Future plc (FUTR) Earnings Call Transcript

Thank you very much for joining us. Over the last week or so, there's been a couple of updates around privacy and the changing media landscape. We received a number of calls from investors asking around what the [indiscernible] mean and what, if any, is the impact to future. We thought it would be helpful to update our privacy webinar from 2021 for the latest announcements to help explain what's changing and what it means, and why we believe that Future is well positioned to be a beneficiary. Zack and Nick will take you through a few slides, and then I will host a Q&A with Zack Nick that captures some of the questions that come up over the last few days. So without further ado, Nick, do you want [indiscernible] everyone with a brief reminder of Future's media fundamentals.

Thanks, Zillah. And before we get started, we want to just give you a recap on the core fundamentals that underpin Future as a media property. The first is users with enormous scale reaching 1 in 3 online users in the U.K. and U.S. Now, our lead verticals, this market penetration is even higher, which ensures we cover large percentages of addressable markets for advertisers, thanks to our search ownership strategy and audience development capabilities. The usage of our sites is a value. Thanks to the content we produce and the functionality on the site, we can demonstrate the users of high intent and deep connections with their passion points. This is not true for all publishers, many of whom will struggle to identify interest their audiences. And the third is that we continue to offer a wide range of tools to allow advertisers to reach their target audiences. One of these is, of course, Aperture, but there are many other things for our proprietary ad stack. And lastly, we have the ability to capture valuable first-party data. Our ad stack means we can capture information relevant to ad campaigns for our DMP, SmartBrief, e-mail data, Hawk, Hybrid, Falcon, and we are also looking at other ways of incorporating our rich and permission data sets from GoCo, Kiplinger and SmartBrief. Next, I'd just like to talk about what's changing. Looking forward, it's really clear that consumer privacy will play a major part in all areas of the advertising ecosystem and Future are really highly supportive of that. As you can see from some of the recent examples of industry change that we've highlighted on this slide, almost all are based around protecting the use of, whilst building a more healthy and sustainable ecosystem. The 2 latest changes involve Google update and their proposals for replacement of the third-party cookie across Google Chrome and the latest regulatory rulings around the transparency and concern framework, which is used to collect user permissions. Apple, Google and other large [indiscernible] vendors have all been innovating their platforms to bring more privacy compliant advertising solutions to market. Future are really well positioned to integrate and adapt to these technology changes as they are released into the ads ecosystem. So looking forward, Future's premium content has always had really high contextual relevance. Just think of some of the examples we see every single day, including iPhone review, [indiscernible] et cetera. These happen tens of thousands of times a day, and the user intent is really clear and ad performance is strong. Google's original Flock proposal had 30,000-plus cohorts whereas Topics has 350. This is still a lot more than many advertisers were ever used to be buying programmatically and they're ad targeted. The proposals from Google really narrows down the data that people can use when trying to target these users with adverts, making the publisher's ability to collect enhanced or enriched data even more unique. Our data is valuable, rare, [indiscernible] and we are organized around it, providing sustained advantage. Google have regularly provided industry updates following its January 2020 announcement that it's going to phase out the use of third-party cookies from Chrome, its browser. 2 weeks ago, they provide an update to the industry on where it got through the process, and I wanted to provide some really clear points of clarification. The first is that user [indiscernible] a more privacy compliant model has been introduced and proposed by Google, and we are supportive of these changes. The second is that Future fundamentally supports more privacy-focused ads ecosystem, and we've always been aligned to this. And third, we do all we can to work with a wide range of cookieless [indiscernible] solutions, including IDs, contextual targeting, platforms and various bits and pieces that allow us to transact with our buyers. Publishers such as Future have scaled, high value, intent-based audiences will do best out of these changes. And Zack, our CRO, will go into more detail around this on our first-party data solutions that we offer to our clients.

Thanks, Nick. Let me start by reminding everyone of Future's proprietary technology. Our tech stack works to create websites that users visit every day. This enables several spokes of Future's diversified revenue wheel. Relevant to this topic is Hybrid, our unique ad stack. Hybrid works in tandem with the tech stack to create standard display and video ad impressions that are complementary to the content on site. This system delivers the first-party direct and premium programmatic, our highest-yielding demand on-site, whilst enabling impressions to be sold via the open auction or real-time bidding. These are lower-yielding demand partners. The system ensures we achieve the highest possible price for each impression sold. Hybrid is flexible by design and can integrate with any partner. This allows us to work with a diverse range of partners and avoid any dependencies. The flexibility also allows us to adapt to new technology early. Future regularly works with partners in alpha and beta programs to test new solutions and contribute to their product development road map, ensuring that our needs are met and well served and that Future remains at the forefront of ad tech innovation. Hybrid now benefits from Aperture, a data targeting platform. With the ability to capture and target unique high-value audiences, the future value proposition is stronger than ever and positions Future wells to work directly with large media buyers such as ad agencies to buy very large [indiscernible] ad impressions at higher yields. Future already works with these agencies and is becoming a key partner, selling more impressions directly at higher yields and with fewer intermediatory taking fees, creating the upside risk we see. Now I'd like to talk to you about the Transparency and Consent Framework [indiscernible] TCF. The TCF gives the publishing and advertising industries a common language with which to communicate consumer consent for the delivery of [indiscernible] and online ads using data collected on that user, is overseen by the IAB, an industry body. The Belgian Data Protection Authority, which acts as the lead authority of data protection in Europe, has ruled that the TCF does not make it clear enough to online users that their online data is being used for and [indiscernible] where the consent is used, is therefore, not GDPR-compliant. The IAB has 6 months to make the framework compliant following a review. It should be noted that there have already been multiple updates to the TCF. Some of the DPA's recommendations were already addressed in previous updates. Publishers and advertisers are used to and fully expect that this framework to be amended. The industry continues to work with all stakeholders to find a solution that works, whilst respecting users' privacy. The ruling is a catalyst for more change, change that Future is well positioned for. As a premium publisher, we have a good relationship with the communities that we serve, which drives a higher opt-in rate for data usage. The value of the data that Aperture collects with users' consent is becoming more valuable. Due to Future's scale, reaching 1 in 3 online users in the U.K. and U.S., compliant data can be collected and used across the platform, allowing advertisers to reach high percentages of target audiences, making Future a strategic partner to the large media buyers. Our Proprietary Tax Act allows any and all the changes to industry standards to be implemented quickly and with no dependency on other partners. We must await further developments on the TCF changes, but we believe the framework will continue and has adapted sufficiently before to meet the needs of all stakeholders. Future remains well positioned to adapt to and take advantage of the changes as we surface the value of our high-intent premium audiences and contextually relevant and quality sites. I hope that this has helped answer some of the questions on how Future is positioned within a complex system. To summarize the key points from today, media is and will continue to be a constantly changing environment, and Future has a strong track record over recent years of adapting and thriving with change. Future is supportive of the move to protect consumer privacy and we believe that we have a key role to play as a premium publisher. There is no material downside risk to the revenue from the changes to third-party cookies. And there is an upside case that we will increase revenue through providing yield and market share due to availability of our high-quality first-party data that is becoming increasingly scarce. Future is well positioned already due to our proprietary tech stack. We maintain large audiences with high intent that the advertisers are keen to reach. We have global reach, covering 1 in 3 U.K. and U.S. online users. And finally, the Aperture platform that captures first-party data makes us valuable to advertisers, works with direct and private marketplace deals. Now I will hand back to Zillah to cover some Q&A.

Thanks, Zack. We wanted to make sure this session was as helpful as possible. And so we've collected some of the questions we received over the last few days. So what do you think happens, Nick, now in relation to TCF and the IAB?

Transparency and Consent Framework, TCF, is overseen by the IAB, the Interactive Advertising Bureau of Europe. They now have 6 months to make the framework compliant and have already said that they are working with the relevant regulators to amend it until this feedback from this, the full extent of any changes required for the industry will not be known. From our perspective, it's worth noting that we've already employed several iterations with the TCF, and we're committed to maintaining user privacy within the industry framework.

Okay. And so Zack, what do you think that the ruling on TCF means for Future?

So the ruling is an industry-wide matter and one which Future is well positioned to respond to as a premium publisher, our scale and specialist intent-based content lends itself well to closer relationships with our audiences, and therefore, we anticipate being net beneficiaries of any resulting changes. The value of the data we collect from users with consent will increase as [indiscernible]. We collect data from a variety of different global sources, including opts-in with permission from GoCompare and SmartBrief. Advertisers still need to reach the target audiences. The Future continues to offer contextual targeting solutions which when enriched with our data offering, makes the Future proposition a very compelling one for advertisers.

And so Zack, do you think it's likely that future will need to erase any data collected prior to the ruling?

So the IAB has 2 months to present a plan to the DPA in order to address the issues raised. It isn't the case that the current transparency and consent framework was found to be illegal. From our perspective, Future has always ensured we follow best practice in collecting consent from users and the use of the data for advertising is done in a transparent way. Our view is that the data in Aperture, for example, won't be impacted, but it should be noted that the data within Aperture is constantly refreshed and recollected. Part of its value is the recency of the data and therefore, its accuracy in reaching the target audiences that advertisers want.

That's a really good point. Zack, given that the ruling will limit the information that Future and other publishers are likely to able to collect on audiences, won't this lead ultimately to yield compression? And by extension, hit Future's revenues and profitability?