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Perion shares plummet again after Microsoft removes it from Bing

Two months after Microsoft’s Bing changed its advertising rules, it has now completely removed several advertisers from its network. Consequently, Perion, whose revenue from its collaboration with Microsoft has so far constituted a large part of its operations, will see its income from the tech giant fall to less than 5% of its revenue in the second half of 2024 (down from 50%). Perion’s stock reacted with a dramatic drop, plunging by 30% on top of the 40% it fell in April due to Microsoft’s previous move.

Perion notes that similar notifications have been sent by Microsoft to other Bing distribution partners. “The recent changes implemented by Microsoft for Bing regarding distribution partners in the search market are unfortunate and have significantly impacted our search-based advertising activities,” says Tal Jacobson, Perion’s CEO, adding that “Perion remains committed to expanding AI-based advertising solutions through innovative products and partnerships.”

Due to Microsoft’s dramatic decision, Perion’s second-quarter revenue is expected to be between $106-108 million, and annual revenue is expected to drop to around half a billion dollars. In April, the adtech company issued a severe profit warning due to changes made by Microsoft’s Bing search engine. This led to a decrease in the RPM index (average revenue per thousand impressions), significantly impacting Perion and its clients. As a result, search-based advertising, its main activity, also declined.

A company specializing in digital advertising, Perion connects search engine advertisers with consumers and shares revenue from referrals with Microsoft. In 2023, search activities accounted for 46% of Perion’s revenue, and of which Microsoft generated 85%. Perion insists that despite the sharp expected drop in revenue and deep impact on profitability, it does not plan to make cuts, as it is investing efforts in new developments to diversify its revenue sources, partly to reduce dependence on Microsoft. This is not the first time Perion has experienced such an event, although it is the first under current CEO Tal Jacobson.

Ten years ago, Perion was one of the prominent actors in the field and was deeply impacted by Google’s changes which essentially blocked toolbars. Incidentally, this is what caused the relatively young company ironSource into the gaming market and to become one of Israel’s largest companies. Perion similarly reinvented itself after the toolbar crisis, and in recent years its stock has outperformed the indices. In 2023, the company approached a market value of $2 billion against the backdrop of rapid growth in recent years. However, even with the release of the latest annual reports indicating 16% revenue growth and high profitability, Perion’s investor forecast was weak and the stock began to fall.

Jacobson, who replaced veteran CEO Doron Gerstel last summer, knows the field well, having managed Perion’s search division for the preceding five years since moving from Similarweb. Jacobson realized that Perion’s high dependence on Microsoft was dangerous and had already started using Perion’s large cash reserves of half a billion dollars to enter new fields. For example, a few months ago, he acquired Canadian company Hivestack for $100 million in cash to gain a foothold in the out-of-home advertising market. According to estimates, Perion is currently exploring several additional acquisitions to reduce the share of its search-dependent revenue.

Originally Appeared Here

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