People Incorporated (PPLI) Earnings Call Transcript

Great. All right, everybody. We're kicking off the second day here of the Barclays TMT Conference. Again, Ross Sandler. I run the Internet team here. We're super excited for this presentation. We've got Neil Vogel from the new Dotdash Meredith, straight from Iowa, in fact. So Neil, welcome. Not only are you...

In Iowa. In fact, in Iowa. In the ancestral Chairman's office here in Iowa.

There we go. Yes. You have 2 claims of fame. You built one of the best businesses at IAC, and you have the best hair on the Internet. So congrats.

Thank you. That's...

Looking good from Iowa. Yes. All right. So maybe to start...

A long list of people making fun of me, you can be.

Yes. If we could go back to the beginning of Dotdash and maybe talk about some of the history there, that might help frame what you guys are doing with Meredith. But like, from what I remember, Dotdash kind of was birthed out of About.com and that acquisition. And from what I remember of About.com, it was kind of like a UGC contributor model, where people would pipe in content, you had decent SEO, certain categories were stronger than others. Kind of like a Demand Media back in the day, and then that was kind of the foundation which then you built Dotdash and all the different verticals out of. So can you just walk us through, I mean, a, is that a fair characterization of where...

Yes. I mean, look, it's pretty fair. I mean the -- it's generally correct. I think the one difference, and it's the kernel why this whole thing worked is, all that is true, except we were never like a Demand Media. Demand Media was trying to like scan an algorithm with weird headlines. If we -- what About.com was always trying to do in the early days of the Internet, it was very valuable. We have experts on virtually every topic write about their expertise and help you, whether it's how to make a blueberry pie or how to deal with having diabetes or why my router's too slow. And it was a very good model from like 1996 or '95 when it started until the Internet matured. And as the Internet matured, this business didn't mature. And as the Internet got better, people got better at this and About.com didn't get better at this. And IAC bought it from the New York Times for, I don't know, like $300 million, 2012. And the business was essentially the same as it had been for, at that point, already like a really long time, like 15 or 20 years. So we got there. And we've -- when we arrived, we acknowledged we were probably the worst scaled consumer site on the Internet. Experience was terrible. As you said, it was all contributor model. There was no attention paid to brand or design or usability or satisfaction. It was all about like getting ads up, again, in front of this content. And it wasn't working. And what was happening was our health content, we had no chance to compete against WebMD, which is a specialized health site with reputation and built for health. We had no chance to compete against Allrecipes. We had no chance to compete against Shape, to any of these guys. So it just wasn't working. And we spent a year or 2 trying to figure this out and really struggling. And we came to the conclusion that the model was wrong, like the model for About.com was wrong. And in the process of figuring out that model was wrong, we kind of thought the whole model for media was wrong, and -- which to us was like sort of scary, but to IAC was very appealing. When we went back to Joey and Mr. Diller and said, "Okay, we've been at this for 2, 2.5 years. We're not doing so hot. But here's what we think we can do. We think this About.com content that helps people, is a great kernel of like intent-driven content, like content that really, really helps people, but we're doing it wrong. Why don't we take this content and here's what we're going to do. We're going to create new brands from scratch that are vertical. We're going to build vertical sites that look specifically like that endemic vertical. And we're going to do it in the most competitive and most valuable categories on the Internet: health, finance, home, food, tech, travel. And we're going to -- and then when we're done, we're going to throw the rest of About.com in the trash. Oh, and we need like $30 million to do it." And -- after not doing well for 2 years. And the answer from IAC, which was a very IAC thing, was, they've been following what we were doing. And although we've been struggling, we were learning so much. The answer was basically like, "What took you, knuckleheads, so long?" Like let's do this right now. And we started to -- the minute we started to do this where we took About.com from 2 million pieces of content, down to about 0.5 million pieces of content, and we launched very well. And we launched The Balance, and we launched The Spruce. And then it really started to get traction. Then we bought Investopedia, and then we bought Byrdie, and then we bought Brides. And we did all these things. When we started to do the Internet properly, everything really worked. And this is the fundamental difference between us and everybody else. And it sounds super simple, but it's not that simple. As -- we said when we were doing this, the Internet does not need any more mediocre stuff. And when we started launching things in 2016-ish, '15, '16, early '17, the Internet was at like a low point of how content worked. It was really just s*****, people doing terrible things. So like we're going to make -- for everything we cover on any topic, we're going to try and make the best thing on the Internet. We're to going put it on the fastest, most well-designed sites. Speed and performance are very correlated. And we're going to have fewer ads than everybody else, with the bet that if we have 2/3 of the ads, they're going to perform significantly better. And if you do it on a really fast site with great content, it's going to perform even better and even better. And we were totally right. So all of a sudden, we came out of nowhere with these sites and these incredibly competitive verticals that were faster, better designed. We think the content was better and had fewer ads. And when you tell it like that, that seems super logical, but then the outcome was, they all did great. And I think we were in like the low 40s in Comscore for About.com when we started, like high 30s, low 40s when we started this. We're north of 100 before we did this deal. Now we're like 180. And I think the really interesting thing about the Meredith properties is, given what we started and then the series of smaller things that we bought, Meredith is just a basket of brands, a basket -- they're bigger than us. But every one of their brands, you can draw a direct line to one of our brands in terms of scale and what it needs. And we have like a tremendous amount of pattern recognition of what we've done to our brands, particularly some of the brands we've bought, like Investopedia and Byrdie and Simply Recipes and Serious Eats. So the playbook for what we need to do to these things online is incredibly clear to us, and we like cannot wait to get in there. And frankly, if you look at our business, and I think, Ross, we talked about this before, like our 2 needs that were really -- we were really struggling with were scale, which is $100 million is great, but $100 million is not $180 million. $180 million is amazing, and now we can compete with anybody; and real brands. So we've managed to build -- what nobody knows -- I've [ guarantee ] very few people on this call know The Spruce is the biggest home site on the Internet, bigger than Good Housekeeping, bigger than Better Homes and Gardens, bigger than HGTV. I think it's the biggest. But if you look at Google searches for -- on brand, Better Homes and Gardens is searched 10x as much by name as The Spruce is, but The Spruce has more than twice as much traffic. The opportunity for us to now do what we've done for The Spruce in the voice of Better Homes and Gardens, on Better Homes and Gardens, and it's just like, look out, like here we go. Like it's going to be incredibly fun. And that's -- so if you go back to where we started to how we got here, it's sort of like -- it tells us a good story. It was obviously much bumpier than the story tells. But everything that we've done to this point has sort of prepared us for where we are now. And that's why I think we had in this -- we're telling everyone at our company, like approach -- M&A is very tricky culturally. Confident but humble, confident but humble. And that's our approach to all of this. Like we know what to do. We just have to get in there, win the hearts and minds, and execute on it.

Got it. Okay. And with some of the acquisitions you guys made of the verticals, bridal, et cetera, after rebuilding About, you had time to kind of do it one by one and do the technical changes, the demonetization, all that. Here, you have like the basket of like several humongous websites that are well-known. So what's the, I guess, the process of like, do you go one by one? Or is there something like unifying like platform that they can just put them all on and then they're all kind of up and running? Like how is that going to work?

You actually asked like that is -- if you're sort of sitting in our meetings, that is the only question that matters for us, which is, how to get this done, how to prioritize it, how to culturally make it work? And I'll get like a little granular, maybe more information than you care about. But we run our brands super vertically, right? So we run very well our health brand. You have -- you run the whole thing: sales, editorial, tech, products, growth. All -- anything a brand would need, you run. They're very different. They're very matrixed. They're very -- different people do different things. And one of the opportunities we have is like we have a very strong sense of ownership and accountability on our brands and our teams. Like our brands have their own e-mail addresses. Like we -- they are like really identified culturally as with their brands. We need to do that there. That's like the first step we have to do, is get -- first step we need to do is get the structure right. And then you can put the processes in. And the processes are -- we have -- they're very, very good at content and branding at Meredith, very, very good at it. But as you know and guys who followed it, they have not had the benefits of like the same sort of ownership or growth that we have. Like we're growing materially faster, and we've got really good margins. And they were very constrained by being public. They're very constrained by various capital needs, like having to pay dividends. So they were not able to look beyond the next quarter in most cases. So changing that view and then teaching them the skills and disciplines that, we just say it again, like best, fastest, fewest. How are we going to have the best content, on the fastest, best most well-designed sites with the fewest ads? And before the call, we were chatting, like we're doing some things day 1. Like we're taking the s******** ads, excuse my language, off their sites. They're gone. Like we're just taking them away. And that's how you win hearts and minds. And we're really empowering people to make real decisions. Now it's going to be hard. This is -- as you said, we bought a series of things that probably adds up to, what would be, I don't know, 1/3 of Meredith. Now we bought all Meredith. Prioritization is a key for us. We're obviously going to do the biggest opportunities first. We're doing a lot of -- this isn't so much a Dotdash takeover. There's a lot of talent there. The combined management team is going to come from both places. We're identifying the people who are going to lead each one of the brands. We are sort of like going to -- that's almost like, think of sports, something [ like going to have a ] draft of like, well, all these product people are central. Now who's going to go into which vertical? Who's got an expertise? Who wants to work here? But we've been here -- we've been in the building for a week. We've obviously been around it for -- since we started this process over the summer. So we feel like we know a lot. There is nothing that we've seen that makes me anything less than optimistic since we've gotten here. I think the -- look, the culture for -- the cultural issues are always a risk, but these guys have been like incredibly receptive. Like we joke around, we didn't go out and buy one of these like snobby media companies. We bought Meredith. Meredith does what we do. They're nice people. Like there's a lot of Midwestern values. They just want -- everybody wants to win. And we have the tools to win, and I think they're ready, too. It's a very long answer to your question. But prioritization and cultural things are where this thing is going to fall apart. The mechanics and the playbooks are the thing we're most comfortable with. But like you got to get the right people in the right seats and identify the talent, and it -- change is hard. It's not for everyone. It's not going to be for everyone there. But I think we have a really solid crew of folks to work with.

Okay. Maybe we can talk a little bit about the mechanics that you just touched on. But it sounds like there's some technical low-hanging fruit, like the page construction and the load times and stuff like that. And then there's the monetization, which you guys put in the famous Slide 10 around like high CPM versus low CPM and affiliate.

Yes. We [ just love ] it.

Yes, so...

Just think of it one by one. So the first thing is, technically, their back-end stuff is actually pretty good. Like -- but have platforms to build on. That's not the issue. The issue is like just like front-end performance is just not good. And we've invested incredibly heavily. And we have very strict, call it, like rules and regulations for how we do help and make things to make them super fast. And Meredith's sites is not -- they know it, too. I'm not like besmirching it. They're the slowest sites in media, and we're going to fix that fast. That's going to be a huge advantage for performance, for users, and a signal to algorithms and others that like, this is a much better place, right? Then in terms of ads, that's probably the second thing you can do. And their ads -- or actually, their ad stack is very good. And how they use ads on a typical page or on mobile or whatever is actually quite good. They just do some very few egregious things that make the whole thing look bad. And we're pretty much going to end that off the bat. And again, a lot of it was -- there was a lot of pressure to do other things there that were, because of our model, maybe less concerned with, right? Like you don't have to put a pop-up to get an e-mail from everyone that comes. Like there's lots and lots of ways to get magazine subs. It doesn't have to be like taking over your pay. All this stuff, we're going to clean up. And then the third thing which is going to take the longest is the content. And their content is, by and large, excellent. But the difference between being like excellent, excellent content written by excellent people and being excellent content for the Internet in 2021 is steep. And this is where I think our investment is going to help. So take like a blueberry pie, 3 years ago, 4 years ago, you could have a blueberry pie recipe written by some really great person. Have the recipe, step-by-step ingredients, picture of it, and it would do great online. And it looks really good. It's photographed well. And it's written by a chef or pastry chef or whatever. But today, what you need is something different. Today, you need those ingredients. You need a video of somebody making it. You need step-by-step photos. You need links to the knife skills, you need to make it. You need nutrition information. You need a vegan option. You need it made and tested by a chef. You need all these things that we've built processes and systems to do. And when you can combine the general high quality of their content with all the stuff that you have to have to make content great, that's what we're most excited about. That's going to take the longest because it doesn't happen overnight. But we are -- that has already begun day 1. And like we -- we're in the process now of basically auditing everything. We will take every single article in every single one of their sites, and we'll throw out on the floor. We will pick it up. We'll read it, and we will reorganize it, and we will go from there. And the good news is they're all really good. But every -- some is going to need a video. Some is going to need a better picture. Some is going to need to be rewritten. Some is going to be modernized. Like they have certain demands, like Health.com, which is like an incredible opportunity in conditional health that is run more like a lifestyle site. We're going to convert that more to look like the Verywell or WebMD. And there's just a lot of -- there's just so much opportunity. It goes back to your prior question, we just have to prioritize it right.

Yes, yes. Okay. And so it sounds like you're demonetizing right out of the gate to do some of the cleanup. Some of these things are going to be quick flip fixes. Others are going to be kind of medium to longer term. So I guess, just can you walk us through, now that we've closed, next 12 months, what does that look like? Like what kind of impact you might see in 2022, without providing any like formal...

Yes. I think -- I mean I think Joey said it well, and we've said it before. I think there's no question, '22 is going to be a transitional year. Our goal for -- and I think -- actually '22 is just, it's going to be fine. But there's a lot of work to do. And as Joey has said and as we've said, we sometimes take a step back to take a step forward. And so the first thing we do to make everything better is take down some crappy ads. That might be like a little bit of a financial hit. But we know what's going to happen because we've already done it 11 different times. So we know -- we have pattern recognition of what it looks like. Our goal is to come out of this year with great -- this year, meaning 2022, with great momentum. I think we still feel very good about that $450 million digital EBITDA number. We feel very good about that 15% to 20% top line growth number for digital we gave. Again, I don't think we've seen anything here that makes us anything less than like super-excited that we did this. We feel -- I mean, we feel very -- we're -- it's still honeymoon, right? We haven't had our major issues and problems, which we know we will have. But we just -- we feel really, really good about this.

Yes. The initial take in Iowa's...

Initial take is, everything is as expected. And frankly, even in places where it's worse than expected, and anybody who buys something of this size and is like comes in and tells you everything's been unexpected is lying to you. Like it's not, that. But it's not -- it's the stuff that's almost opportunity based. It's not like their tech is broken, and we lost a year because we have to fix it all. It's not that kind of stuff. It's more like, "Oh, that process is weird. This is an easy fix."