Digital Turbine, Inc. (NASDAQ:APPS) 24th Annual Needham Growth Conference January 12, 2022 10:45 AM ET
Company Participants
Bill Stone – CEO
Conference Call Participants
Laura Martin – Needham & Company
Laura Martin
Good morning. Welcome to the third day of the 2022 Needham Growth Conference, now in its 24th year. My name is Laura Martin; I’m the senior media and internet analyst at Needham & Company. Our format today is a presentation with Q&A at end. As Bill talks, you might want to type in your questions to the chat box so he can address them at the end of his prepared remarks.
Maybe most appropriate to start with a quick introduction of Bill Stone. I’m happy to welcome to the stage the CEO of Digital Turbine, Bill Stone. Bill joined Digital Turbine in September of 2012, and was elevated to its CEO and the Board, in October of 2014. Today, Bill is Digital Turbine’s CEO, as well as its chief visionary. Bill brings over 30 years of experience in teleco, mobile applications, content, technology, marketing, and distribution to Digital Turbine. Prior to joining Digital Turbine, Bill served as the Senior Vice President of Qualcomm, and as present of its subsidiary, FLO TV and MediaFLO Technologies, between 2009 and 2011. From 2007 to 2009, Bill served as the CEO and President of Handango, a smartphone application software, storefront provider, which was ultimately acquired by Appia Inc. Bill received his BA and his MBA from Rice University.
Take it away, Bill.
Bill Stone
Well, thanks, Laura. It’s great to see you. And I see this is the 24th one of these. And hopefully the 25th one, we’re back in midtown Manhattan, doing this one face-to-face.
Laura Martin
I hope so too.
Bill Stone
Let’s hope so. As far as what we want to accomplish today, maybe a little bit different than, historically, how we’ve done these. What we want to do today is just recognize some of the sentiment that’s out there around some of the macro things, whether that’s inflation or supply chains or what have you. And right now it seems like, from our perspective, that most companies are really bucketized into one or two things, either they’re a growth stock or they’re a value stock. And our view is actually you can be both. And the companies that can be both should be recognized for being both. And we want to spend some time talking about how we see ourselves in that light today. And specifically, how we’re going to continue to grow and have the success that we’ve had in the past.
What we did is we had an analyst day, back in November, and we — and as part of that presentation, the first slide we showed is actually from our analyst day from June of 2018. And we felt it was important because we wanted to provide, back then, a view of how we saw the business evolving over the next few years. And at that point in time, we put out some metrics you can see highlights here, as well as some revenue figures in terms of how we’d grow the business at that time to about $300 million. And if we fast-forward to the present, what you see is we now have a business that’s, obviously, grown well, and above and beyond that. But over that three-year period, we basically hit those metrics on target.
And we felt like it’s important for, at that time at the Analyst Day, as well as today, for investors to recognize, with all the supply of new companies that have gone public, the companies that have executed over that timeframe and have said what they’ve done and done what they’ve said. And so, we had really nice growth on revenue that you can see on the left here. Some really good scale metrics you can see on the bottom. But equally importantly, as you can see, also, is the profitability. And whether we want to define profitability by EBITDA or whether we want to define profitability by good-old-fashion earnings per share, some really nice acceleration of that.
And to double-click on that a little bit more, we’re excited just to have great 80% growth comparing this fiscal year to last fiscal year, but even more impressively, as just being a mobile cloud software company, is we’re able to accelerate the bottom line faster than the top line. So, you can see our growth rates of nearly 200% on both EBITDA and earnings per share. So, that’s something that we’re really proud of. It’s the nature of our business model where it is somewhat insulated from supply chains, or container ships, or inflation risks, or interest rate rises, and the like. We tend to be much more insulated than a lot of those things. And we think that’s important for investors to recognize.
And the reason for that, as we kind of look at the past and the present, is we’re turning to the future. And what we showed at our Analyst Day was how do we take this business from a pro forma $900 million revenue, $100 EBITDA business, and how do we grow it to a $4 billion-plus business and a billion dollar-plus EBITDA business. And while we’re really excited about the growth prospects of the business, that you can see on the blue bar there, the green bar, on the profitability, we’re equally excited about in terms of whether that’s EBITDA margin expansion or just overall EBITDA growth. And for the mathematicians out there, you can also know that we’ve got roughly 100 million shares outstanding. So, if you want to put some metrics and multiples and values against that, you can easily do the math on that. So, we really think that growth is impressive. And we also think that value is impressive, as we go forward.
So, as we turn the page, let’s spend some time now talking about how do we get there? And for us, it really, it all starts with our technology, [On-Device] [Ph]. Our vision when we started this thing many years ago, our vision today, our vision for tomorrow is we continue to want to be the company that can connect the dots between all the people that want to be on these devices to the devices themselves. And that’s an easy thing to say, it’s a really hard thing to do. And so, we’ve been at this for a number of years, and we have software that goes on to devices that distributes applications and content to the devices.
And whether that’s for the app publishes who are looking to acquire more users and then monetize the users, or whether that’s for brands that are looking for visibility to follow our eyeballs that are all now on mobile, or whether that’s for global wireless operators or OEMs that make the devices that are looking for new revenue streams, versus those historically have gone to other players, it benefits all of those players. And we do it in an independent way, meaning we’re not an app publisher, we’re not the fox guarding the henhouse with trying to have other interests. Our interests are to help all of those players achieve their objectives. And so, that independence of having that technology on device is really our strategic mode and what makes is really successful in the marketplace.
But to be successful in the marketplace you’ve got to have a really exciting addressable market. And when we started this business a few years ago, you could see the little slice of pie there on the $5 billion market, in purple. And that was initially the market that we were going after in terms of getting our applications installed on devices, and we had some success with that. But we recognized the broader app-install market was much, much larger than that. So, we innovated new products and services, and things like Single-Tap, things like notifications and so on that really helped us expand that market opportunity, from $5 billion to closer to $100 billion. And then, with our acquisitions that we did last year, it really accelerated our addressable market out to well over $360 billion.
And that allows us now to go after all the non app-install names, so think of things like Unilever, Coke, or McDonalds, or what have you. So now, we’ve got access to this growing market with all of our acquisitions that we, historically, have not had. So, when we think about the numbers that we showed on the prior chart, the market is definitely there for us to go after. And equally exciting is any time we’ve got a big market, what’s even more exciting is the tailwinds that are behind it in terms of growing. And so, when we look at the marketplace right now, apps and content are just part of our lives. The average person spends one month a year inside applications on their device today.
The average person looks at their phone 100 to 200 times per day, and half the time they don’t even know specifically what they’re going to look for, whether that’s a stock quote or news, weather, sports, Kardashians, whatever it happens to be. And so, being able to have that first look of content when somebody is trying to get on to the device is something that the operators and the OEMs actually control. So, we think that’s a great tailwind for what we’re doing. And the overall market just continues to grow as we’ve seen for over the last 200-plus years, is the media dollars follow eyeballs, and our eyeballs are, increasingly, now on these mobile devices.
But as we kind of look forward now more in the advertising side of business, advertisers want simplicity. There’s a lot of complexity in this space. Advertisers are looking for companies that can provide them one-stop shops and ease to integrate in, rather than having to deal with hundreds of players. But they’re also looking for diversity; they don’t want to have all their eggs in one basket with one or two players. And as we think about a lot of the larger platforms today, they’re saturated. Meaning that somebody is putting on $100, but $101, $102, $103 may not necessarily get the same ROI or return on ad spend as the first dollar that goes in. And so you’re seeing, with more eyeballs going into mobile more and more platforms, like ours, benefiting from that.
And then we’re also seeing regulatory tailwinds. Right now, society is going through a debate around when we started the internet it was democratized; now it’s in the control of a few players, and how do we want to think about antitrust versus privacy. And regulators around the world are debating that right now, whether that’s on payments or app stores divorced from operating systems or what have you. And to the extent those things happen, we feel like those are very favorable things for our business as we want to offer our consumers both choice and privacy and security, and we think we’re well-positioned, given our relationships, to be able to do that.
And so, as we think about that more broadly, there’s a lot of things in the news that we all can see around that, and we’ll stay tuned for those developments to happen. But I think it’s important investors to know that we’re well-positioned there. But also, over the holidays, we put a release out regarding our relationship with Google. And we felt this was really important for three reasons. First is just the benefits of scale, we put the companies together. Our two largest operating expenses are people and hosting. And so now, being able to have our hosting consolidated with our scale is something that will be a driver to get to that billion dollars-plus of EBITDA I said before.
But more importantly than that, is now expanding our relationship with Google more strategically. One of the concerns or questions that I always had from investors, does Google view Digital Turbine as an opportunity or a risk. And hopefully this release answers that question as we now are working with Google more closely, above and beyond just on the hosting side of the business and having resources internally, collaborating with us on a variety of initiatives right now that we’re really excited about. And then finally a benefit from that was just credibility. You look at the words on the release that are here, the quotes are coming from Google, not coming from us, about how they view Digital Turbine, we think is important in terms of the credibility of the company and just where we now are as part of the mobile ecosystem.
So, let’s spend a few minutes now talking about how we get there from a growth and profitability perspective in terms of the business drivers. First, if you think about that $369 billion that I showed on the prior chart, and you want to connect that now to the end users, there’s a lot of links in the chain. And we don’t want to get into a lot of the ad-tech alphabet soups of DSPs, and SSPs, and [SDKs] [Ph], and all that. But really, what’s important for investors to note is that it’s just advertising, at the end of day. It’s about people that have brand dollars are trying to target an audience, they want to get to those users, and how do they get to those users.
And now with our acquisitions, all of those links in the chain we now have. And before we did these acquisitions we did not have those. And so, now, the ability to connect those dollars directly to the end users on device is something we now have. And then so if we think about the benefits of that, before we did these acquisitions you’d have an advertiser that would pay us a little bit of money, and then there were these kind of other links in the chain that other people were involved in, and we take our little share here on the small blue part on the top.
Now, we can connect the dots between that advertiser all the way to the end user, and we can keep more of the economics, we can also get better scale benefits in terms of what the advertiser is paying, and we can share more of the money with the publisher. So, it’s a win-win-win all the way around. And it’s just the classic benefit of what scale brings as far as the per-unit economics go. So, if we think about the per-unit economics now, its scale and how do those things grow. There’s really three drivers of how those things are going to grow for us. Number one is just more devices and getting our software and more and more devices. Secondly, it’s just more products and more penetration of more products in terms of the apps and content that are on the device; and then finally, just more media relationships. And so, we think about breadth of devices and depth of media relationships and depth of products, in terms of how we really accelerate the flywheel. And that’s important because that’s how you get network effects. And you saw the hockey stick revenue growth and profit growth on those earlier charts. And that’s really when all three of these things are all working together and growing together versus just being reliant upon one of these variables.
So, we talked first of our growth driver of devices, and we put our software on 750 million devices. We add anywhere from 50, 60 plus million at each quarter. In terms of new devices, I believe in the last 12 months, we put our software and about as many devices as iPhones have been sold globally. It’s doing at a real scale. And with the acquisitions of Fiber and AdColony, we’ve added another billion and a half devices where our software, we have code on page. And so, that means that within these applications, our software is running inside these applications to be able to connect the dots from those devices to the people that want to be on them.
So, you can think about the chart on the right is really a Venn diagram, where we’ve got the 750 million Android devices, we’ve got a 1.5 billion devices that are pretty much equal between Android and Apple’s iOS platform. And it allows us to do a lot of things depending upon overlap between them as well as do things on each side of them to expand our market. And how we go after that market is we work with operators and OEMs. And we think about this in the context of breadth and depth. Mostly, people want to talk about new logos on the left, and I’ll come to that in a second. But we like to think about it as expanding our relationships with the mobile operators and OEMs and growing more products, more services over time.
Just to pick one example here, I’ll talk about AT&T. We launched with AT&T with our wizard product a number of years ago, we expanded Dynamic Installs, we expanded that to SingleTap. Recently, we’ve now extended that to our Content Media platform. So, we continue to add more and more products with our partners as we go forward in time and that allows us to grow our revenues with them over time as well. But then we also continue to like to add new names and new relationships and for those that are looking for new information today, they’re a little closer to the story. I’m pleased to see some new logos on here with Oppo and Vivo that are large Chinese OEMs. We’re in the process of launching with them in Asia Pacific.
Right now, we’re excited about those relationships. That’s an important part of the world for us. Those are important OEMs in that part of the world, so for us to start expanding our relationship. There’s it’s very strategic for us and look forward to a lot of the names on the left of that chart moving to the right over time, but really the key here is if you think about that many, many billions of devices, a lot of the names on this list are the ones that distributor make the devices, so having relationships is very strategic part for us.
So, our second driver is really around products and as I mentioned earlier, we distribute apps, we distribute content out to devices, and there’s a variety of ways that we do that. And most of you think about a company like Coca Cola is a consumer-packaged goods company, they have beverages and they package it up in small cans, big cans, two-liter bottles, fountain drinks, they’ve got a variety of ways they package up. In terms of how consumers want to think and decide how they want to consume it.
For us, similar, we package up applications and content in a lot of different ways and our operator and OEM partners can decide how they want to consume it, they want to consume it with portals or news pop or wizards or game folders or SingleTap or whatever it happens to be, they’ll make that decision. But getting more and more of those products over time and seeing more and more revenue streams that they can now take advantage of and offer benefits out to their customers is important to them.
And so, as we continue to add more and more products that obviously becomes a growth driver for our business and I know one of the growth drivers that investors in particular been excited about, is there one here about SingleTap. SingleTap is a product that, we started out many, many years ago, it’s a product that’s taken us a long time to get going. But we finally cracked the code on it about a year ago. And we really have two different ways of go-to-market with that product.
First is on the left, we take a direct approach. And what we do is, we actually go out and work with partners that are trying to drive app installs. So, I think of names like Twitter, think of names like Pandora, today’s customers. They will actually go out and buy advertising on CPM with those players. And then, we’ll use our machine learning and AI that from our appreciate acquisition. We’ve got some really, really great technologists and data scientists that can help us arbitrage the market to find the devices that have SingleTap on them. Because we know that and the rest of the market necessary won’t know that and then we can go ahead and drive App Installs back to Twitter, Pandora whoever happens to be and then we can get paid on a cost per install basis. So, you can think about us spending $0.25 in advertising and collecting $0.50 in cost per install back for that, as a result of leveraging our SingleTap technology. And we’ve been able to take that market from basically a really nascent new market to now a nine-figure market in a year as a result of just ramping and scaling the business here and continue to add more and more advertisers with it and we continue to be excited about how we can grow that business. But this isn’t a nine-figure business; it’s a 12-figure opportunity.
So, how do we get after that? And we’re going to continue to ramp that direct part. But really, we think about how can we leverage SingleTap as a technology? And what you see here on the right side of the screen is working with people that are trying to drive App Installs through their networks and those could be social media companies, for example, or they could be, maybe just regular brands like a McDonald’s or Starbucks, for example, when you go to their mobile webpage. They’re trying to get the applications onto device through their platform. And so, customers can see ads they can click on the to get to it. And we know which devices have SingleTap or don’t have SingleTap on it. So, if that goes through without SingleTap on the device, it just goes through the regular process as it does today. But as we continue to add more and more devices with SingleTap, and we do more and more of these licensing deals, we can now have those providers pay us whether they pay us a SaaS fee to license the technology, or whether they want to share the revenue with us in terms of what they’re getting to put the application on device. We can do it either way.
But the point being is we’ve expanded the breadth of SingleTap, but we don’t have to handle every advertiser through us. We can now cast a much wider net to get after the much wider opportunity it’s out there with our technology. So, we’re really excited about that. We’ve made some announcements on one of the investor conferences that we did late last year about working with large social media provider that’s in testing on that and we will look to continue to update investors on our progress here. There’s a lot of interest in doing this because it drives improved conversions. It’s better for end customers. So, as we think about growth drivers back to that 4 billion and 1 billion on the prior charts, this is absolutely going to be one of them.
And one thing we also want to think have investors make sure they think about is that with all these tailwinds. It’s not just about smartphones and contents and apps. There’s a lot of things happening where we’ve positioned ourselves to the extent there’s alternative app stores that we see emerge as a result of regulatory conditions. Some people might have saw a press release that we did late last year with a U.K. listed company named Bingo. Bingo has done a great job with the plumbing in terms of being able to connect mobile operators to different payment types and with our software and device. There’s some really interesting things that perhaps we can explore there and we are exploring with different app publishers and carriers around the world. There’re also other operating systems. We’ve historically been really focused on Android because Android is where the market’s been from a global share perspective about 85% of global market, but there’s other operating systems and other things that we think we’ll see emerge over time, and our platforms architected to support those as those as those opportunities come to us who wouldn’t want to make sure we don’t think too limited about how wide of a net we can cast.
And then, in our Analyst Day, we did a bunch of demos on different device types and integrated device types. And so, we want to make sure that we can think about it as a screen company versus just a smartphone company. So, for us, we think there’s a lot of things that can continue to propel growth for us above and beyond the things that investors are familiar with today.
So, just to wrap it up here, I’ll turn it back to Laura for the Q&A. For us when we think about, how do you have a successful business? There’s really some drivers and they’re pretty common amongst all businesses, and they’re very much true for Digital Turbine. Number one, you got to have an enormous total market opportunity to go after. Number two, that’s got to be growing and some secular tailwinds to make it easy. Number three, you got to have a moat and something makes you different and unique to grow your audience. And number four, you got to have a way to make money and then scale it and then last, but definitely not least, probably first is you got to have a great team. And you got to have people that execute it, people have track record of executing and bring — people who bring their lunch pails to work every day and just know how to hustle and get after and get it done. And make it happen. And we got that and that’s probably the thing I’m most proud of on this list right now. But I think we have all those things working together. And there are some special things can happen. And obviously we’re really excited about the business.
And so, hey, Laura, I’ll turn it back over to you for whatever questions you may have.
Question-and-Answer Session
Q – Laura Martin
Fantastic. Thank you so much, really great presentation, really interesting. So, I just want to sort of make an impassioned plea to the audience. We have 217 people listening to Bill Stone right now, and I don’t have a single question. So, I have 10 questions that I have garnered from listening to his presentation, about half of which will be interesting to this audience, but I don’t cover this company. So, if you want to talk about something that you care about in this audience about this company, specifically, you need to put it in my chat box and I will fast pass it to the front, so he can answer it. So, I will start with my questions from listening to you. Can you talk about in a COVID environment, we went to more screens, but a lot of those screens were in home. Is it your view that it — as we exit the pandemic state, you will actually have faster growth because you’re going to have more mobile usage?
Bill Stone
Yes, so, one of the interest things, Laura, about when COVID hit you know, March of — two years ago, people panicked that “Oh my God,” people aren’t going to buy devices anymore. That’s a negative for Digital Turbine and people aren’t shopping anymore. And our company got hit and all of a sudden then we became “Oh my God.” People are at home, people are on their phones more, they’re engaging more, they’re spending more time playing games and on social media, and all the like. And so, it became something that’s associated COVID. And in my view on it, it was is it, people are — whether there are people at home with COVID, people are outside and worlds back home, people are going to be on devices. And we whether we’re doing screens of televisions, or we’re doing tablets, or we’re doing cards [Ph] or we’re doing smartphones, it will be with those screens that we’re all going to be on today. So, I kind of view it from a Digital Turbine perspective is that we’re pretty, pretty insulated from that. It’s not necessarily a tailwind or a headwind for us, although, investors like the [indiscernible] companies, obviously in the one or the other.
Laura Martin
Okay. So, I’m surprised you don’t think it’s just the usage of mobile going up post-pandemic, we are — [multiple speakers]…
Bill Stone
I think it’s going to happen, but my point is, it’s going to happen regardless.
Laura Martin
Okay, very interesting.
Bill Stone
Whether it happens in my house because I’m on my device or whatever happens because I’m outside, it’s going to happen regardless because people want — they want the convenience of a heaven right there with them.
Laura Martin
Well, I do think that was a big surprise during COVID as we got a lot of extra eMobile usage because people are just on more screens all the time even at home. There are multiple screens simultaneously.
Bill Stone
Yes, and we obviously benefited from that.
Laura Martin
Yes.
Bill Stone
But as people went back to work we also benefited because we saw brands now spending more money as people were trying to go back out and spend money and shop. And so, there’s things that are working on both sides of the aisle there.
Laura Martin
Okay. So, Wall Street is all the rage about CTV and just let me give you a couple numbers and CTV as in your space. So, all of the open Internet is 30 billion in ad revenue and CTV or sorry, linear TV is 60 billion a year, so as linear TV moves, it could double the total addressable market, U.S. only numbers of the open internet like Jeff Green, who runs Trade Desk says that everything we’ve done today is a dress rehearsal for CTV. Okay, my question to you is, do you think Wall Street is over emphasizing the CTV, connected television, CTV opportunity and in a way therefore, undervaluing the opportunities still in front of us in mobile?
Bill Stone
Yes, we think about CTV is, we think it’s strategic to help our partners. So we’ve announced some deals and some relationships with some of our Korean OEM partners, and we want to continue to partner with them for integrated experiences between mobile and CTV, we think that’s important. We absolutely think there’s an opportunity in CTV, so we’re pro-CTV, but we also maybe I’ll give you some numbers on the other side of the aisle is, I think we added more devices in the last quarter than Roku has added subscribers in the history of the company. So, when we think about scale, and you think about the billions of devices that get sold every year on mobile, versus kind of the 10 to hundreds of millions that get sold on CTV, our view is the market opportunity is there, but the market opportunity is still is a little bit crowded, it’s a little bit nascent. And I like to think about this topic, maybe through the benefit of some gray hairs, is I remember back in the smartphone days back in kind of the mid-2000s are companies called Blackberry, and Palm and Symbian and Windows, obviously, Apple and Google and others. And the market was kind of crowded, and it was unclear who is going to ultimately win in the space, you kind of fast forward and obviously Apple and Google have and I think about the CTV space, and I think about companies like Roku that’s running a proprietary, proprietary operating system, Amazon, the fourth version, Android, Tizen on Samsung, WebOS on LG, and so I think about the app providers in the monetization, it just it’s probably it’s going to show itself out.
And so, that’ll happen in time. And so our view is we want to think about timing, being not too late, not too early. And I think there’s, are you betting on Palm, are you betting on Google, if you want to use a 2005. So again, we’re pro CTV, we’ve chosen to go with Android, because it leverages our infrastructure, it’s not a risky bet for us, our operator partners are already using that. So that’s a natural thing for us to do. But we’ll see how the rest of the market shakes out. But we’re pretty excited about the mobile opportunity and the TAM that we just talked about, we don’t think $369 billion is chopped liver.
Laura Martin
Okay. As promised, I’m fast passing the audience questions to the front of the line, we now have a couple. So thank you very much audience for participating. One, several recent acquisitions, how integration is going and do you see more M&A anytime soon?
Bill Stone
Yes, I think one of the things we wanted to make sure that we pointed out to investors is our history of our company has been acquiring companies, we’ve acquired a number of companies over the years, two years ago, we acquired a company called Mobile Posse. And we highlighted how when we integrated that company, we grew revenues organically 100% year-over-year and we know investors want to see a few quarters of our integration with our companies that we’ve just done. And we love our earnings coming out in a few weeks and love to talk more details specifically about that. But hopefully, we’ve established a track record of execution. And we look forward to showing investors that we’ll continue to execute on it. But from our vantage point right now, it’s going extremely well. And all the theses is and the strategic rationales of synergies, both on the revenue and the cost side that we thought we had pre acquisition. I’m more excited about today post acquisition.
Laura Martin
Fantastic, the other question I have from the audiences is the 25% to 30% revenue compound annual growth rate you highlighted organic or does it include M&A?
Bill Stone
Yes, no M&A included in our assumptions with that if we do any M&A in that timeframe that would be incremental to what we’re doing. So right now we’re just looking at this organically.
Laura Martin
Okay, fantastic. Anyone else in the audience has a question, send it off. It does take about five minutes for me to see it here on my dashboard. Let’s go to regulatory tailwinds. One of the things you said in your commentary is that you think there are regulatory tailwinds that benefit you, we had an FCC Commissioner on stage Monday, he said that basically, he doesn’t see any legislation passing that would hurt Facebook or Google’s including 230 because of the differentiation of remedies between Democrats and Republicans. So, can you actually sort of drill down into what are the regulatory tailwinds, you’re referring to that are helping APPS?
Bill Stone
Yes, absolutely. I guess the first thing I’d say is, I’d look at it, I’d encourage us to look at it beyond the U.S. So I think about the U.K. that just came out with some things, I think about the EU, I think about the regulations that came out South Korea, so I’d encourage us to take a global perspective versus just a U.S. perspective on the topic would be point number one.
And then, point number two, within the U.S. I do believe there is some bipartisan support around legislation again, I’m not going to prognosticate on what’s going to happen when, but I think anytime you have Democrats and Republicans sitting together talking about a common issue, I think that the probability of something getting done is going to be increased versus what we’re historically used to in our country. More specifically, I think that, I think we’re going to see things on a couple of fronts. Number one is, are we going to see some things around the payment space? If you think about Google and Apple take double-digit percentage of revenues today versus 1% from Visa or 3% from American Express. And is that something that how does that get remedied in the marketplace? And again like you’re seeing in South Korea, where they’re forcing that issue, specifically and is that going to open up other alternative payments, is App publishers are looking for a greater share of the economics, right?
I think that, if you go into a restaurant and you had to pay 30% to American Express to dine that that wouldn’t work, right. So I think there perhaps be some things we’ll see around that. And then secondly, I think this question around, am I buying my light bulbs from the electric company right now, and as my only choice in terms of look back to, if I wanted Netscape back in the late 90s as my browser but I had to take Internet Explorer, we’re going to see similar things right now in terms of app stores, and what gets preloaded on device tied to the operating system versus consumers, or the people that are actually buying the devices or making them having more optionality there. So yes, I think that’s probably where we’re going to see some activity. Again, I won’t prognosticate if it’s next month or next year or two years from now, but the winds are definitely I think blowing in the direction of how do we protect consumer privacy, but also give consumers choice.
Laura Martin
Okay, you talked about your new Asia-Pacific telco OEMs, that you’re and you said Asia is a really important region for you. Can you talk about if we’re sitting here a year from now, can you talk about what the risks are for the China, U.S. geopolitical rising tensions with China specifically and how that puts risk on this new sort of strategic area you said you’re focusing on?
Bill Stone
Yes, so our strategy regarding China has always been much more of a China out versus China in strategy, we don’t have, we don’t think about our business in terms of trying to get into China specifically and work inside China. I think there’s a lot of companies have tried that, it’s been really, really difficult. There’s a lot of risks, I’m sure you can point to many companies that fall into that bucket today. But to the extent we’re seeing China out we’re seeing a lot of Chinese app publishers, or we’re seeing Chinese OEMs or we’re seeing other Chinese content companies that are looking for international expansion and reach into new markets, that’s something where I think we see the opportunity for greater partnership and I think it’s going to be really difficult to see regulations coming for things that are dealing with for example, a Chinese publisher trying to expand their business in Indonesia, for example and trying to how the U.S. is going to try to play a role.
Inside China, absolutely and again, we can, there’s long conversations we can have around that. But I think as the Chinese are looking to expand, they’re reaching their distribution, they’re looking to companies like ours and many others to help them expand their reach. And for us, if we’re going to be in Asia-Pacific out here in the United States, names like Vivo, and Oppo, and Xiaomi are not necessarily household names. But if you go to many countries in Asia-Pacific, they’re absolutely household names. And so there are things that we obviously want to be partnered with.
Laura Martin
Okay. Makes sense, you’re talking about privacy issues. So specifically, since you’re predominantly Android what the impact of cookies deprecation would be on you in 2023, if Google actually deprecates cookies, we’re the Google analysts, I’m saying no, but they say yes, so let’s pretend they’re telling the truth. If we have cookies deprecation, how does that affect you? And have you had, it is I got the sense, you don’t have any iOS? So I just wanted to double check, double click on that, and ask you if you had any defaqto IDFA negative impact when they did their 14.5 or 15.1 upgrades?
Bill Stone
Yes, so first on Android, then we’ll come to iOS, on the Android side of things, there’s no concept of cookies inside applications, right. So that’s a web thing. And so the question is, is Android ID, which is kind of the proxy for cookies? Is there any risk of that getting deprecated? Our view right now is the answer is no, as if you kind of look at the changes going from kind of Android 11 to Android 12 and the potential Android 13, you’re seeing actually Google being putting more steps in the way not last, but still offering it up to customers to do it as a customer choice thing versus forcing it like Apple did in your face.
So, we see it going the other way. But let’s just say for argument’s sake, it does happen because of our software and device, we actually have our own identifiers on the device. And we can actually create our own identifiers and integrate them in with the mobile measurement partner. So we actually have belt and suspenders on that issue or that risk, if it were happening, and we don’t think it’s going to happen. But if it were to happen, because we have our technology embedded on the device that actually gives us the identifiers. And because we then therefore draft off the carrier or OEM privacy policies, not Google’s privacy policies, the operator OEM can make a decision of how they would want to implement that with the ID. So that could actually give us a big strategic advantage in the marketplace relative to where other players have, we are obviously in an IDFA world, that wasn’t the case. As far as Apple goes specifically, yes, we do have exposure to iOS, and that that’s intentional, we want to continue to grow our exposure to iOS, but the majority of our revenues 75% of those revenues today are on Android.
On the iOS side, we’ve seen on IDFA, we saw some initial impact, like others did. But I would say relative to a Snap, for example, nothing in that Zip code, or that it was very much around the edges for us. But at the end of the day, we know consumer eyeballs are on iPhones, we therefore know that advertiser budgets have to go to those eyeballs because that’s where they’re at. And they may have to adjust the return on ad spend goals and objectives. But the budgets are returning on to iOS. And I think that what we’re seeing on that front is probably pretty similar to what other companies are, but we just don’t have the same amount of exposure to it, given our Android focus.
Laura Martin
Fantastic, we have like three minutes left. So I’m just going to ask you if something goes wrong, like we’re sitting here a year from now, and it all went to hell? What went wrong?
Bill Stone
Yes, usually when investors ask that question to me, they’re thinking about existential things, right? We’re thinking about Google, we’re thinking about IDFA. We’re thinking about regulations and those types of things but that’s not keeping me up at night. What keeps me up at night is are we executing and did we control, we can control do we get it done, and we’ve shown a great track record of execution, we now are a much larger company, we’ve got to be able to show we can execute a scale right now. And so, our major focus right now is, just bringing the lunch pails to work and executing it I think about if something didn’t go right or didn’t go, right. So it’s what did we do to get to the opportunity because I don’t see any scenario where the TAM changes. I don’t see any scenario where the secular tailwinds of our lives been in mobile and how we interact with things. I don’t see anything that that changes. It’s just going to be Digital Turbine specifically execute to get after this enormous opportunity or did enough. And if we did, we’re going to be widely successful. And we’ve shown a password been able to do that. If we didn’t, then we screwed it up. And so that to me is really where our focus is.
Laura Martin
Okay, sounds great. We’re right on time. So, I’m going to call it there. Thank you so much for being with us, Bill. I really appreciate your time. And thank you to the audience. We still have 200 people watching you. So thank you very much for your questions that you’ve asked and for listening to the whole presentation. And thanks for coming to the Needham Growth Conference.
Bill Stone
Yes, thanks a lot, Laura, for taking the time.
Laura Martin
Thank you.
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