine powers a two-sided platform for advertisers and media owners that delivers concrete business outcomes. Our platform enables thousands of digital media owners to provide tailored experiences to their audiences, delivering audience engagement and monetization. For tens of thousands of advertisers, from enterprise brands to performance marketers, our platform optimizes audience attention and engagement to deliver greater return on investment at each step of the marketing funnel.

Over the past decade, consumers have become increasingly accustomed to seeing highly curated content that aligns with their unique interests. Social media and search have simplified discovery by leveraging billions of data points to offer personalized experiences. In a similar fashion, our prediction engine ingests billions of data points each minute to provide digital media owners with a platform to deliver curated editorial and advertiser experiences to their audiences. We have been leveraging AI to enhance our ingestion of data and the performance of our prediction engine since our inception. This type of AI, known as traditional or predictive AI, uses machine learning to filter and better understand data to forecast consumer preferences. By contrast, generative AI turns machine learning inputs into actual content. Throughout this Report, when referring to “AI” we are referring to traditional or predictive AI, unless the term “generative AI” is specified.

According to Statista, consumption of content continues to shift online, with over 5 billion consumers accessing the Internet, primarily through mobile devices, where the ability to scroll through a feed has come to be expected by consumers on every page. This means the method in which audiences discover and engage with editorial content must evolve. Our media partners are media owners that use Outbrain’s technology to help their audiences navigate what to read, watch, consider, and 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 73% of our revenue in 2023.

Outbrain operates a two-sided marketplace, which means we usually have exclusive control over all aspects of the consumer experience, allowing us to quickly test and deploy new formats for our advertisers and media owners. Since inception, we have been guided by the same core principles pertaining to our three constituents: consumers, media partners, and advertisers.

•Consumers. Our platform is centered on predicting consumer attention and engagement. We believe that by focusing our algorithm on optimizing toward these consumer-centric factors, we are able to cultivate user behavior patterns that compound over time, delivering greater effectiveness and efficiency for our advertisers, superior long-term monetization for our media partners, as well as increased value for Outbrain.

•Media Partners. We are committed to supporting the long-term success of our media partners. We strive to develop multi-year contracts with media partners, with the objective of delivering long-term revenue and deeper audience engagement. Our media partners include both traditional publishers and companies in new and rapidly evolving categories, such as mobile device manufacturers.

•Advertisers. We offer unique advertising solutions across the marketing funnel and provide a single access point to not only reach, but drive real business outcomes from consumers across the Open Internet. We provide advertisers from enterprise brands to performance marketers with solutions to optimize consumer attention and engagement, to deliver accountable business results and greater return on investment.

We partner with thousands of the world’s most trusted digital media owners. We believe we are an important technology and monetization partner to these media owners, delivering approximately $5.2 billion in direct revenue to our partners since our inception. Some key partners with which we have long-standing relationships across our various regions include Asahi Shimbun, CNN, Der Spiegel, Le Monde, MSN, New York Post, Sky News and Sky Sports, and The Washington Post. The average tenure of our top 20 media partners (based on our 2023 revenue), which also includes our more recent partnerships, such as Axel Springer and Fox News, is approximately seven years.

Through our direct, usually exclusive code-on-page integrations with media owners, we have become one of the largest online advertising platforms on the Open Internet. In 2023, we provided personalized ads to over a billion monthly unique consumers, delivering on average over 12 billion experiences promoting content, services, and products per day, with tens of thousands of advertisers directly using our platform.

We are one of the few technology companies who provide a single point of access to consumers as they engage with thousands of media properties across the Open Internet. As a result, we provide a platform that delivers a consistent experience to these consumers, giving advertisers confidence in how they reach their audiences at valuable moments of engagement and consideration.

Our AI prediction engine is fundamental to how we optimize experiences and outcomes for consumers, media owners, and advertisers. We process billions of data signals per minute, powering more than one billion predictions and over 100,000 experiences per second. The growth of our platform, access to audiences, and analysis of marketer results provides us with greater data, which enables us to continually improve the efficacy of our AI prediction engine. Our ability to collect and synthesize large data sets using AI is a key differentiator, and enables us to deliver advertiser outcomes, consumer experiences, and media owner value.

Our Industry

Advertising is the primary business model for digital media on the Open Internet, including traditional media environments, as well as gaming and retail media environments. As a result, digital advertising not only subsidizes media consumption for billions of consumers globally, but also finances the creation of journalism, news, and innovative mediums of entertainment across thousands of independent properties — creating a more diverse consumer ecosystem beyond walled gardens.

We believe that the following industry trends are relevant to our business:

Proliferation of digital media and digital advertising across mobile environments, with changing consumer expectations. As mentioned above, the consumption of content continues to shift to mobile devices. In mobile environments, consumers habitually scroll through apps, mobile browsers and news feeds, such as those found on social media, providing continuous opportunities to deliver personalized advertising experiences. As a result, we believe that personalized and engaging digital content experiences, supported by non-intrusive ads, have become the expectation of media owners, rather than a consumer luxury. Advertising spend follows time spent and engagement, and as such mobile ad spend is expected to increase at a faster pace than digital ad spend in total. There is a significant opportunity for technology platforms to develop similar browsing experiences for consumers across the increasing amount of available content on the Open Internet. According to Insider Intelligence, in 2023 global digital ad spend grew to $610 billion, a 10.7% year over year increase, and mobile ad spend grew to approximately $450 billion, an 11.9% year over year increase.

Trusted editorial content is becoming increasingly important. The massive scale of content creation and distribution across social media has made it difficult to curb the creation and proliferation of factually inaccurate news and misinformation. Social media has become the preferred method of news consumption for Americans, despite it being the least trusted category of media, according to a 2023 Statista report. This indicates the desire of audiences to consume media through tailored experiences similar to social, and in contrast spotlights the need for trusted, journalistic content. We believe that this trend will continue. As a result, advertisers have begun to express that they are seeking media environments that prioritize quality, transparency, and fact-based reporting.

Advertisers and media owners are focused on enabling a more sustainable digital media ecosystem. As delivery of content and advertising over digital channels increases in scale, the advertising industry is focused on increasing efficiency and transparency for both advertisers and publishers. Advertisers are requesting greater transparency into the publisher environments they are buying and appearing on, and technology platforms play a critical role in enabling this transparency. This has created larger industry focus on supply optimization. By understanding and prioritizing the most direct access points to publisher inventory, advertisers can reduce media waste and inefficiency. This enables a more sustainable advertising ecosystem at large, ensuring media dollars are spent on quality environments that drive value and reward publishers with sustainable revenue. Platforms with direct media and advertiser relationships, ability to control bidding, and to increase the effectiveness and efficiency of impressions served by optimizing to true consumer attention and engagement, will be best positioned to reduce carbon emissions while providing greater transparency to media owners and advertisers as a result.

Addressability of audiences and increased focus on consumer privacy. All major browsers have now announced an intention to deprecate the use of third-party cookies, with Google Chrome officially restricting third-party cookies for 1% of consumers on January 4, 2024. Third-party cookies have historically been the primary vehicle to target and measure advertising campaigns across web environments. The advertising industry at large is focused on creating methods to deliver tailored experiences to consumers without infringing on user privacy or creating data leakage. As a result, platforms which focus on delivering relevant experiences to consumers based on context and interest, rather than user-based factors, will ostensibly be best positioned to meet advertiser needs in a post-cookie environment.

Performance and return-on-ad-spend (“ROAS”) are important to advertisers. As advertising spend becomes more accountable to key business metrics, technology platforms that deliver on concrete engagement and performance are more relevant than ever. This creates demand for solutions that can adjust in real-time while measuring and optimizing for specific price and performance thresholds. As tools for targeting and tracking become more sophisticated and effective, advertisers are increasingly relying on performance centric pricing models to drive more measurable ROAS, for example, paying for a click (cost-per-click), lead, acquisition, download, install, or sale. Similarly, advertisers are now defining and tracking more accountable metrics for branding and awareness campaigns, rather than measuring views and impressions alone. While viewability remains crucial, advertisers are looking for metrics that provide greater insight into the moment in which they reach consumers. For example, ad placements with high viewability may be quickly passed over by consumers and receive low attention. As a result, advertisers are exploring the use cases for attention metrics, which we believe will enable advertisers to better measure the impact of upper-funnel advertising. Attention adoption is high, with almost 96% of surveyed advertisers worldwide using attention metrics in at least some of their buys this year, according to a February 2023 survey from DoubleVerify. Combining prediction models, accountable metrics such as attention and engagement, with a wide range of formats (from video, to display, to native) will enable advertisers to deliver greater ROAS at each step of the marketing funnel.

Rapid rise of AI provides significant opportunities in advertising. AI models have become increasingly user-friendly and directly applicable to a wide range of industries and use cases. AI has made it possible to collect and rapidly process massive amounts of real-time data signals related to content, context and performance, and incorporate those signals into prediction algorithms like ours. The most recent developments in AI and generative AI will enable platforms like ours to provide solutions directly to self-serve and managed advertisers to tailor creative experiences, automate campaign parameters to improve performance, and inform traditional buying methods with new metrics, such as attention, to optimize ad efficacy. Both advertisers and media owners will increasingly rely on AI-powered automation to deliver tailored experiences to consumers while maximizing performance and monetization opportunities.

Navigating the Transforming Media Landscape for Media Owners and Advertisers

We are targeting a large, fragmented and growing market. According to Insider Intelligence, global digital advertising is expected to grow by 26% over the next two years, accounting for $767 million in spend in 2025. The addressable market for advertising on the Open Internet is tremendous: Insider Intelligence data (January 2024) shows that the programmatic advertising sector is still growing significantly, especially on the Open Internet, where spending in the U.S. alone is rising at a faster rate than in walled gardens and could surpass $50 billion by 2025.

The media landscape is undergoing a substantial transformation, primarily due to the increased consumption of video on social platforms. This shift is shaping how consumers engage with digital media and influencing advertisers in budget allocation.

Global digital advertising revenues have historically been concentrated by the walled gardens, particularly within Google, Meta and their platforms. According to Insider Intelligence (eMarketer, October, 2023) the relative shares of Google and Meta are expected to decline year over year through 2025, despite their revenue growth. Other channels are capturing share of digital advertising spend, including TikTok, Amazon, and Roku, supporting our belief that advertiser dollars will shift and overall spend will increase to platforms delivering incremental reach, engaged consumers and return on investment for advertisers.

Additionally, while consumers are spending a large proportion of their time on social media, Insider Intelligence’s data shows that growth of time spent is plateauing, as consumers seek longer-form content to engage with (rather than short-form social content alone). We believe this represents an opportunity as the broader ecosystem of advertisers seek partners to support continued growth of editorial and journalistic content.

Accordingly, we are executing on strategies to draw both consumers and advertisers to the Open Internet. Our long-standing approach to navigating this changing landscape includes our efforts to become the leading prediction platform on the Open Internet, continually optimizing for user attention and engagement.

Our Offering for Media Partners

Outbrain’s extensive platform provides a suite of solutions tailored specifically to meet the needs of media owners. Our comprehensive media owner suite brings advanced AI-backed prediction technology to the Open Internet, enabling our media partners to enhance their businesses through sustainable monetization, robust audience development, and efficient revenue diversification. This data-driven decision making allows our media partners to position themselves for success in 2024 and beyond.

•Monetization that Balances Content and Ads: Outbrain facilitates content discovery and seamless monetization for our media partners on their own sites. Our sophisticated algorithms optimize the editorial recirculation of content, resurfacing high-quality material for consumers and driving longer sessions on the site. This approach also enhances the value of audience interactions, as consumers engaged with editorial content are more likely to interact with paid advertisements.

•Fueling Publisher Business with our Demand Strategy: Outbrain's branding platform, Onyx by Outbrain™, is designed to maximize brand impact on the Open Internet. Collaborating with premium brands, we optimize for user attention to captivate audiences, boost engagement, and unlock increased monetization opportunities for media owners. This reinforces our value proposition to media owners and drives sustainable success for the industry.

•Customized Layouts: Outbrain’s AI-first platform delivers customized experiences. By leveraging machine learning to analyze audience behavior, contextual insights, and campaign performance data, Outbrain dynamically optimizes our media partners’ digital properties for user experience. Outbrain’s AI-powered prediction engine surfaces the most relevant editorial content and our ad delivery is optimized for campaign performance to increase engagement and drive higher ROAS. Our Smartlogic technology dynamically selects the right experience and layouts according to the audience’s interests and the media owner’s own key performance indicators (“KPIs”), from engagement to monetization.

•Engaging Experiences: We offer a range of formats for strong monetization, including premium pre-roll video ads contextually matched with relevant editorial video content, high-impact display creatives, standard IAB banners, and classic native formats. Combined with our prediction engine, these experiences provide reliable and stable monetization across the entirety of media owner digital properties. We are particularly focused on creating engaging video experiences for both publisher audience development and advertiser purposes, to directly address the desire of consumers to “watch” rather than read: According to Insider Intelligence, “in 2023, it’s estimated that digital video comprised 52.3% of total time spent on screen, with entertainment and news as the preferred categories for that consumption.”

•Efficient Audience Development: A significant proportion of the engagement created by our platform is with the content of the media partner, which we refer to as an “organic experience.” Outbrain equips our media partners with essential tools and services to promote relevant organic editorial experiences to their audiences, improving audience engagement, recirculation, and monetization opportunities as a result. This offering is crucial to support continued audience acquisition and retention across the Open Internet.

•Powerful Revenue Diversification: Keystone by Outbrain™ technology extends ad server optimization capabilities beyond direct campaigns to various campaign types, allowing media owners to effectively diversify their revenue streams. With our total revenue optimization tool, media owners can execute subscription campaigns or optimize their own eCommerce and affiliate campaigns with Outbrain’s distinctive capability for driving engagement.

Outbrain serves as a technology partner for media owners, and their success is integral to ours. With journalism embedded in our DNA and a strong prioritization of supporting publishing since our inception, we possess a unique understanding of the industry. Our long-lasting partnerships, averaging seven years, currently extend to over 8,000 media owners worldwide, with over $5 billion invested back into our media partners through our business model to date, contributing to the sustainability of the publishing industry.

We document most of our media partner arrangements using standard contract terms, which are comprised of a partner enrollment form, completed by media partners seeking our services, that hyperlinks to our publicly available standard partner distribution terms. The partner enrollment form contains the commercial terms of our arrangements: term length (initial, auto-renewal and notice period), the specified percentage of the revenue earned from implementing our technology on the media partner pages, the payment terms, as well as any additional terms agreed upon by the parties. The hyperlinked standard partner distribution terms include terms related to the license and use of the platform and technology, limitations on use of similar technologies, and customary terms and conditions.

In addition, certain media partner arrangements include additional commercial terms such as variable revenue percentages based on page view volume or revenue, or a guaranteed minimum rate of payment if the media partner meets certain additional criteria, including the implementation of advertisement spaces in defined placements across the media partner sites. We also have arrangements with media partners on a programmatic basis such that the contract defines the mechanics to participate in the media partner’s real-time auction for access to the media partner’s inventory, with neither party committing to provide or bid on inventory. The commercial terms of these arrangements, such as revenue percentages, tiering of such percentages, guaranteed minimum rates of payment or programmatic are all factors, among others such as geography and size of the media partners, that contribute to our revenue mix.

Our Offering for Advertisers

We provide a full-stack, cross-funnel advertising solution for advertisers of all sizes — from enterprise brands and the agencies who serve them, to direct-to-consumer brands, performance marketers, and beyond. We drive ROAS for advertisers by connecting them with audiences when they are most likely to pay attention, engage, and convert. This enables advertisers to not only reach, but drive real business outcomes from consumers across the Open Internet.

We have several proprietary buying platforms that enable our advertiser partners to deliver measurable results across each step of the purchase funnel. Amplify, our performance advertising platform, drives engagement and conversion with native ad experiences. Zemanta, our demand-side platform (“DSP”), enables advertisers to optimize their media spend for engagement and outcomes with programmatic buying methods. In 2023, Outbrain launched our new branding platform, Onyx by Outbrain™, applying our AI prediction engine to a viewable, brand-safe environment that delivers greater consumer attention. We believe this presents a significant opportunity to both provide brands with more accountable methods of measurement for their upper and mid-funnel marketing objectives, while also providing the tailored, relevant experience consumers have come to expect.

Regardless of the buying channel advertisers choose to use, our product offerings provide differentiated value by delivering accountable results beyond views, such as attention, engagement, and conversions.

Our unique inventory is also programmatically accessible via leading third-party demand side platforms, which enables advertisers to access the value of Outbrain and Onyx environments on their platform of choice. Our proprietary buying platforms, described above, provide unique value through AI-powered campaign tools, unique formats, and targeting capabilities, all of which are designed to deliver better ROAS.

Our offerings provide advertisers with:

•Seamless and engaging ad experiences. Outbrain features ad inventory and formats that blend seamlessly with the page experience, and are relevant and engaging to the user based on their interests. Outbrain formats are available in a range of variations tailored to achieving specific engagement and performance goals. Onyx formats are designed for attention and are large-format and high-impact in nature. Our suite of ad experiences includes standard native, carousel and app install ads, outstream video, contextual pre-roll video, and high-impact display.

•AI-powered prediction engine. Our deep and direct integrations with thousands of media properties provide us with a wealth of consumer interest and engagement data points. Our proprietary prediction engine ingests billions of data points each minute, utilizing AI and machine learning to make real-time ad serving decisions based on which opportunities are most likely to yield optimal results for the advertiser. This unique engine differentiates our offering beyond typical programmatic platforms, and consistently delivers ROAS for our advertisers.

•Performance tools driven by automation and AI. Use of AI to power better performance is part of our DNA. Our Conversion Bid Strategy (CBS) tool harnesses our wealth of engagement data and machine learning to optimize bid strategies to hit the advertiser’s desired campaign goals. CBS has proven so effective that approximately 75% of advertiser campaigns in 2023 utilized CBS to optimize campaign performance. We are also leveraging generative AI in dynamic new features like AI-powered headline generation, which simplifies ad creation and produces tailored, engaging content, elevating click through rates and overall performance.

•Unique interest and contextual data. Our relationships with our media partners also provide us with a wealth of consumer interest and contextual data, which we use to build unique targeting products. Our data offering includes targeting offerings based on consumer interest segments, as well as complex offerings that predict audience characteristics based on contextual and interest data. This supports our advertisers reaching relevant audiences without reliance on third-party cookies, and powers greater performance.

•Concrete business outcomes. The Outbrain platform enables advertisers to optimize specific campaign goals, guaranteeing engagement and delivering other measurable business outcomes beyond traditional ad views. This includes sales, conversions, traffic, sign-ups, leads, attention, and more. Advertisers are able to view progress, manage ongoing campaigns and maximize ROAS. Our Onyx platform similarly optimizes towards an accountable outcome: attention. Onyx enables advertisers to deliver concrete ROAS with their branding campaigns, by providing high audience attention and corresponding incremental outcomes as a result, rather than ad views alone.

•Full-stack buying solutions. As referenced above, we provide a full suite of buying capabilities for advertisers. We own and operate our own proprietary performance platform, Amplify, as well as our own DSP, Zemanta. We also connect with leading third-party DSPs via our own programmatic platform (SSP), providing agency holding companies and brands with programmatic access to our platform on their buying platform (DSP) of choice. We are one of the few Open Internet advertising companies with an end-to-end buying stack, including our own SSP, DSP, and performance buying platform. This enables advertisers to benefit from greater supply-path optimization, efficiency, and transparency — and enables a more sustainable advertising ecosystem.

•Quality. We work with established media partners, employing rigorous selection criteria, onboarding standards, controls, processes, and ongoing monitoring. As a result, our platform provides predominantly exclusive access to engaged consumers in high quality content environments across many of the world’s most trusted media properties.

Advertiser Results Driven by Tailored Consumer Experience

Our relationships with media owners notably differentiate our offering for advertisers. Our Smartlogic product dynamically optimizes the arrangement and format of experiences delivered to each consumer, predicting which experiences they are most likely to be interested in and engage with. This ensures optimal performance for our advertising partners, and allows them to reach consumers at incremental, exclusive moments of high attention and engagement.

Our Strengths

•Exclusive, owned and operated inventory at scale across the Open Internet. We are one of very few platforms with access to exclusive inventory on over 8,000 properties across the Open Internet. Our goal is to ensure that the capabilities and revenue we provide to our media partners will enable them to sustain their businesses and deliver quality journalism. The unique services and mission-critical partnership we provide to our media partners enable us to continually grow and protect our exclusive inventory. This provides advertisers with the ability to reach incremental audiences at new moments of attention and engagement — adding value to their media mix in an advertising ecosystem that is congested with commoditized offerings.

•End-to-end tech stack for advertisers. We own and operate several buying platforms, allowing advertisers to access the value of our unique inventory, data, and performance offerings in the ways they currently buy. Our proprietary performance platform allows us to support a high volume of diverse advertiser profiles, meeting a wide range of objectives through automation tools. In contrast, our SSP and DSP enable us to seamlessly work with enterprise brands and agencies as well as performance marketers. This provides us with growth opportunities across the full catalog of advertising demand.

•Unique proprietary data and algorithms driving a virtuous cycle. Our direct integrations across our media partners’ properties provide us with a large volume of proprietary first-party engagement data, including context, consumer interest and behavioral signals. Leveraging our data and AI capabilities, we continuously optimize our prediction engine to improve consumer engagement and advertiser ROAS. By delivering better results to advertisers, we are able to continually enhance our platform performance and value for media owners.

•Well positioned for a privacy-centric world. By integrating directly with our media partners’ properties, we generate proprietary first-party data and are able to collect and infer valuable data and insights, while respecting privacy regulations. With the upcoming discontinuation of third-party cookies and confusion about the efficacy of any new approaches, marketers are looking for more enduring ways to understand their customers. Our ability to extract and leverage contextual signals enables us to deliver tailored advertising without relying on cookie-based targeting.

•History of successful innovation. We pioneered the category of engagement-driven consumer recommendations. Since then, we have developed our core prediction capabilities into a scaled advertiser business that serves objectives at each stage of the marketing funnel. Additionally, we have evolved our AI prediction technology to optimize all media partner revenue goals and maximize full-page monetization with video and other new experiences. To ensure continued product innovation, we operate as a continuous deployment engineering organization, releasing hundreds of code deployments daily.

•Scaled, profitable and diversified business. We have grown our business while achieving profitability. This demonstrates the scalability of our technology to new use cases, and the strength of our long-standing client relationships. In 2023 our top twenty digital media partners accounted for approximately 50% of our revenue, with the largest accounting for 10% of our revenue. During the same year, our top twenty advertisers accounted for approximately 24% of our revenue, with the largest accounting for approximately 2% of our revenue.

•Team and culture. We rely on a global and diverse team of high-performing and results orientated employees to collaborate, innovate, and execute our vision. In our ongoing commitment to fostering a robust company culture and reinforcing the social fabric within our organization, we recognize the profound impact that these elements have on our overall success and sustainability. This commitment is manifested through strategic investments in initiatives that prioritize employee well-being, diversity, equity, and inclusion. We understand that a strong company culture not only enhances organizational cohesion but also contributes significantly to attracting and retaining top talent. Our continued investment in professional development programs, mentorship initiatives, and employee engagement activities underscores our dedication to nurturing a positive and inclusive work environment. By prioritizing these aspects, we aim to build a resilient culture that strengthens our workforce, fosters innovation, and ultimately drives long-term value for our shareholders.

Our Growth Strategies

We are well positioned to capitalize on the continued growth of digital content consumption and advertising. We have demonstrated the applications of our core AI prediction technology to new arenas as consumer habits and advertiser needs change. We believe there is a significant opportunity to leverage our technology and algorithms to bring more relevant consumer experiences to the Open Internet, similar to those which have grown the popularity of social platforms. We believe that this will enable us to partner with traditional media properties in new ways, to apply our prediction engine and optimization technology to new media environments, and to grow the share of wallet across our scaled advertiser client base.

•Grow user engagement across the Open Internet. Improving the abilities of our prediction engine has been an important driver of past growth and we expect it to remain a key driver of future growth. Continued investment in our technology, artificial intelligence and machine learning capabilities enable us to power consumer engagement for media owners in new ways, as consumer habits change. We believe that improvements to our existing prediction capabilities, as well as applications of our engine to new formats and media environments, will enable us to significantly grow our revenue.

•Grow media owner partnerships and access to ad inventory. We have an extensive history of growing ad inventory by expanding our media partnerships and forming new ones with an emphasis on premium media owners in the markets where we operate.

Existing partners. We have a strong track record of growth through the continuous expansion of existing media partnerships. We are actively growing our available inventory by providing solutions: (i) for new placements on our media partner properties, such as video and mid-article, and (ii) to create new experiences across our existing placements and feeds. We strive to manage a larger proportion of our media partners’ digital properties, to ultimately become the preferred total revenue and full-page optimization partner for media owners.

New partners. We also plan to pursue new partnerships with media owners to power new media environments that are attuned to grow next-gen audiences — as well as integrations with platforms that will provide access to new consumer segments, across apps and other environments. We plan to expand our partnerships with original equipment manufacturers (OEMs), news aggregators, browsers, operating systems and other platforms enabling us to offer dynamic content feeds and advertising solutions for different platforms.

•Grow budgets from new and existing advertisers. We have developed an advertiser offering that drives business outcomes across multiple steps of the marketing funnel. We plan to continue development of our offerings to drive growth from a diverse set of advertiser types.

◦Further invest in our advertiser product suite, developing cross-funnel solutions. In the past, improvements to our advertiser solutions have been a meaningful driver of growth for our business. With the release of Onyx by Outbrain, we increased our ability to access branding and video budgets. We plan to invest in the continuous improvement of our buying platforms and technology, including enhancements to our AI prediction engine, our DSP (Zemanta), and our performance platform (Amplify), in an effort to ensure we can grow the share of budget from our advertiser base from branding to performance objectives.

◦Continuously improve ROAS through AI and automation. We aim to deliver better results for advertisers through improved consumer attention and click-through-rate (“CTR”) and outcome prediction. Our investments in AI and automation tools are designed to deliver better results for our advertisers, with less hands-on intervention. This will enable us to deliver better advertiser results and grow new and existing advertisers’ share of wallet.

◦Grow brand spend through development of Onyx creative experiences. The rollout of Onyx by Outbrain enabled us to serve brand awareness objectives and capitalize on growth in the video and high-impact advertising sectors. Our Brand Studio and the video experiences we are now able to provide as a result of our acquisition of video intelligence AG (“vi”) in 2022 enable us to provide innovative creative solutions that deliver high attention. The addition of video experiences (including pre-roll, and outstream) to our platform presents a significant growth opportunity in video, which has not exceeded 10% of our revenue mix, with significant remaining headroom for growth into a higher yielding business.

◦Attract new types of advertisers. In addition to investments in our advertiser product and technology, we plan to continue investing in sales and marketing initiatives aimed at attracting new types of advertisers, such as enterprise brand advertisers. Our focus on premium media partnerships and high-impact and video formats enable us to form new business relationships with advertisers who traditionally have not spent with Outbrain.

◦Deepen strategic value to media partners. The expansion of our demand business to service new objectives greatly increases the opportunity for our media partners. Onyx enables our media partners to benefit from an entirely new catalog of video and high-impact display demand, which is complementary and incremental to the dependable, year-round performance advertising demand we provide. By evolving our business to service advertiser objectives across the funnel, we are in tandem evolving our relationship with media owners to provide full-page, cross-demand monetization solutions. This is critical at a time when media owners are seeking dependable, diverse revenue. In addition, Keystone by Outbrain further broadens the revenue opportunity we can provide to our media owners — providing solutions to optimize total revenue across their site by optimizing affiliate revenue, e-commerce, events, subscriptions, and more.

◦Acquisitions and strategic partnerships. We have a track record of successfully executing a number of acquisitions and partnerships, helping us efficiently expand our offerings, grow our business and grow our talent. In 2017, we acquired Zemanta, providing us with a DSP and bidder that has enabled us to grow in a multitude of strategic areas (including the development of Onyx by Outbrain’s managed programmatic offering). In 2018, we acquired AdNgin, an advanced user interface optimization platform, which has been instrumental in developing our AI-backed media owner engine, Smartlogic. In 2019, we acquired Ligatus, a German-based native advertising and programmatic company. In January 2022, we acquired vi, providing us with an expanded video offering for advertisers and media owners, enabling the creation of Onyx by Outbrain’s video suite. We intend to continue to opportunistically pursue partnership and acquisition opportunities that will enhance our technology or market presence and deliver more value to our partners and advertisers.

Our Competition

The digital advertising industry is highly competitive and fragmented. Many of our competitors provide only one element of the full demand offering we have now created. We believe we are in a differentiated position due to our ability to service advertiser objectives from branding to performance and provide media owners with full-page monetization as a result. We compete for advertising dollars and media owner partnerships with advertising technology platforms who have traditionally been performance focused, such as Criteo, Taboola, and RevContent. With the creation of our branding platform, Onyx and our programmatic tech stack, we also compete with companies such as Magnite, PubMatic, Teads, and TripleLift. The Open Internet category, which we and the competitors listed above are placed within, also competes with large consumer-facing digital platforms for ad dollars. These include companies such as Amazon, Meta, TikTok, Google, and X (formerly known as Twitter).

The key factors that differentiate us from competitors and secure long-term media owner partnerships as a result include: (i) our unique media owner suite which includes audience engagement and revenue diversification offerings that provide valuable tools that extend far beyond monetization alone, and increasingly (ii) our ability to offer full-page monetization solutions, with an array of advertiser demand types from branding dollars to performance dollars, which are optimized by differentiated AI-backed Smartlogic technology.

The key factors that enable us to compete effectively for advertising dollars include: (i) deep understanding of consumer interest and intent across editorial environments, as a result of our unique media owner offering, (ii) utilization of our core AI prediction technology to leverage this data to deliver better branding, consideration and performance outcomes, (iii) access to massive audience scale on premium media owner properties across the globe; and (iv) supply-path optimization by design, offering advertisers efficient, direct access to media owner inventory at scale.

Our Technology

We have designed our platform to process real-time content and advertising transactions quickly and efficiently at a massive scale. Our platform delivers on average over 12 billion recommendations daily, in 20 languages. We designed our platform using a microservices-based architecture, which enables the rapid deployment of new features with high availability, reliability, and redundancy.

Our platform consists of the following key technology components:

•Infrastructure. To support our business needs, we operate our own proprietary cloud infrastructure, and also utilize other public clouds. Our proprietary infrastructure includes over 7,000 servers, with storage capacity exceeding several petabytes. Our servers are primarily located in three third-party data centers, on a co-location basis, in Secaucus, NJ, Sacramento, CA, and Chicago, IL. Each of our data centers is operated by a different vendor, in order to minimize the impact of any outage on our platform. While all three data centers actively serve recommendations to consumers, we are able to serve all of our traffic from two of the three data centers if needed. We utilize a global content delivery network (CDN), and dynamic acceleration, for additional performance optimization and redundancy. In 2022, we also started serving recommendations from a public cloud based in the Netherlands to several countries in Europe. We use architecture similar to our primary third-party data centers and deploy over two availability zones for high availability.

Our infrastructure is designed such that we do not have any known single point of failure at any level. Within each data center, we have load-balanced servers on each layer of the system, so that a failure in one server or component will not impact performance or availability. Some of these clusters are dedicated to handling incoming traffic and delivering content, including web servers, caches and real-time database applications. Other clusters are devoted to the data analytics and algorithm modeling involved in creating content recommendations. The design also includes load balancers, firewalls and routers that connect the components and provide connections to the Internet. In particular, we use software specifically designed for processing large data sets to provide real-time data analysis, the results of which are then fed back to refresh and improve our recommendation algorithms.

We monitor our system using several tools, both internal and external, to gauge our uptime and performance. We also use multiple layered security controls to protect our recommendation engine and our data assets, including software-based access controls for our source code and production systems and centralized production systems management. We believe that the failure of any individual component will not affect the overall availability of our platform, having maintained an uptime of 99.9% from 2018 to 2023.

•Data. One of the key benefits of our platform is the management, analysis, and structuring of valuable user engagement and advertising data.

◦Our data scale: We gather billions of data events per minute delivering over 12 billion recommendations per day. During 2023, we improved our data efficiency by reducing the overall terabytes of data collected per day, while increasing overall click-through-rates by focusing on the most impactful data such as contextual signals, advertiser data, and user engagement data (typically clicks on recommendations). We leverage our data to improve our algorithms and prediction capabilities.

◦Our automated content index: To operate our platform, we have created our automated content index, comprising over 5 billion content elements. Our technology automatically classifies and analyzes content at a rate of over 1 million pages a day in 20 different languages. We index content through RSS feeds and JavaScript triggers to continuously identify new content and changes to existing content. Our automated index deconstructs content into base elements including titles, images and topics in order to recombine the elements into targeting data and formatted recommendations and ads.

•Artificial Intelligence and Machine Learning. Our proprietary artificial intelligence and machine learning capabilities enable us to harness the vast volume of data we collect in order to effectively match consumers to relevant content and ads based on our content index. AI is at the heart of our key prediction engine, which backs all of our advertiser and media owner offerings. Leveraging AI to ingest and analyze the billions of data points we access daily, and effectively utilizing them to make predictions that deliver better business outcomes, is a key tenet of our business. Our algorithms make over 1,000 click and conversion rate predictions per second, on average, before selecting which recommendations to present on each page view.

Our Data Flywheel

Sales and Marketing

We focus our sales and marketing efforts on supporting, advising, and training our media partners and advertisers. We strive to add value for our partners through education of the best uses of new metrics such as attention, as well as providing key insights around consumer engagement and interest which are accessible to us through our platform. We employ in-market sales teams across our markets, helping us attract premium digital media owners and advertisers to our platforms, as well as global support hubs to manage small and medium clients. In addition, we have developed and currently utilize online acquisition channels to attract new advertisers, who we are able to onboard and serve in an automated manner, using self-serve tools and technologies.

Our sales teams educate prospective media owners, partners, and advertisers on the use, technical capabilities, and benefits of our platform. Our dedicated teams work with potential customers through the entire sale cycle, from initial contact to contract execution and implementation. Throughout the process, our teams provide guidance as to how our platform can optimize the value of a media owner’s audience or how an advertiser can reach relevant consumers. Additionally, following contract execution and implementation, our account management teams guide our media partners on how additional platform deployment and optimizations can deliver incremental monetization. We engage advertisers and their agencies in order to educate them on how to increase reach and ROAS using our solutions.

Our marketing team is focused on delivering strategies that drive efficient new media partner and advertiser acquisition, increasing awareness of our brand and our evolving solutions, and educating the market in order to enhance our position as key industry thought leaders.

Human Capital Resources

Much of our success can be directly attributed to our global team of technology, business, and data science experts who work out of our 15 locations worldwide. Outbrain is comprised of a diverse, intelligent and driven group of individuals who are passionate and excited to be leading continued innovation in Open Internet technology and advertising.

Our culture and team are a critical asset in building and expanding our business. We believe that our strong and diverse teams deepen customer relationships, promote innovation, and increase productivity. Our Culture Manifesto, available publicly on the Outbrain website, is one of many important expressions of the values and principles that reflect how we behave, collectively and individually.

Our people strategy revolves around creating employee experiences. We strive to foster deep employee engagement built upon personal development and achievement that is supported by continuous feedback, learning, and team building. As we continue growing our team, and become more diverse culturally and geographically, we want to make sure we retain a shared mission among the people that become part of our Company. In particular, there are certain characteristics that we seek out in our employees:

•Intelligent and productive. There are many great attributes companies can seek in the candidates they hire —academic degrees, deep industry expertise, hands-on work experience, etc. While these attributes are an important part of our screening process, we seek, above all else, a combination of smarts and a “get stuff done” attitude.

•Collaborative. We love hiring and nurturing professionals who are great at their craft. At the same time, we are cognizant that we are ultimately playing a team sport and we therefore look for people who strive to be amazing team players. A self-described “Superstar” focused on personal status is not likely to fit our team, even if they are very good at their profession.

•Passionate. People who have a passion for something typically have that spark in their eyes when they engage in the work they love. They bring their best self to work, possess the desire to improve and learn, and focus on opportunities rather than obstacles. Through their passion, they set the tone for the rest of the team and become excellent examples for everyone to follow.

We also strive to make Outbrain diverse at all levels of the Company, and in all types of jobs. Our priority is to always hire and promote people based on qualifications and merit, and we believe that this approach does not conflict with the objectives of inclusion and empowerment. Our team consists of people from many different nationalities and cultures with different perspectives, opinions and ideas which we believe is undeniably powerful and ultimately drives shareholder value. We support employee-led employee resource groups (“ERGs”), which foster a diverse and inclusive workplace. We currently have four ERGs: OB Good, OB Green, OB WE and OB-4-Equality, focusing on social responsibility, environmental sustainability, women’s empowerment, and diversity equity and inclusion, respectively, all of which are open to people of all backgrounds.

As of December 31, 2023, we had 942 employees and contractors. Based on where data is available, 49% were male, 47% were female and 4% undisclosed. Approximately 40% of our workforce is located in Israel, 13% is located in the United States, 13% is located in Slovenia, and the remaining 34% is located across our other global offices. In March 2020, we transitioned to remote work, with selective offices returning on a hybrid basis where conditions related to COVID-19 permitted. In 2022, we returned to our offices using a hybrid model, with employees working from both our office locations and their homes. As of September 2023, we formalized a hybrid schedule of three-days a week in office.

Intellectual Property

The protection of our technology and intellectual property is an important component of our success. We protect our intellectual property rights by relying on federal and state statutory and common law rights, foreign laws where applicable, and contractual restrictions. We seek to control access to our proprietary technology by entering into non-disclosure agreements with third parties and disclosure and invention assignment agreements with our employees and contractors.

We consider our trademarks, patents, copyrights, trade secrets, and other intellectual property rights to be, in the aggregate, material to our business. In addition to our intellectual property rights, we also consider the skills and ingenuity of our employees and the functionality and frequent enhancements to our solutions to be contributors to our success. We believe our platform would be difficult, time consuming, and costly to replicate. We protect our competitive technology position through innovation and by continually developing new intellectual property.

Outbrain has built an extensive intellectual property portfolio to date. This portfolio includes 18 granted U.S. utility patents, 35 granted U.S. design patents, 15 European registered community designs and 14 UK registered designs.

Regulatory Environment

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, many of which are still evolving and being tested in courts, and could be interpreted or enforced in ways that could harm our business. These laws and regulations involve matters including privacy, use of artificial intelligence, data use, data protection and personal information, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, data localization and storage, data disclosure, competition, protection of minors, consumer protection, accessibility, taxation, environmental reporting and economic or other trade controls including sanctions, and securities law compliance. Foreign laws and regulations can impose different obligations, or penalties or fines for non-compliance, or be more restrictive than those in the United States. More generally, the application, interpretation, and enforcement of applicable laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction, industry or size of company. For example, the Digital Services Act (DSA) in the European Union, which became enforceable in February 2024, is aimed at protecting users and the digital space from harmful and illegal content. Although we have not been named a “Very Large Online Platform” under the DSA, we are required to meet certain content transparency requirements which require technical and compliance changes. The DSA includes significant penalties for non-compliance. In addition, the rising global adoption of artificial intelligence technologies has resulted in the European Union reaching a provisional political agreement on the Artificial Intelligence Act, 2023 (“EU AI Act”). The EU AI Act imposes multiple new requirements on the utilization of generative artificial intelligence technologies which may adversely impact our business practices and affect our ability to adopt new technologies.

Orders issued by, or inquiries or enforcement actions initiated by, government or regulatory authorities have caused us, and in the future will likely continue to cause us, to incur substantial costs and expose us to civil and criminal liability (including liability for our personnel) or penalties (including substantial monetary remedies). Such orders, inquiries or enforcement actions could be materially adverse to our business, result in negative publicity and reputational harm, divert resources and the time and attention of management from our business, or subject us to other structural or behavioral remedies that adversely affect our business.

We have been subject to significant legislative and regulatory developments in the past, and proposed or new legislation and regulations could significantly affect our business in the future. For example, we implemented a number of changes and controls as a result of requirements under the General Data Protection Regulation ((EU) 2016/679) (GDPR), and may implement additional changes in the future. The GDPR also requires submission of personal data breach notifications to our lead European Union privacy regulator, and includes significant penalties for non-compliance with the notification obligation as well as other requirements of the regulation. The interpretation of the GDPR is still evolving and draft decisions of regulators are subject to review by other European privacy regulators as part of the GDPR’s consistency mechanism, which may lead to significant changes in the final outcome of such investigations. As a result, the interpretation and enforcement of the GDPR, as well as the imposition and amount of penalties for non-compliance, are subject to significant uncertainty. In addition, the United Kingdom, Brazil, Japan, Singapore and other countries have enacted similar data protection regulations imposing data privacy-related requirements on products and services offered to users in their respective jurisdictions that could increase the cost and complexity of delivering our services, cause us to cease the offering of our products and services in certain countries, or result in fines or other penalties. The California Consumer Privacy Act, as amended by the California Privacy Rights Act, and similar laws recently enacted by other states also establish certain transparency rules and create certain data privacy rights for users. In addition, the European Union’s ePrivacy Directive and national implementation laws impose additional limitations. Changes to our products or business practices as a result of these or similar developments have in the past adversely affected, and may in the future adversely affect, our business and adds complexity to our and our partner’s compliance programs.

We are also subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process and/or receive certain data that is critical to our operations, including the collection of data and the data shared between countries or regions in which we operate. If we are unable to collect data and/or transfer data between and among countries and regions in which we operate, it could affect our ability to provide our services or our ability to target ads, which could adversely affect our financial results. For example, in July 2023 the E.U.-U.S. Data Privacy Framework (“DPF”), a voluntary certification program for the transfers of personal data from the EU to the U.S., became effective. The DPF replaced the prior transfer framework that was invalidated in July 2020 by the Court of Justice of the European Union. Though we have been certified under the DPF, these mechanisms, including the Standard Contractual Clauses, for transfers of data continue to face legal challenges and invalidation of such schemes or restrictions on data transfers could materially and adversely affect our business, financial condition, and results of operations.

Interest-based advertising specifically, or the use of data to draw inferences about a consumer’s interests and deliver relevant advertising to that consumer, is under increasing scrutiny by legislative bodies, regulatory bodies, self-regulatory bodies, privacy advocates, academics, and the press in the United States and abroad. In particular, much of this scrutiny has focused on the use of cookies and other tracking technologies that collect or aggregate information regarding consumers’ online browsing and mobile app activity. Our Company, our media partners and advertisers rely upon large volumes of such data collected primarily through cookies and other tracking technologies. It is essential that we monitor legal requirements and other developments in this area, both domestically and globally, maintain a robust privacy and security compliance program, anticipate the evolution of regulations applicable to us and engage in responsible privacy practices, including providing consumers with notice of the types of data we collect, how we collect it, with whom we share it, how we use that data to provide our solutions and how consumers can exercise their rights and personalization choices. We typically collect IP addresses and device identifiers that are considered to be personal data or personal information under the privacy laws of some jurisdictions or otherwise may be the subject of current or future data privacy legislation or regulation. The definition of personally identifiable information, personal information, or personal data varies by jurisdiction and continues to evolve in ways that may require us to adapt our practices to comply with laws and regulations related to the collection, storage, use, and sharing of consumer data. As a result, our technology platform and business practices must be assessed regularly against a continuously evolving legal, regulatory, and technology landscape.

Beyond laws and regulations, we are also members of self-regulatory bodies that impose additional requirements related to the collection, use, and disclosure of consumer data. We are members in good standing of the Network Advertising Initiative (NAI), an association dedicated to responsible data collection and its use for digital advertising. We adhere to the NAI Code of Conduct, along with the IAB Self-Regulatory Principles for Online Behavioral Advertising, and the IAB Europe OBA Framework. We are participants in the Digital Advertising Alliance and the European Interactive Digital Advertising Alliance and adhere to the Self-Regulatory Principles set forth by these organizations. Some of these self-regulatory bodies have the ability to review or sanction members or participants, which could result in penalties and cause reputational harm. Additionally, some of these bodies might refer violations of their requirements to the Federal Trade Commission or other regulators.

For additional information regarding the current regulatory environment and how it may impact us, see Item 1A. “Risk Factors” under “Risks Relating to Legal or Regulatory Matters” included in this Report.

Security

Being a trusted partner is a key value for us and, as such, security is an ongoing commitment. Our products are designed with security, and privacy, at the forefront. We maintain tight controls over the personal data we collect, encrypting it where necessary, and retaining it in our databases with strictly limited and controlled access rights, to ensure it is secure while utilizing advanced monitoring over our environment. All traffic to and between our data centers is encrypted, along with all sensitive configurations, while our users and customers have their passwords hashed.

Secure advertising is a building block of user trust. In order to provide secure ads, we integrated an advanced industry leading third-party technology to scan live ads looking for potential security violations either in the ads themselves or on the pages to which they directly link. Combined with internally developed capabilities and our content review process we are tackling both malicious ads and the bad actors behind them.

Providing a clean, non-fraudulent premium network for media owners, advertisers and consumers is a top priority at Outbrain. Our dedicated anti-fraud team monitors our platform to identify and investigate unusual web traffic patterns. We detect, block and prevent fraudulent web traffic by using both internal and external third-party TAG Anti-Fraud certified solutions. We have been a Trustworthy Accountability Group (TAG) Brand Safety Certified member since 2018. We also implement certain Media Rating Council Invalid Traffic Detection and Filtration Standards in our internal fraud detection technological ecosystem.