Demand Media's Management Presents at Barclays Internet Connect Conference (Transcript)

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Demand Media (DMD)

March 06, 2013 1:35 pm ET


Mel Tang - Chief Financial Officer


Kevin Allen - Barclays Capital, Research Division

Kevin Allen - Barclays Capital, Research Division

All right. We're going to go ahead and get started. It's my pleasure to introduce the Demand Media team. This is Mel Tang, CFO.

Mel Tang

Thanks, Kevin. It's good to see everyone today. Quick legal disclaimer before I get into the presentation. Today, I'll be making forward-looking statements during the presentation, so please refer to our SEC filings for risk factors associated with these statements.

For those of you new to the story, or a quick refresher, who is Demand Media? Demand Media is a leading digital media company. We operate 2 businesses. The first, a Content & Media business where we've devolved a very unique approach to content creation that has attracted and engaged a massive audience across our owned and operated and network properties. Our second business is our Registrar business where we're the largest wholesale registrar in the world, and we offer domain registration and other web-related services to both consumers and small businesses.

A few investment highlights to keep in mind as I go through this presentation. First, on the Content & Media business, we think we built a very unique content platform that helps us understand what consumers are looking for. We have a scalable way to create high-quality content with economics that work on the Internet. And we have a massive audience, again, through our owned and operated and network partners. This platform is positioning us to really diversify beyond kind of an ad-supported model and diversify into new areas of distribution, new geographies, new formats as well as new revenue models. The nature of this business is such that it generates good ongoing cash flow and margins that we can use to reinvest in long-term growth opportunities.

On the Registrar side, we have built again the largest wholesale registrar platform in the world. We're the second largest overall registrar in the world. And what this has done is, over the past year, is allowed us to position ourselves to be a leading registry. I'll talk a little bit about this later in this new gTLD initiative. But we're one of the leading applicants for the slate of new GLT -- gTLDs set to hit the market later this year.

What this will do is take our Registrar and our registry business and provide one of the largest end-to-end solutions in the domain services business.

So first, a little bit about our Content & Media business. So what makes us different? What makes our platform different than everybody else out there? Well, I kind of boiled it down to 3 things: listen, create and connect. So we listen, we understand what consumers are looking for. We've developed a scalable platform to develop high-quality content using experts integrated into that process. And we then connect consumers to that content in a meaningful and relevant way. But because of the nature of that content, we also connect advertisers to those consumers in an intent-driven way. So this concept of listening, creating and connecting is important not so much at each step in terms of the uniqueness of what we've done there, but also the order. Unlike traditional media companies, we understand what consumers are looking for before we create a unit of content. And I think that's important because prior to expending any capital in publishing or creating a unit of content, we have a good sense of what consumers are interested in, but also importantly, what advertisers might be advertising against it. So in that way, we have a predictive model for content creation, which, I think, is unique in the industry.

So let me get into the listen, create and connect a little bit more. The listen part of it is really aggregating all the billions of signals that consumers give us in terms of insights and what they're looking for. So think about the last time you did a search on Google or another search engine. Chances are you typed in a very specific detailed query. And more importantly, your expectation was that you were going to get a very specific answer to that exact query. So while search is a very important part of it, we also get insights from where you search on our platform, the types of articles or videos you view, what you share with your friends, the videos you watch, what you tweet, et cetera. So we aggregate all these signals that help us understand consumer demand for certain topics, et cetera. We filter using algorithms of technology to the topics that, we think, are long lived. So we stay away from news topics, stay away from celebrity gossip and really focus on more long-lived practical articles.

On the flip side of that, what we also do is marry those topics against modernization opportunities. So we collect data on bid prices, on keywords, what advertisers are looking for, et cetera. So at the end of it, what you end up with is a series of topics and titles that both have consumer as well as advertiser demand, all this before we put pen to paper to use upon.

Once we have those topics, those topics are then on-boarded to our virtual studio, what we call Demand Studios. Demand Studios takes the best of traditional media best practices. So we have a number of ex-newspaper, ex-magazine editors on -- in-house that helped us develop this platform. And it goes through 14 steps that can be found in most newsrooms, everything from copyediting to plagiarism check and that's done in a virtual fashion. So we've created these processes online, so we've taken the best of technology, but we made sure to also integrate expert advice and expert participation into the relevant steps.

So the green boxes on this slide represent where there needs to be an additional qualification for an expert to be able to contribute, meaning if the title is about a legal topic, the person who's working on that title or that piece of content needs to have additional legal background qualifications, an ex-law school professor, a retired lawyer, things like that.

So what this content, at the end of the day, does is marry the best of technology with the best of human capital and human intellect to create what we think is a scalable, automated process that creates high-quality content with economics that work on the Internet.

This platform is diverse in that it is not only short-form how-to content, but over the past few years we've the developed the capabilities to expand into other formats such as slide shows, short-form video, long-form broadcast quality video, feature articles, blogs. And so we'll be looking to continue to refine and expand the capabilities of this content platform.

So what, at the end of the day, is the output from our content identification process? It's listening, as well as the creation. It's what we call Content For Real Life. Content that is practical, it's actionable, it's relevant to consumers on a day-to-day basis.

This slide here is an example, a dinner party. So there are a number of aspects to planning a good dinner party. I've highlighted a couple of articles that you could find in our library, just one of millions that relate to you successfully throwing a dinner party, for example. Everything from how to make a Nicoise salad, to how to cook a chicken, to how to open a bottle of wine without a corkscrew, even how to get Kool-Aid out of a white carpet if you have kids coming to this party.

So it cost us $130 to produce these 5 articles. To date, they've been be viewed over 2 million times and we made $50,000 so far against that $130 cost. So that's the power of our model where we have predictive technology that identifies topics that consumers and both advertisers are looking for and we're able to create that content with good probable economic benefit.

How does this content get consumed or reach to consumers? Both on our owned and operated sites, sites like eHow, LIVESTRONG. We have Mobile, mobile-optimized sites for all of our websites where you go to eHow on your mobile phone and the format is such that it's easy to read on a smaller screen, bigger font sizes, bigger buttons, et cetera. We have a number of YouTube channels. You can go to YouTube and search for eHow, LIVESTRONG and there's a number of channels there where you can view how-to videos. Even social, people share, Facebook, Twitter, all that's integrated into our content. And we've also had this feature on eHow where we call it eHow Spark. It's similar to a Pinterest for projects.

And then also we're diversifying to third party, what we call, Content Channel. So essentially, white labeling our content to partners and brands such as National Geographic, USA TODAY and LegalZoom.

So through all these means, we connect to massive audience. Just last month, we reached 125 million uniques. That's 1 in 3 Americans, last month, coming to 1 of our sites. We've grown our page views almost 30% last year. And again, we diversify how we're reaching these folks. At the end of 2011, most of our content was going to our owned and operated sites. Late last year, a majority of our content was going to our third-party partners. So as we look to expand this audience, we're doing it both on our owned and operated sites as well extending our reach to other publishers and brands.

But beyond the overall reach, we also have leadership in key categories. We are a top 5 comScore rank in 8 categories. Among these, home and garden, we're the largest; personal finance, we're #2 behind PayPal, so if you think about it, we are really the largest content finance leader in that category; health, we're #3; and so on and so forth. Overall, we're the 13th largest web property online, up from 38 just a few years ago. And so this is all built upon the back of this content platform again that allows us to understand what people are looking for and create content to match that demand.

What's great about the audience that we attract is that they're very intent driven. And so unlike a casual browser or the morning news or someone is looking at a Facebook feed about their friend's vacation photos, by the time someone comes to one of our articles, they are in the frame of mind to be responsive to an ad. For example, if I'm busy trying to fix a leaky faucet and I see a Home Depot ad, I am in the right frame of mind to act on that Home Depot ad or have that association with the home improvement project that I'm working on.

And the way that we attack or the way that we make this approachable to advertisers is 3-pronged: The first is we partner with performance networks like Google AdSense where we yield very good conversions on a CPC basis. We also have a direct sales force that goes out and directly markets higher CPM impression-based ad campaigns. And then finally, we also integrate a number of ad exchanges to monetize what's left basically, the remnant display network.

So we think this 3-pronged approach is different and unique in that it puts all of these in competition for each other such that at any point in time on our sites, our ad units will be yield optimized, will have the right advertiser being shown to the right consumer at the right time.

And so I want to come back to this content platform a little before I go on. So we don't think anyone else out there in the digital landscape has all the components that we do. There might be folks that have 1 or 2 of these in their platform, but we don't think there's anybody else out there operating these components at the scale that we're doing. And again, these components are proprietary technology and algorithms to understand what people are looking for, a very unique way to create this content in a high-quality fashion with the scale and economics necessary to be successful online. We have a massive audience reach through our owned and operated sites and distributed to our third parties; diverse monetization capabilities by utilizing both direct sales force as well as automated and yield optimized monetization exchanges; and we're very good at making sure that our content is surfaced by the right search engines and making sure that consumers can discover our content very easily wherever they may be, on desktop, mobile, et cetera. So I think it's this platform that we built over the past 6 years that allows us to really go after some of the long-term opportunities that we see in the marketplace.

So let me talk a little bit about what's going to drive growth going forward. This platform certainly is something that we spent the last 12 to 18 months retooling. We are prepared -- we anticipate doubling our content investment this year relative to last year. And so that'll mean that you'll see more content going into eHow, LIVESTRONG, but especially expanding this network partnership with Content partners.

So the Content partners is a small business we started just over 2 years ago. Again, this is a white label distribution of content to leading brands and publishers. It's a business that's doubling year-over-year and something that we look to continue that trend.

Mobile is something that is a big opportunity for us. Over 25% of our traffic to our top sites is coming from Mobile. We think that our content platform extends the Mobile not just because it's already pretty well optimized for Mobile, meaning it's short, it's actionable, it's something that doesn't take a lot of reformatting for the small screen. But the opportunity is to create mobile-centric content, so something that is more touch-based, something that is more interactive, something that leverages all the information on that smartphone device.

Our platform, we think, also can extend into other international geographies pretty easily. We are in Latin America. We have 2 sites addressing the Latin American market: eHow en Español; eHow Brazil, which we launched late last year. We are in the U.K. We just launched eHow Germany. And we're looking to launch in new geographies in the coming quarters.

What's great about our platform is that we can launch in these geographies without having to ramp up a big sales office, a big engineering effort. I have a library of millions of units of content that a subset is very easily translatable and localized for that specific market. So I can deploy content, I can build a website pretty easily leveraging the best practices that we have and get into a market to start to get market share, get data very, very cost effectively.

And finally, diversifying our content away from ad supported. So virtually all of our content right now is free, it's ad supported. But we have both the content creation capabilities, as well as the organic traffic for which to upsell e-Learning-type products or on-demand real time chats with experts. So if you think about people coming to eHow, for example, on eHow auto section right now, we have launched a beta test where if you don't find the exact answer that you need, we can connect you with one of our experts for a cost of, I think, we're running a beta of $20 or $25. So really, upselling people to getting better answers than what might be available for free and in a way that leverages both our content creation capabilities, as well as all the organic that we naturally get.

On LIVESTRONG, we're launching a subscription workout plan. We've hired some folks that worked on the workout plan, P90X, if you're familiar with that. They are working with our content studio to develop a high-end workout plan that's integrated with the other features of LIVESTRONG and that'll be launching in the coming months.

So we're very excited about the opportunity for us to really monetize content in a way that's different than advertising.

So switching gears a little bit to the Registrar. Quick overview on the landscape, if you're not too familiar. ICANN is the nongovernmental body that regulates the rights to what are known as top-level domains or TLDs. TLDs are the string of characters after the dot in a domain name, so dot com, dot info, dot pro. The owners of these rights are what's known as registries. VeriSign is the largest example of this. They own the rights to dot com among a few others. The registries can't sell directly to the consumer. So they go through what are called registrars. Registrars come in 2 flavors: the first is a B2C. The biggest one there is Go Daddy. These are known as retail registrars. They sell directly to the consumer. We're the largest wholesale registrar of B2B, eNom. Our customers tend to be resellers, folks that are web design firms, web hosting firms, even people like Google who offer the ability to register a domain. So we recently acquired a smaller but well-known retail registrar called, and we'll be looking to expand into that retail registrar segment more.

Again, Demand Media, currently today, is the largest wholesale registrar worldwide. We're the second largest behind Go Daddy, overall. We have over 15 million names under management, which includes the 1.5 million that came over with Name, which we acquired at the end of last year. And this is a business that, if you look back over time, has been a steady Eddie subscription-based recurring revenue business.

But what's exciting about what's happening in this domain industry and where our platform is well positioned to go into is that ICANN last year accepted applications to over 1,000 new general top-level domains. So up until now, there's been 22 generic top-level domains that you can register a domain under: dot com, dot info, dot net. And in the coming quarters, you'll be able to register domain names with dot web, dot home, dot green. And we think this really changes the landscape in which the Internet is based upon.

The real estate will become much more diversified. Consumers will have more choice on the types of names that they can register. I don't know when the last time you tried to register a domain, but chances are just about everything you can think of has been registered in a dot com. So now, consumers will be able to register these same names with different strings: dot green, dot engineer, dot lawyer. We think businesses will be able to better brand themselves. If you're a something dot green, chances are maybe you're eco related. And it will also help consumers better understand what the website is before they go there. Right now, what you're seeing is a lot of names that are made up words simply because the typical string that they would use is gone. So consumers don't have a good sense of what these domains contain until they go there. We think that with new TLDs, that could greatly increase discovery by consumers, improve clarity about where they're going.

So how do we expect to benefit from this advent in the Internet that's slated to launch later this year? So it's 3 ways. The first is, just by nature of being the second largest registrar, we will see increased volumes go through the purchase path as these new TLDs get adopted by both businesses and consumers.

Secondly, because of our technical know-how on the Registrar, we built a registry back end that will license to other applications. A lot of these other applicants are marketing services firms. They don't want to necessarily deal with the hassle of running the technical back end. So we'll provide that service to them for a fee.

Then, finally, and I think the most exciting, is that we're one of the leading applicants for these new gTLDs. We've applied for 26 of our own accounts, and we have rights participating in another 107 through a partnership with another large applicant. And what we think this does is it allows us to better market domains on our own accounts and it changes the margin and growth profile of our existing Registrar business. Right now, the B2B registrar, it's a high-volume, low-margin business. We register a domain for $10. We remit $8 and change back to ICANN and VeriSign. If, for example, we become the registrant for engineer -- or the registry for engineer, we charge $10. We remit to ICANN somewhere in the neighborhood of $0.50 and we keep the $9.50 as gross margin. So that could completely change the way that, that business looks from a growth and margin profile.

The expected time line of that I'm showing here really depends on how closely ICANN makes sure that they hit their milestones and time lines. But based on our best information, what we should expect to start seeing is post the Beijing ICANN, somewhere in the time frame of Q2, Q3, you'll start to see these gTLDs hit the marketplace. And once it gets ramped up, there should be roughly around, I think, 100 a month hitting the marketplace. Our distribution across this is roughly kind of 5 a quarter on the 26 that we've applied for ourselves.

So we're very excited about this time line. I mentioned on the earnings call that we think that while it's difficult to put exact range on what revenues will look like, we do think that we'll get a couple of million dollars of cash flow later this year, which will grow $5 million to $10 million next, next year.

So if you think about what we have on the Registrar side and what we will have on the registry side, we think we're going to have the largest complete end-to-end solution for the life cycle of a domain. So say I come up with an idea. I call it the next big thing. I'll be able to go to eNom or go to Name and identify that next big thing dot green or maybe it's dot engineer or what have you. So right now, if I go is probably taken, I'll have to come up with something else or a more unknown -- less well-known or something along those lines. But in the coming quarters, I'll be able to choose from a lot more TLDs to better brand that next big thing.

Through and through additional products and services that we plan to launch through that channel, we'll enable someone to build a web presence, e-commerce, web hosting, things like that. And let's just say the business doesn't work out and I need to sell the domain name, we actually run the largest auction platform. It's a JV with It's an entity called NameJet where I'll be able to sell my to the next entrepreneur who has that idea. So we'll be able to service at every stage of a domain life cycle through our Registrar and registry platforms. So we're very excited about this opportunity.

On our earnings call, we announced that we're evaluating a plan to separate the businesses. And so this makes sense if you step back and think about what I just mentioned about the growth profile and the different capital characteristics of the media business relative to the TLD business. And so as the TLD business starts to really rubber meeting the road here of new TLDs getting launched, that was the catalyst for us to really look at separating these businesses. They have different growth opportunities and priorities, different capital requirements and we think that by separating the businesses into a pure-play media company and a pure-play domain services company, it will allow for better capital raising and better align investors with each of these unique opportunities. So that's something that we're working on this year we expect to compete in the next 9 to 12 months.

Finally, let me cover some financial highlights. We try to simplify how we make money, volume, price metrics. On the Content & Media side, which is a little over 2/3 of our business today, higher-margin, faster growing, the volumetric is page views, the pricing is RPMs or revenue per thousand page views.

On the Registrar side, which is again a subscription-based model, it's about 1/3 of our business today. The volumetric is end-of-period domains and ARPD or annual revenue per domain is the volume -- is the price metric.

I wanted to come back to something that's very unique about our content relative to traditional media. So if you think about a movie like Argo, which even with the Oscar bump, actually has made 60% of its lifetime domestic gross to date in the first 4 weekends. Conversely, our content takes a little while to season. So 6 months a year it gets indexed by the search engines, discovered by consumers who link to it and then it moves up in the search engines. So our content actually asymptotes the other way where it has a fast rate of growth up in the initial period of its life cycle. And then after that, it's on a normalized growth basis versus traditional media where the bulk of the revenues are front loaded.

Our revenue growth over the past few years has been driven by acceleration in Content & Media. The Content & Media business grew in 2012 into high teens. It exited the year at north of 20%. And this is what's kind of driving our growth as our Registrar business kind of reverts back to normalized levels in the high single digits for next year.

The faster Content & Media growth has driven our EBITDA growth, as well as margin expansion. We exited the year generating just over 30% EBITDA margins and so it's this unique business model where content that we put in the ground continues to generate ongoing cash flows and revenue growth. And we feel very good about reinvesting that into the business in the long-term opportunities that we see going forward.

So some of the key investments that I highlighted on our call for 2013. First, on the CapEx side. We'll more than double our investment in content spend this year. Last year, it was around $10 million. So this year, it will be around $20 million-plus. We are moving headquarters so there'll be build-out associated with getting people under the same roof. That'll be about $10 million onetime this year, mostly in the first half of this year. And then we're very committed to be aggressive yet disciplined on going after the new gTLDs. There's a number of gTLDs where we are competing with other folks on. The way that they're going to determine who owns the rights to those TLDs is going to be via auction. So we've done very detailed bottoms-up models, cash flow models in terms of what we think these TLDs are worth. And so we're going to go into these auctions ready to be aggressive but disciplined and sticking by what we think they're worth.

On the OpEx side, we're reinvesting some of that margin back into our people, things like 401(k) matching, training, better recruiting presence.

On the content side, I mentioned diversifying into commerce content or paid content, e-Learning-type opportunities. We're going to be investing 1% to 2% of our Rev ex-TAC back to building the subscriptions, investing in the content to really go after this opportunity.

And then finally, there is some ramp-up required on our core Registrar side to get ready for new TLDs. So never mind our own registry initiative, the core Registrar will need to ramp up just to be prepared for the new gTLDs coming down the pipe that will be done by other parties.

So we're very excited about the fact that our platform allows us to generate good cash flow, good margins that we can reinvest in long-term growth opportunities.

This leads to our full year outlook and for Q1 at the midpoint on the year. $414 million of revenue; year-over-year growth, 15%, which is comprised of high teens growth on the Content & Media side with high single-digit growth on the Registrar side; adjusted EBITDA, it's still in the high 20s in terms of margins; again, we're reinvesting some of that margin back into long-term growth opportunities.

So let me just summarize with the kind of investment highlights that I started with, which is on the Content & Media side, we built this very unique platform that helps us understand what people are looking for, create it in a very high quality and scalable manner and take that platform and really diversify it into new revenue, geographies and formats. The substantial cash flow generation of this business is what allows us to self-fund a lot of these initiatives.

On the Registrar side, as the second largest Registrar, we'll stand to benefit from the new gTLD initiative. And with our leading position as a new registry heading into this, we think that we'll be one of the largest end-to-end solution providers in this domain services business.

So with that, I'll open it up to questions.

Question-and-Answer Session

Kevin Allen - Barclays Capital, Research Division

Thanks, Mel. I guess, to start off, the new sort of paid content opportunities are pretty interesting. So can you talk a little bit maybe more about the sort of the potential opportunity there, the size of the potential -- the TAM [ph], that kind of stuff or is it still kind of too early to tell? And then I have a follow-up after that.

Mel Tang

Okay. I think the best things that I can point to is if you look at the e-Learning space, there are established companies out there that have developed very sizable presence and business lines around e-Learning. is one of the better examples. They're based in Santa Barbara. They're mostly focused on training for tech, basically. And my understanding, and I could be wrong here, but my understanding is that they're around $100 million of revenue. So we think that the e-Learning space is not just in the tech space, but there is a number of e-Learning companies across different verticals that we think make a lot of sense to replicate and go after given the large organic traffic coming to eHow. And then on other paid content initiatives, such as this eHow Now that I talked about, the real time connection to the expert, there's a company out there that I can point to. They're called or JustAnswers before they changed their name. And that's another business doing very well connecting people in real time fashion to experts.

Kevin Allen - Barclays Capital, Research Division

And I guess, the follow-up is, I think, historically, you've kind of talked about potentially leveraging sort of your existing video capabilities across some of your partner network. Is that still a viable opportunity for you? Or is new paid content really going to be the focus for your videos or capabilities going forward?

Mel Tang

Sure. I think video will continue to produce video as it helps to augment kind of the content offering that we have both on our own sites as well as our partner sites. But the focus on video, we believe, is less from the volume stream ad-supported model but more towards e-Learning and paid content. So we're going to take everything that we learned in producing video for the YouTube channels deals, that broadcast quality content and really focus it on paid content opportunities.

Unknown Analyst

Going here. I guess, I'd like the way that you've kind of described the Registrar business as being sort of like the historically the steady Eddie and so I think it's been there sort of to support the Content business [indiscernible] any sort of potential business disruptions. And I'm thinking longer term, historically, things like the Google Ads will change back in the first half of 2011. So the question is, is that a risk from a potential spin? And do you think that you have all sort of the pieces in place that would make that less of an issue going forward? And things like, for example, your engineering teams obviously now are very, very adept at sort of responding to Google changes. You've diversified away from just purely ad supported-type -- purely an ad supported-type model. And if not, I guess then should we also anticipate potentially some sort of small, strategic M&A tuck-in acquisitions as you get ready for that spin?

Mel Tang

Sure. So I think just if you look at the performance of the Content & Media business through the course of last year, post-Panda, I think our ability to really produce good quality product and weather the many changes that happened on Google really kind of speak for itself. I think the diversity of the Registrar was helpful. But for both businesses, I think it helps us open the opportunity for those management teams to really kind of focus on their individual strategic priorities and make sure they're making the right decisions without thinking about the trade-off for either business. M&A is something that we continually look at. The landscape is full of companies that are interesting. I think the question is just finding the right asset at the right price. And I think we're actively looking on a constant basis.

Unknown Analyst

What are sort of the key areas of focus for you? Feel free to add details as you're...

Mel Tang

Yes, so on the Content & Media side, clearly, we'll be looking for folks that have started and have proven some success in paid content. So e-Learning, things along the nature that help us diversify our content strategy. On the Registrar side, there already is sort of the consolidation happening in that space, so web hosting firms, web design firms, I think things that would help us augment that retail offering that we have, but also to expand our distribution footprint. So we'll be looking for companies that do that on the Registrar side for us.

Kevin Allen - Barclays Capital, Research Division

So I guess then maybe just switching over to the Registrar business as well. The sort of obviously diversified into more sort of a retail focus for you. What portion of that business do you expect to be retail going forward, or maybe said another way, maybe actually more importantly longer term to reflect your target model?

Mel Tang

Sure. So, while it's retail focused, is -- has relatively low upsells. What they really focus on is providing the best customer service for people to register their domain names. And the reason why we acquired them is that it allowed us direct control to be able to feature kind of the TLDs that we'll own the rights to, et cetera, directly. So the acquisition was more for footprint. That being said, I think it offers a lot of opportunity for us to really start to push that retail game. Now clearly, we have to differentiate from the 800-pound gorilla that is Go Daddy out there. Going head-to-head against them would probably not be the wisest thing. But has carved out a very good niche for itself in that segment despite Go Daddy's efforts. And it's done that on the back of customer service, et cetera. So they have a very loyal customer base. If you do a search on their reviews, people love them because they're a little bit quirky. They're passionate about customer service. And so we'll be looking to expand that to the extent it makes sense.

Kevin Allen - Barclays Capital, Research Division

Great. And then my last one then is just on Mobile monetization. Uniquely, it's been sort of improving for you pretty meaningfully. So can you talk a little bit about that, what's driving that? And then maybe sort of like a follow-up, what does your guidance kind of assume for Mobile monetization going forward?

Mel Tang

So Mobile, again, has been awesome for us. From a monetization standpoint, it was, a year ago, 10% of desktop. Now, it's closer to 50%. I think a lot of that has to do with us better understanding kind of how to optimize, where to put the ads, what kind of ads to put in there. But there's also the marketplace as well. ADTECH is getting a lot smarter about how to monetize on that device. You have advertisers and marketers moving campaign dollars into that space, which will help obviously increase the rates there. So we feel very confident that, that trend will continue simply because of the amazing adoption of Mobile relative to any other technology device in the history of man, I think. So we feel very confident that monetization will hopefully converge relatively quickly there. And what was the second part of your question?

Kevin Allen - Barclays Capital, Research Division

What does your guidance kind of assume for continued -- does it basically assume Mobile will...

Mel Tang

I think it assumes a modest increase in that RPM. But hopefully, it's something that we'll -- you can see a lot of good traction on.

Kevin Allen - Barclays Capital, Research Division

Great, thanks. That does if for me.

Mel Tang

Great. Thanks, everyone.

Kevin Allen - Barclays Capital, Research Division

All right. Thanks a lot, Mel.

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