Perion Network (PERI, Financial), a digital advertising and content monetization provider, has hit its lowest levels since late 2020. The drop follows its revised Q2 and FY24 revenue guidance. The main issue stems from changes at Microsoft (MSFT, Financial) Bing, historically one of PERI's largest advertising partners, contributing about 35% of PERI's revenue by the end of 2022. Bing’s decision to "exclude a number of publishers from its search distribution marketplace" is now expected to reduce search revenue from Bing to less than 5% of PERI's revenue in 2H24.
- Bing's exclusion of certain publishers, including PERI, is a significant shift in its pricing strategy with distribution partners.
- In early April, PERI had already issued downside Q1 revenue guidance and cut its FY24 revenue forecast to $590-$610 million from $860-$880 million due to changes in ad pricing at Bing.
- These changes have started to lower Revenue per Thousand Impressions (RPM) and search volume, although search advertising revenue still increased by 26% in Q1.
- During its Q1 earnings report about a month ago, PERI reaffirmed its FY24 revenue outlook, and its Q2 guidance of $118-$122 million was above expectations at the midpoint. CFO Maoz Sigron described the company's relationship with MSFT as "strong," making Bing's decision to exclude PERI from its search distribution marketplace unexpected.
- PERI now expects FY24 revenue of $490-$510 million, a 43% drop from its original guidance at the midpoints of the ranges.
- Replacing the lost revenue from Bing will be challenging. PERI is collaborating with other search engines to rebuild its search business while diversifying its revenue streams through its CTV and Retail Media businesses.
- Both CTV and Retail Media are experiencing strong growth, with CTV revenue up by 108% and Retail Media surging by 134% in Q1.
- However, CTV and Retail Media still account for only 5% and 9% of total Q1 revenue, respectively.
The main takeaway is that the situation with Bing has worsened, surprising investors once again. PERI now faces the dual challenge of replacing lost business from Bing and restoring investor confidence.
