In April 2017, the adtech (digital advertising) company Perion Network, which was then trading at a value of about 120 million dollars, suffered erosion in its traditional market, faced a debt taken out to finance a large purchase two years earlier, and began to recover from a control struggle that took place a few months before. This was the background for Doron Gerstel to become CEO of the company. Recently, after six years in the position, Gerstel announced his retirement this August.
He will be replaced by Tal Jacobson, currently the director of the CodeFuel search division in the company. Gerstel will remain a board member at Perion, which provides solutions for advertising campaigns in search channels, social networks and more.
“Perion is the fifth company that I am CEO of – I managed two public and three private companies, for nearly 100 quarters,” says Gerstel in an interview with Globes. He came to Perion after previously managing the companies Nolio, Syneron, Zend Technologies and Panaya. “In the four companies The last time I managed it was in the context of a turn-around (optimization process). You enter a reality where on the one hand the board that is interviewing you for the position says that this is ‘the next Google’, and on the other hand the situation is a catastrophe. In terms of productivity, the situation was very difficult, with debt, revenues In decline, and above all – a major image problem vis-à-vis the capital market and difficulty in recruiting employees. I can say that when I arrived at the company, the board of directors considered an offer – did not reject it outright – to sell Perion for $70 million. This gives a sense of how challenging the business was.”
Doron Gerstel (62)
personal: Married and father of four, lives in Zichron Yaakov and Tel Aviv
professional: In addition to productivity management, since 2018 he also serves as a director. In the past, CEO of Panaya, Nolio, Syneron Medical and Zend Technologies
Something else: sailing enthusiast “I’m leaving soon for a sabbatical to cross the ocean on a sailboat”
Today, Ferion’s valuation on Nasdaq and BETA reaches $1.5 billion – more than 12 times the value on the day he was appointed CEO. “The story of the turnaround is no different between companies, and I always divide it into three parts. The first is to take great care of the entire balance sheet issue – to start earning, generating cash and repaying debt, because a company needs to have solid financial legs. The second, at the same time as the reductions that are required, we must put gas on technological developments, which will be the main force for the third stage – growth.”
When you describe it like that, it sounds simple.
“It’s not simple, but it needs to be done simply and spoken in clear terms. The first issue is a long-term strategy. The strategy we presented six years ago serves us and is different from the edtech industry in general – we made a decision to diversify the activity. The right strategy is to look through whose glasses who owns the digital advertising budget in the organization, who divides the budget between the various advertising channels – search oriented, websites, social networks.
“The idea is that if we know how to create solutions for these three channels, we won’t suffer if the allocation changes. It sometimes changes following various events, including macroeconomic ones, and we don’t suffer from that – we flourish. The big problem is that there are no free meals, if we weren’t educated to do so In an effective way, this would have become an expensive and wasteful strategy. That is why it was important for us to develop the ‘master’ with the ability to link the various solutions so that there would be operational efficiency.”
“Scraping the potential”
According to Gerstel, in 2022, out of 52 public companies in the industry, Perion was the only one that presented a positive return. The stock rose by 5.2%, and from the beginning of 2023 added another 31%. “In the end, it’s all about numbers, and the numbers proved the strategy,” he says. “In the beginning the company did not give forecasts at all, then it started giving forecasts, meeting them, bypassing them and raising them. Little by little there was interest, volume in the stock, an understanding of the story by analysts. Even from the heights of 600-700 million dollars (revenues Annually; in 2022 they were 640 million dollars and in 2023 they are expected to be about 730 million dollars, NIS) We are only a fraction of the edtech market. We are just scratching the surface of the potential.
Productivity Network
Line of Business: Provides solutions for campaigns in digital channels.
history: Established in 1999 under the name Verticon, a year later it changed its name to IncrediMail, and in 2011 its name was changed to Ferion Network. In the first years, it dealt with free e-mail applications, and later expanded its activities to the Internet and digital advertising. It has been traded on Nasdaq since 2006 and on Tel Aviv since 2007. Among its stakeholders are Phoenix and Harel
data: Employs about 500 employees, of which 230 are in Israel (Holon). 2022 revenue: $640 million, net profit – $99.2 million, EBITDA of $132 million
“The market is very large and the trick is to identify places with serious growth potential, which correspond with advertising avenues. There are options within them. For example, in the world of smart TVs we focus on sports events that are broadcast live. The advertiser wants a return on investment and rewards accordingly. Last year we grew by 40% and the market grew At 10%, a sign that we took market shares.”
According to him, Ferion today has a good infrastructure for growth because it manages to take the signals – the data and signals, from all the different advertising channels and target them effectively. “In our world, data gives the biggest advantage. If the advertiser returns his investment, does it matter how much he pays? Our prices are very high, and we are trying to educate the market that it doesn’t matter how much it costs, but it really matters how much it’s worth.”
Advertisers value privacy
Perion also launched a solution without cookies – pieces of information that are collected while surfing the Internet. “We understood that we needed to prepare for this, and build a technological solution that would be at least as effective as using cookies, and that would preserve privacy in the cleanest way,” he says. “Consumers prefer brands that maintain their privacy in the advertising campaign. More advertisers understand this – it also enters the subject of ESG in the business world – and it brings us a lot of business.”
What is the main challenge of your replacement, Jacobson?
“To continue the growth in the same direction as the diversification of activity, perhaps through a significant acquisition in places where we do not yet play strongly. We have a very large force multiplier and an interesting playing field. I am sure that he will continue to move the company forward, I recruited him four years ago from Similarov, And he developed the strategic partnership with Bing. He is the right person in the right place to take the company to the next level.”
Are there more opportunities to purchase today?
“The opportunities are increasing because the public market is quite locked and the issuance window is closed, so what is left in terms of a liquidity event if not to be sold? There are amazing opportunities and in the spirit of the times they are cheaper than they were two years ago, and the market is much more realistic.”
Has the high-tech sobered up from the hype of 2021?
“Totally, the valuations were unrealistic, the spec’s gave unrealistic values and values and came back to sober up. Even in the private market there were quantities of companies that boasted the title of unicorn, which turned out to be something unrealistic compared to the results. I consider myself a ‘man of the old economy’ who strongly believes in profitability despite that A start-up or a public company. You need to make money first and then handle it with great responsibility. There was a trend of ‘we grow and it doesn’t matter how much it costs us’ – this is not the responsibility of a CEO, it’s a short-term vision that has brought companies with their backs against the wall when they need to recruit in unfavorable conditions”.
Today it already looks completely different, but a year and a half or two years ago, companies recruited workers under excruciating conditions and competed for the treats they showered on them; In the program Eretz Fahadrah, a series of sketches made fun of a high-tech company that recruits employees and gives them Tesla cars and dozens of flavors of ice cream. “I have to say that if you want to recruit good personnel and someone sets a certain standard, I can’t come and tell the candidate, ‘Work for me for Zionist reasons.’ We were also required to do things to appear relevant, because that was the discourse. We cannot educate, but we do have to act responsibly.”
“A tested leader in the Union”
Do you share the fear of damage to the economy due to the legal reform?
“I am much more concerned about the division in the nation. In history, the destruction of the Second Temple was born first and foremost from sibling rivalry. Today’s discourse is very unhealthy – I do not believe that in the 21st century there are those who bring out the sectarian demon. Leaders should be tested for unity and not for polarization.
“It is clear that reform is the right thing, an improvement process is not foreign to us in the business world. However, there is no doubt that no matter how good and confident a manager you are that change is needed, dialogue is required; even in high-tech, the management style has changed and the business is more democratic. No one is born with all the wisdom, and to do Doing things unilaterally leads to suspicion and lack of cooperation. The party leading the reform could have delivered better with a compromise. Why not? There is an impossible load in the courts, perhaps it is related to the process of selecting judges, but the result also concerns those who did not ‘win’ In the elections. Therefore, it should have been done through negotiations. We are not thinking about taking our funds out of Israel. We need to act responsibly, and I hope that whoever leads the reform will come to their senses and create a negotiation process. If this results in unification – it will be beneficial.”
Tal Jacobson / Photo: Ohad Dayan
At the end of the overlap, Gerstel, a sailing enthusiast, plans a trip on a sailboat from Italy to the Canary Islands, and to cross the Caribbean. “I’m going to rest,” he says. “I had a succession of jobs, each of which required learning and that requires energy, certainly as a manager who likes to dive deep. I’m not retiring, and I’m not ashamed: I like to work. I need to return with renewed strength to the field of expertise I’ve taken, turn-around.”
Wouldn’t you like to be the chairman of a company that someone else would manage on a daily basis?
“I’d rather be a coach on the lines than sit in the stands.”
About ChatGPT: “It really came as a gift to us”
A development that may benefit productivity is the expansion of the use of artificial intelligence (AI) and more specifically, the huge interest around ChatGPT. This is an AI-based chatbot developed by the OpenAI company, which allows those who use it for search purposes to receive AI-based answers that are not based on links to other websites.
Microsoft, with which Ferion has a long-standing partnership regarding search solutions, invested in OpenAI and announced its intention to integrate ChatGPT into its solutions, including the Bing search engine, which for years has not come close to the popularity of its competitor Google. The investment house IBI recently wrote that in this case Bing will grow in terms of users, and the number of productive searches will contribute to the growth of Perion, which is an essential partner of Microsoft in the world of search.
Gerstel points out that “Microsoft sees Bing as an important strategic asset. Unfortunately, they have a 3% share in the world of searches, but they see it as a very large potential. Each point of increase in market share is worth $2 billion to them, and there is a one-to-one value relationship between improving the experience the user and increasing the amount of user searches and bringing in new ones.The impact on us should be really direct.
“I guess we will get to see it, because Microsoft is all-in on this thing, and as they are successful in all kinds of other fields, they can take a significant share from Google. This step really comes as a gift to us.”
Microsoft has made purchases in the edtech worlds, why wouldn’t it buy Perion?
“We are not for sale. I believe that Microsoft buys in places that are good for its portfolio, and we are very diverse in what we do. Right now it is not on the agenda at all, the strategic partnership with them is good for productivity.”
What about another buyer?
“There is always consolidation in the market, but I am truly convinced that we are trading short even by 1.5 billion dollars – that’s 10 times the EBITDA, which in terms of technology and the profitability percentages we have, is nothing compared to other companies.
“It is true that they are knocking on our door, but we do not even enter into a dialogue, because there is no reason to give it as a gift, when they can reach much larger market values.”