Viant Technology Inc

NASDAQ:DSP

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Hello everyone, and welcome to Viant Technology's Second Quarter 2024 Earnings Conference Call. My name is Annabeth, and I will be your operator today. Before I hand the call over to the Viant leadership team, I'd like to go over just a few housekeeping notes for the program. As a reminder, this call is being recorded. [Operator Instructions]

Thank you for your attendance today, and I will now turn the call over to Nicole Kunzman from The Blueshirt Group.

[Nicole Borsje]

Thank you, Annabeth. Good afternoon and welcome to Viant Technology's Second Quarter 2024 Earnings Conference Call. On the call today are Tim Vanderhook, Co-Founder and Chief Executive Officer; Chris Vanderhook, Co-Founder and Chief Operating Officer; and Larry Madden, Chief Financial Officer.

I'd like to remind you that we will make forward-looking statements on our call today, including, but not limited to, our guidance for Q3 2024, our platform development initiatives and industry trends that are based on assumptions and subject to future events, risks, and uncertainties that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of today, and we undertake no obligation to update or revise these statements, except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements and our entire Safe Harbor statement, please refer to the news release issued today as well as the risks and uncertainties described in our quarterly report on Form 10-Q for the quarter ended June 30, 2024, under the heading Risk Factors and in our filings with the SEC.

During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, are included in the news release issued today and in our earnings presentation, which have been posted on the Investor Relations page of the company's website and in our filings with the SEC.

I would now like to turn the call over to Tim Vanderhook, Chief Executive Officer of Viant. Tim?

[Tim Vanderhook, executive]

Thanks, Nicole, and thanks everyone for joining us today. We saw continued momentum in the second quarter with record advertiser spend on our platform, a notable milestone that exceeded our seasonally strong Q4 of 2023. Revenue in Q2 grew 15% year-over-year, while contribution ex-TAC grew 23%. Our ongoing focus on improving efficiency and disciplined expense management continues to drive outperformance in adjusted EBITDA, which increased 41% year-over-year to $9.6 million in the quarter. I am pleased with our team's ongoing commitment to innovation and execution, which drove our consistency and strong results. We remain laser-focused on building on our differentiated position as 1 of only a couple independent, self-service, buy-side platforms in the market.

As advertisers look for alternatives to the largest legacy players in the industry, Viant is capitalizing on the shifting sentiment and committed to growing our market share across the programmatic advertising market. Discussions across the ecosystem, such as the Department of Justice's antitrust lawsuit against Google, demonstrate that advertisers are unhappy with the dominating behavior of a handful of players in the industry. Many ad-tech partners are frustrated with the centralized power exerted over the ecosystem.

Our ability to capitalize on this changing sentiment is reflected in our results and the growing number of partnerships and integrations we are building. Major content owners, data companies, agencies, and advertisers are coming to us for an alternative solution to the largest DSPs in the market. We believe we are uniquely positioned to capitalize on this changing sentiment.

A key area of differentiation for us is our vision for autonomous advertising, supported by our award-winning and ever-evolving suite of AI products and features. Today, I am thrilled to announce a significant milestone in our journey. Given the amount of AI-related initiatives in development, we are ready to properly brand our AI suite, so today we are announcing the rebranding of our AI suite under the name ViantAI. ViantAI is designed to revolutionize digital ad campaigns by seamlessly crafting high-impact, multichannel ad experiences that reach the right audience at the right time with precision. We are rebranding our suite of AI products. Previously announced as Bid Optimizer, Chat with Data, and AI Recommendations under ViantAI.

ViantAI is focused on developing AI agents that deliver automation for the 4 key components of programmatic advertising: planning, buying, measurement, and optimization. Under planning, our latest innovation is a large language model, or LLM. Already launched internally, it delivers comprehensive omnichannel media plans in seconds. This LLM has been heavily trained on thousands of ad campaigns, encompassing years' worth of historical ad spend, enabling us to create high-impact media plans that are designed to achieve the goals of any advertiser. This includes selecting high-quality CTV apps, mobile apps, websites, and digital out-of-home locations. It makes recommendations of campaign budgets across channels like display, CTV, streaming audio, and digital out-of-home. We are showcasing this to clients now and are receiving tremendous feedback.

Under buying, we released version 2 of our Bid Optimizer in Q2. The improvements achieved with version 2 are substantial, and Chris will talk more about this in a bit. For measurement, we previously announced Chat with Data, which is continuing to be tested internally with live customer data. We have made great strides and expect this product to be out in Q4. Our final phase towards full autonomy is the application of Autonomous Optimization, which we expect to release in 2025. This will be an AI-driven agent that dynamically adjusts campaigns in real-time, employing advanced ad strategies like channel allocation, publisher selection, dayparting, and audience discovery.

Investing in ViantAI is investing in the future of advertising. We are excited about the transformative impact that will have, and we'll look forward to sharing more updates as we progress. Our vision is resonating with customers who are continuing to scale with us, as evidenced by the expansion we are seeing with our largest customer cohort, our top 100 customers, where we have grown contribution ex-TAC 29% on a trailing 12-month basis.

We are scaling well with our agency partners and continue to add new advertisers within these agencies, which we believe is a testament to the superior service and results we are driving for them. We expect to continue to capitalize on the market tailwinds in our favor and drive more spend from existing customers. We also have had great success this year attracting new customers to our platform, which Larry will talk more about shortly.

Our pipeline of large customers continues to grow, and we feel very good about our ability to win more of these advertisers over the long term. Our success with customers is also driven by our focus and investments into the fastest-growing channels in programmatic, notably CTV and streaming audio. We continue to see particularly strong momentum in these channels, with both reaching record spend levels in the quarter. The growth in CTV spend on our platform continues to outpace the market, growing more than 40% year-over-year in the quarter, while streaming audio almost doubled year-over-year. Together, these channels represented more than 50% of spend on our platform in the quarter. We expect them to continue to see outsized growth relative to other programmatic channels as they provide access to some of the most premium content in the market at scale, while also allowing for advanced targeting and measurement capabilities despite the absence of cookies.

We are continuing to make investments in our Direct Access program, which gives our customers more seamless access to these channels, and Chris will touch on this in a bit more. In addition, our patented Household ID technology continues to be a differentiator for us in the market, enabling customers to plan, buy, and measure campaigns across all channels, regardless of the presence of cookies.

Before turning things over to Chris, I wanted to share some thoughts on Google's recent announcement to reverse course on cookie deprecation. We touched on this briefly last quarter, but this news doesn't change our overall vision of making programmatic advertising easier, more efficient, and more effective for our customers with leading measurement and targeting capabilities across all ad formats. CTV is a core driving force across the ad industry as a whole, beyond even linear TV and social channels, and the only way to plan, execute, and measure omnichannel campaigns to include CTV is with alternative identifiers such as our Household ID. As we noted last quarter, less than 10% of spend across our platform leverages third-party cookies, and we see this number continuing to shrink over time given the industry's increasing focus on cookie-free channels like CTV.

If anything, we believe this announcement from Google is helpful for the industry as it eliminates the uncertainty overhang that has been complicating the landscape for the last few years. Our long-term strategy and focus remain unchanged, and we look forward to continuing to drive growth and capture share in this very large and growing market for programmatic advertising.

With that, I'll turn it over to Chris.

[Chris Vanderhook, executive]

Thanks, Tim. I want to spend a few minutes today on our recent product updates and dig deeper on some of the positive business dynamics that we are seeing. We were excited to officially roll out Bid Optimizer 2.0 in June, which is driving significant savings over what we saw in version 1.0. As a reminder, Bid Optimizer is an AI-agent bidding solution which enables marketers to achieve better bid price discovery, real-time data processing, and predictive ad performance, saving customers time and money by achieving lower CPMs and driving higher return on ad spend. Our upgraded solution is powered by a deep learning neural network trained on Viant's entire bid stream and is capable of processing millions of requests per second. Bid Optimizer also now running on over 65% of the impressions on our platform, up from 50% under version 1.0, which notably expands the number of impressions and potential cost savings that we can pass along to our customers.

A powerful example of customer savings with Bid Optimizer has been Juice Media, who began using the product in Q3 2023. They shared that they have seen significant savings in media costs, and for one client in particular, they tripled their performance with the help of Bid Optimizer. This feedback shows that our customers are benefiting from the cost savings and better performance, which has driven more spend to our platform since its rollout. We're excited about the early adoption we are seeing, and we expect to continue to build on Bid Optimizer 2.0 to drive incremental savings for our customers.

Next, we are seeing continuing increased demand for our advanced reporting solutions, which are becoming a meaningful driver of contribution ex-TAC. These solutions provide advertisers with closed-loop return on ad spend, as well as lift and incrementality reporting, integrating both online and offline activity, which is becoming increasingly important for customers.

We have seen that marketers are willing to pay for advanced reporting because they are losing signal in certain channels and are having a hard time figuring out what is really driving campaign performance. Within walled gardens, advertisers get data on attribution and last-click behavior, but clients are getting smarter and are really looking for reliable data that shows what's driving incremental contribution or incremental sales. Customers value the capabilities and completeness of the advanced reporting solutions we offer, and we expect these products will continue to drive revenue and contribution ex-TAC in the coming quarters.

Another dynamic at play in the industry is the acceleration of streaming and the growing dissatisfaction with walled gardens, which is driving more dollars to CTV. Analytics prove out that CTV drives incremental impact and outcomes, where the walled gardens merely show ads to people who are already going to make a purchase. This is why so many consumers continue to see ads for products and companies that they already buy from.

The data is clear that CTV is the most impactful channel for creating new demand. We show clients all the time that if you want to grow your revenue, allocate more dollars to CTV. Our Direct Access offering in CTV is a significant differentiator for us and a major reason why advertisers are increasingly choosing the Viant DSP. There are a number of benefits of Direct Access that are driving customer adoption. The first is that we are targeting logged-in users of premium CTV content owners, which enables the same addressability as walled gardens.

Second is that we are bringing the world's most premium content directly to advertisers and eliminating nonvalue-added middlemen. This lowers the price of premium CTV in our platform because clients know they are buying directly from the source. The quality and scale of the content partners who have joined Direct Access is an incredible list that now includes Disney, Paramount, Warner Bros. Discovery, NBCUniversal, Roku, Samsung, VIZIO, and many other premium content owners and platforms. Advertisers today much prefer structuring campaigns around premium publisher content over user-generated content on social channels.

And third, we are experiencing a new paradigm with the accelerating rise of streaming and the growing dissatisfaction with the walled gardens, with the larger players trying to set the rules for ad tech. As we continue to scale our Direct Access program, we provide improved addressability and industry-leading measurement to deliver real contribution for advertisers. Our Direct Access program continues to resonate with advertisers, and in Q2, well over half of our CTV spend came through Direct Access, more than twice the amounts spend versus the prior year period. We expect this trend to continue moving forward given the superior performance that our clients are experiencing due to the content quality, addressability, transparency, and efficiency offered by Direct Access.

And finally, I want to add to what Tim touched on in terms of our differentiation in the market, regardless of the presence of cookies across the ecosystem. We recently conducted a market test in conjunction with Havas Media Network, one of the largest media holding companies in the world, to measure the effectiveness of our Household ID versus cookies. The test was run for a client in the healthcare space to compare the success rates of two campaigns, one cookies and the other using the Viant Household ID. The cookieless approach, which leveraged our Household ID technology, achieved 100% scale and a 93% unique reach across premium publishers, demonstrating how our platform delivers a scalable identity solution for their clients. Other cookieless tests have been done with other platforms that have had underwhelming results as they have stalled out in scaling their alternative ID solutions compared to cookies. Where the Viant Household ID is scaled across approximately 80% of all ad opportunities, competitive alternate IDs are available less than 15% of the time. This is a great example of our leadership in this area.

And with that, I'll turn the call over to Larry to provide more detail on our financial performance. Larry?

[Lawrence Madden, executive]

Thank you, Chris. Before I begin, I'd like to remind everyone that we have posted a presentation to our Investor Relations website that includes supplemental financial information to accompany today's call. As Tim discussed, we continued our strong momentum in the second quarter, where we achieved record spend on our platform and 23% growth in contribution ex-TAC. Revenue and contribution ex-TAC were both toward the high end of our guidance ranges, and we once again outperformed on adjusted EBITDA.

Our success in CTV and streaming audio continued to be a big driver of performance in the quarter, with record spend across both channels. On a combined basis, CTV and streaming audio spend grew nearly 50% year over year in Q2 and represented over 50% of total spend on our platform for the quarter. We also continue to benefit from increased customer adoption across our AI product suite, which drove meaningful incremental revenue and contribution ex-TAC in the quarter.

As Tim discussed, there is a shifting sentiment in the market where advertisers and partners are looking for alternatives outside the larger legacy players in the industry. This dynamic is further enabling us to continue scaling our existing customers while also adding new, larger mid-market customers to our platform. And as one of the few independent self-serve buy-side platforms in the market, we expect that trend to continue moving forward.

In terms of existing customers, on a trailing 12-month basis through Q2, the number of percent of spend customers generating over $500,000 of contribution ex-TAC increased nearly 30%, and the number of percent of spend customers generating over $1 million of contribution ex-TAC increased by nearly 40% on a year-over-year basis. We're also really pleased with the rapid scaling of new customers, as the top 20 customers added in the past year generated on average nearly $300,000 of contribution ex-TAC during the period. These positive customer trends have enabled us to continue outpacing overall market growth.

With that, I'll now turn to our results for the second quarter. Revenue for the quarter was $65.9 million, an increase of 15% versus the prior year period, and in the upper half of our guidance range. On a quarter-over-quarter basis, revenue increased 23% from Q1. Contribution ex-TAC for the quarter was $41.6 million, an increase of 23% versus the prior year period, and also in the upper half of our guidance range. On a quarter-over-quarter basis, contribution ex-TAC increased 22% from Q1.

In terms of customer verticals, healthcare, consumer goods, travel, public services, and automotive were the biggest drivers of growth in the quarter. In terms of channels, CTV and streaming audio are increasing in strategic value for customers and continue to drive meaningful growth on our platform. CTV achieved record spend levels in the quarter, growing over 40% on a year-over-year basis and representing more than 40% of total spend on the platform.

Streaming audio also achieved record spend levels in the quarter, nearly doubling on a year-over-year basis and representing almost 10% of total spend on the platform. Customers are leveraging our Household ID technology to execute their omnichannel campaigns across these high-engagement cookieless channels. Direct Access also continues to be a differentiator for us, providing customers with higher return on ad spend versus other platforms. In terms of formats, video, which includes CTV, continued to represent over 60% of total spend on our platform in the quarter, and video and audio on a combined basis represented over 70% of total spend in the quarter.

Turning now to operating expenses for the quarter. Our non-GAAP operating expenses totaled $32 million in Q2, representing an increase of 3% over Q1 and 19% over the prior year period. We remain focused on making strategic investments in our business, specifically around our technology and AI initiatives, to best position ourselves for long-term market share gains and increasing profitability. As we invest, we also remain hyper-focused on driving efficiencies internally, and to that end, we have been able to increase contribution ex-TAC per employee by over 20% over the last 12 months.

For the second quarter, we generated adjusted EBITDA of $9.6 million, above the high end of our guidance and representing an increase of over 41% over the prior year period and an increase of more than 200% over the prior quarter. Adjusted EBITDA margin as a percentage of contribution ex-TAC was 23% for the quarter, an improvement of 3 percentage points from the prior year period and 14 percentage points from the prior quarter.

For the second quarter, GAAP net income totaled $1.5 million, which compares to a GAAP net loss of $3.2 million in the prior year period. GAAP earnings per Class A share were breakeven in the second quarter, which compares to a GAAP loss per Class A share of $0.07 in the prior year period. Non-GAAP net income, which excludes stock-based compensation and other items, totaled $7.2 million for the quarter, which compares to non-GAAP net income in the prior period of $5.1 million, representing an impressive 41% year-over-year improvement. Non-GAAP earnings per Class A share totaled $0.08 in the quarter, which compares to $0.06 in the prior year period.

In terms of share count, we ended the quarter with 63.4 million shares outstanding, consisting of 16.4 million Class A shares and 47 million Class B shares. We also ended the quarter with $210 million in cash and cash equivalents, and we had $227 million of working capital and no debt at quarter end, and we continue to have access to a $75 million undrawn credit facility. In Q2, we also generated $14 million of cash flow from operations and $10 million of free cash flow. Since the inception of our share repurchase program in early May 2024, we've repurchased a total of 809,000 shares of Class A common stock for approximately $8 million in cash through August 9, 2024. Accordingly, we have $42 million remaining on our $50 million authorized repurchase program.

Turning now to our outlook. For the third quarter of 2024, we currently expect revenue in the range of $67.5 million to $70.5 million, representing a year-over-year increase of 16% and a quarter-over-quarter increase of 5% at the midpoint. Contribution ex-TAC is expected to be in the range of $44 million to $46 million, representing year-over-year growth of 15% and quarter-over-quarter growth of 8% at the midpoint. Non-GAAP operating expenses are expected to be between $33 million and $34 million in Q3, representing a year-over-year increase of 14% and a quarter-over-quarter increase of 5% at the midpoint. We expect adjusted EBITDA to be in the range of $11 million to $12 million, which represents a year-over-year increase of 19% and a quarter-over-quarter increase of 20% at the midpoint. And finally, we expect an adjusted EBITDA margin as a percentage of contribution ex-TAC of 26% at the midpoint.

In closing, we are excited by the momentum we are seeing across our business. Our existing customers are increasing spend on our platform, and we are adding new scalable customers to the mix. Our leadership position across CTV and streaming audio, driven in part by the value of our Household ID and Direct Access program, continues to play a pivotal part in our overall growth and market share gains. And the increasing adoption across our expanding AI product suite is driving performance for our customers and incremental growth for the business. We remain ultra-focused on building on this momentum in the quarters ahead.

And with that, I will now turn it back over to the operator to open the line for questions. Operator?

[Operator]

The first question comes from Andrew Marok at Raymond James.

[Andrew Marok, analyst]

Wanted to talk a little bit about the size of the opportunity remaining. Obviously, very early days on the AI side, but hearing the tailwinds it is providing to the business is interesting. I guess, can you just give a sense of the penetration rates you're seeing with these AI-enabled services among your clients right now? And is it just a solution-by-solution approach, or is it, you get one, you get them all?

[Tim Vanderhook, executive]

It's Tim, and thanks for the comments on the quarter. It's good to see you. Yes, overall, long-term, we do see it as a suite of solutions that work together, and that's, again, going against our goal towards autonomous advertising. And we tried to outline the 4 pillars where we're automating all those functions in some of our prepared remarks. So currently, it has been solution-by-solution. We talked about the second generation of Bid Optimizer, now up to 65% of all impressions, and we've seen tremendous adoption there. I think when we complete the autonomous side at some point in 2025, the idea is that they're all working together.

[Andrew Marok, analyst]

And then, maybe a quick one on Direct Access. So an impressive list of publisher partners heard there, but maybe one that was conspicuous in its absence was Netflix. As they're building out their ad-tech stack and the future of their ads business, one, how do you see that playing out? And two, how do you see your role potentially in that?

[Chris Vanderhook, executive]

Great. Thanks for that, Drew. So on Netflix, we're going to remain on the buy side, and there was a list of partners announced there, Magnite being one of them, and so we'll have access to that. We think in the U.S., we don't think it's a very scaled consumer base, at this point. It is in other markets, and we operate in the U.S., so hasn't been a big area for demand from our customers yet, but I think as they get more scale on that, certainly we'll pick up.

[Operator]

Your next question comes from Jason Kreyer from Craig-Hallum.

[Jason Kreyer, analyst]

You've had the AI or the autonomous solutions in the market for a few quarters. Just curious, any pushback you get from advertisers? Anybody hesitant to adopt these solutions or maybe waiting for more proof points before they jump in?

[Chris Vanderhook, executive]

Yes, I think the number one thing that we look to get, there's always a trust factor you got to get to with clients, and the number one thing that we always focus on is we need to show the customer value right upfront. So marketers will come in, and they'll opt into these features and products like Bid Optimizer, and they instantly see the savings. Version 1.0 was about 35% savings, and we're seeing a significant increase over that in 2.0. Hence, that's why you saw the adoption rate get up to around 65% in version 2.0, coming off of 1.0 was just about 50%. So when you prove out the customer value, then they really trust it, and they're opting into those. So that's just a big area of focus that we really try and hammer home before we release anything.

[Tim Vanderhook, executive]

Yes, and I would just say in terms of customer pushback, no, they just want to make sure it's accurate. So Bid Optimizer proves that out. Chat with Data, which is taking someone's spoken language and converting it to SQL query and getting into the database, there's probably higher areas of concern there to make sure that the SQL is correct and the numbers they're looking at are accurate. So I wouldn't call it pushback, but I'd certainly say it's looked at under a bigger microscope.

[Chris Vanderhook, executive]

And I would say, too, with all these products, you're really trying to elevate -- the [ human traders ] on the platform, we're trying to elevate their performance. And we really see these as -- these are assistants to them that are really helping supercharge their efforts. A machine can give an insight, but it's really the human that drives it to a strategic insight. So we see that playing really well with customers as we roll out new products.

[Jason Kreyer, analyst]

That's helpful to hear what advertisers are looking for. One follow-up. You made the point that large marketers are looking for alternatives to the biggest industry participants. Maybe how does that -- in the conversations you're having with these marketers, how does that increase the opportunity for Viant? Or what are you hearing from them that will evolve your role going forward?

[Tim Vanderhook, executive]

Yes. What are they looking for? They're looking for tools that help automate a lot of what they're doing. We've talked about this so many times before, but there's just simply too many choices in programmatic advertising. So just like you're seeing the productivity across our own on a revenue or contribution ex-TAC per employee, they're looking to replicate those results pretty similarly. What else would you add?

[Chris Vanderhook, executive]

I would say one is cost savings, which immediately translates into better advertising and business performance for the clients. I think we've been hammering that drum pretty hard. Marketers know that, especially if you're buying premium ad formats that are good at creating new demand, they want to be able to do that as efficiently as possible.

So everything we're doing from Direct Access to Bid Optimizer, those are the things where marketers are seeing, hey, we need an alternative that's really doing this, not just racking up fees, not forcing us into products that some competitors might build. I think we're a great option there. And I would say the other one is just around our model of focusing on the midmarket. And even though we're moving up market within the midmarket, a lot of larger clients, they really like that because we service them, they like the support, and we know that they need to be successful on the platform. So being a good partner to them really helps.

[Operator]

Your next question comes from Laura Martin at Needham.

[Laura Martin, analyst]

So my first one is, your second sentence says, we're seeing a market share shift where advertisers are increasingly looking for alternatives to the largest legacy players in the industry. That implies you're including Trade Desk because you're doing more than Google. I understand why Google clients are moving to me. In cases where someone chooses Viant and over Trade Desk, why?

[Chris Vanderhook, executive]

Well, I wouldn't say it's...

[Tim Vanderhook, executive]

Probably not a single reason.

[Chris Vanderhook, executive]

Yes. I would say that there's other scale players in the market. I would put the walled gardens in there as well. They're really looking -- again, I'll talk about our midmarket focus. It's just a good whitespace area for us. They want something. It's not one size fits all for only the biggest marketers in the world. Our clients are extremely data-driven, and the advertising needs to perform. So I think the products that we build really helps them drive efficiency. So that's a big area for a need for all alternative. In the end, this boils down to campaign performance. And I think that we live and breathe that every day. And that's why you win clients and why you keep them.

[Tim Vanderhook, executive]

But I would just add to that. It's the scale of the Household ID versus all other DSPs out there as an alternative identifier that works holistically. That continues to be a point that we're driving home, and the productivity of using our software to buy media versus a different software, I think we're starting to show market differences. And we've got new products in the pipeline that I think can expand that leadership position we have today.

[Laura Martin, analyst]

And then my follow-up question is on connected television. So I'm interested if you're seeing downward pressure on CPMs. And if you are, whether you think that's one of the things that drove your 40% CTV revenue growth in the quarter?

[Tim Vanderhook, executive]

I didn't look at the exact numbers prior to the call, but nothing noticeable in terms of downward pressure on CPMs. I think the premium CTV owners get premium CPMs. If you're looking at open exchange or other ones there, there might be some pressure there. But there was already 2 different CPM prices between those 2. So I would say both have been pretty consistent. And I wouldn't say a factor of our growth.

[Chris Vanderhook, executive]

No, I will say, though, if you just look at the upfront market, I think, there was some pressure possibly on some of the premium guys. I think Netflix is -- I think it's recently been reported that they've come down on their CPMs. I think that happens because of some of the FAST channels that are out there, possibly. But nonetheless, in our software, by the time a client moves their upfront plan into the DSP, at least for the premium guys, a lot of those rates may be already set from their upfront buys. But in the spot market, we really haven't seen much of that.

[Operator]

Your next question comes from Maria Ripps at Canaccord.

[Maria Ripps, analyst]

First, can you maybe talk about some of the conversations that you may have had with prospective clients who had been moving further down the sales pipeline in anticipation of Google deleting 3P cookies? Are you still expecting to acquire those customers? And have you seen any changes to your sales pipeline since Google's announcement?

[Tim Vanderhook, executive]

No, the pipeline was pretty robust leading into it. Whether they believed Google was going to do it or not do it, everyone was already of the mindset that the time is now to start looking for alternatives. So I think a lot of those are directly in the pipeline and built in there. I do see when cookie disruption does happen, certainly what you'll see is budget shifts from current cookie-based players into the non-cookie or alternative IDs. And I think that's where that final leg of the stool will kick in. But it's hard to us because 10% or less of our media spend is on cookies. It's hard to know how big that opportunity is transacting in cookie-based DSPs.

[Chris Vanderhook, executive]

I think the other thing to point out, too, is where we see a shift certainly is, and we talked about in the prepared remarks is, away from the measurement of cookie-based systems. And marketers are starting to understand that, oh, just because somebody clicked on a search link, I don't assign all of the credit to that. And I may have shown them a television ad. They may have had a streaming audio spot. They may have had a billboard. They're starting to understand that.

So we actually see -- I have not had one conversation with an agency or a marketer, since Google's recent announcement, where they were just going back all into cookies. The fact is that today it's, if you look in a bid stream, it's around 30% or less, and it continues to decrease every quarter. And I think with Google's announcement, at the end of the day, if they move to a user opt-out or opt-in on cookies, we still believe that cookies are still going to continue to decrease.

So marketers are certainly looking -- they're looking at, I want to start measuring advertising based on what's creating demand versus giving credit to whatever the last ad that was shown to a person that was probably already going to buy in the first place.

[Maria Ripps, analyst]

And then how should we think about the potential benefit from political advertising, both embedded in your Q3 guide and maybe any thoughts for Q4, especially now that your growing exposure to streaming audio is increasing?

[Chris Vanderhook, executive]

I'll let Larry talk about it in the guide, but we do okay in political advertising. I think we have some good products there. In the last 2 years ago, I think, we were in the mid-single digits, and we think it's going to remain there. We haven't really projected in our numbers a big upside there.

[Tim Vanderhook, executive]

Yes. I think one of the hardest parts for us in political advertising is a lack of awareness amongst who controllers of those dollars are, just like some of the other areas in driving growth. I think specifically within politics, we have a lack of awareness that we're trying to change, but I don't know if we'll catch it this cycle. But, Larry?

[Lawrence Madden, executive]

Yes, to be a little bit more specific, so in cycles such as the midterms and obviously presidential cycles, we tend to do about 2% to 3% of whatever the second half spend is, typically see most of that coming in the second half. So we haven't assumed that we'll do more than that in our Q3 guide. Obviously, there will be some more political in Q4. So I have a better sense as we move through Q3 what that might look like. But we're assuming that it's business as usual. We're obviously growing, so by keeping it at 2% or 3%, we're taking in more money, but we're not assuming it popped this cycle.

[Operator]

Your next question comes from Matt Condon with JMP.

[Matthew Condon, analyst]

I just wanted to ask one on the data clean rooms or the Viant Data Platform. I see that you guys integrated with Google Cloud's BigQuery data clean rooms in the quarter. And then also you're launching Chat with Data in 4Q. Can you just talk about how the Viant Data Platform and greater adoption there impacts the P&L?

[Tim Vanderhook, executive]

Yes, definitely. Clean room matching is effectively replacing a process called cookie syncs. And so, it's an identical process to the way the industry became interoperable historically through this concept of cookie sync tables. And clean room matching is doing a very similar process, but just with different types of identifiers there. And for us, our focus is interoperability. So we did do the Google Cloud Platform announcement and GBQ that you've noticed were integrated with Snowflake. We're working with AWS on it. The whole goal here is to make it interoperable so that anyone, any data company, any supply source, or any advertiser that has their first-party data in those platforms can easily, with a single click, access drive connectivity to our platform and that data.

In terms of what does it mean to the financials of the business. I think a lot of it comes from measurement and us basically providing better measurement to these advertisers. And we've seen measurement revenue, which is included under the Viant Data Platform revenue, has ticked up our contribution ex-TAC. So it has an expanding -- if you look at our financial profile, it will increase its contribution ex-TAC over time with adoption.

[Chris Vanderhook, executive]

And we think the interoperability, going back to that real quick, when you're integrated with all of these other platforms, it just speeds up customer adoption. The main thing the clients want to do is be able to use their first-party data in advertising. So when you're already integrated with the largest companies that house CRM data for any of our clients, it just makes a seamless approach of moving their first-party data into their DSP and then being able to use it for targeting and measurement.

[Matthew Condon, analyst]

And then maybe just to follow-up. Larry, you've done a good job of driving profitability here. Just as we think about 2025, and understood, you're not giving any formal guidance here in 2025, but what are the key investment areas? Should we see anything different as far as any additional engineering or sales force investments in 2025?

[Lawrence Madden, executive]

I think you'll see trends similar to '24. Clearly, we're not going to invest -- our growth in overhead is going to be slower than our growth in CxT. The investments we will make will be primarily around engineering and product and sales, and certainly around all of the innovation around AI. But I would expect low-double digits, low-teens growth in terms of investment for '25, consistent with what we've been doing this year.

[Operator]

Next question comes from Chris Kuntarich.

[Christopher Kuntarich, analyst]

Maybe a first one on Direct Access. I'd be curious to hear how you think about what inning you're in as it relates to ramping your partners, and how you think about balancing the quality of the inventory within the Direct Access program versus continuing to grow it.

And then, Larry, maybe just to double-click on the expense question that was just asked. Is it still right to be thinking about low-teens growth for expense growth here and in '24?

[Chris Vanderhook, executive]

Yes. I'll take the first part of that. Chris, thanks for the question. What inning are we in? Well, it represents I think over half of, I think we had said CTV spend is running through Direct Access. So I don't know if we're playing professional baseball or in the fourth or fifth inning, I guess, or fourth inning or somewhere in there. I would say, however, on the program, what's really interesting about it, the first part was just doing a direct integration, helping marketers save on fees. They're not paying middlemen. They're buying direct from the source. That was the first phase of growth.

But the next is really around the data matches here where they're integrating, they're matching their subscriber data to our Household ID. And this drives great addressability for marketers. This is the same addressability that they're used to getting from the walled gardens like social. However, they're on the world's most premium content. It's an incredible advertising execution.

So I think that the next, although that half of our CTV spending is going through there, I think it's going to continue to drive our CTV spending in the platform. It's just a great differentiator for us. There's similar offerings out there, but we don't charge for it. We're not trying to be on the sell side. So right there, I'm getting you lower CPMs, and I'm not charging you for it. Clients love that. So I think it's going to continue to drive more and more CTV spending for the company.

[Tim Vanderhook, executive]

And just to add to that before Larry kicks in, I think one thing that's a differentiator of Viant versus other alternative IDs out there. So Disney may have a logged in user, and it might be Tim who's logged into Hulu that that's going through, but they get a lot of value in doing these data matches as well. We know other email addresses that are part of that household. So if Tim is the logged in user, but Laura buys the product or service, we're able to properly attribute and measure the response to the advertising to that household, where I think other identifiers fail pretty aggressively in that. So there's a lot of value add both ways for the big media companies and other quality content providers that join the program as well. Larry, did you want to take the other question?

[Lawrence Madden, executive]

In terms of overhead for '24, it will be in the low teens, which is what we've been saying all along. You can see the guide in Q3 where we guide overhead. Q4 overhead will be low-single-digit percentages above Q3. You add that all up, and you're still in the low-teens.

[Operator]

That concludes today's webinar. You may now disconnect.

[Tim Vanderhook, executive]

Thank you, everyone.