© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, everybody. S4 Capital's Q3 Results. I'm joined by Scott Spirit on my left, who's coming from Singapore to be with us; and Mary on my right, our new CFO. So we're going to present the results. Mary will present the results, and then Scott will take you through clients, a little bit on strategy, and then I'll just do a brief summary. So over to Mary.
Thank you, Martin. So good morning, and thank you for joining us for our third quarter trading update. We have delivered strong top line growth, continuing the momentum we saw in the first half. Revenue of GBP 300 million was up 68% on a reported basis and 27% like-for-like versus the third quarter of 2021. Like-for-like gross profit net revenue for the quarter was up 29% to GBP 250 million. This takes gross profit net revenue for the first 9 months to GBP 625 million. Our break on hiring has stabilized headcount and delivered improved profitability, especially in the content practice. Operational EBITDA in the third quarter was greater than the whole of the first half, and we exited the quarter at a run rate sufficient to meet our full year target. We expect continued good top line performance in the fourth quarter and maintain our full year guidance of 25% like-for-like growth in gross profit net revenue. Our revised operational EBITDA target issued at the end of July remains unchanged at approximately GBP 120 million. Net debt at the end of September was GBP 158 million after the initial payment for XX Artists and contingent payments on previous year's combinations. We continue to maintain significant liquidity and our 2022 net debt guidance remains at GBP 130 million to GBP 170 million. Moving to the next slide, and my comments here are all on a like-for-like basis. First half momentum continued into the third quarter, and we delivered strong gross profit net revenue growth, led by content and technology services, which were up 28% and 74%, respectively. In content, this growth was driven by our whoppers and whoppertunities. Data and Digital Media was up 15% as growth in the activation and performance business lines was not as strong, but it continued to benefit from the market uncertainty. From a regional perspective, EMEA grew fastest with gross profit net revenue up 38%, and it accounted for 16% of the mix. The Americas, our largest region, grew 31%. And in APAC, gross profit net revenue was up 3% against a strong comparable with performance in China impacted by the zero COVID policy slowdown. On the next slide, we show you a breakdown by practice and region for the year-to-date. And again, my comments are on a like-for-like basis. Our total gross profit net revenue for the 9 months to September was GBP 625 million, up 28%. Content increased 27%, boosted by very strong growth of Whoppers. Data and Digital Media grew 20%, with Technology Services up 80%, reflecting a rapid growth trajectory from TheoremOne and Zemoga. This was mainly driven by expanding our partnerships with existing clients and was further aided by new wins. From a regional perspective, Americas is up 28%, EMEA 37%, and APAC 18%. We have again included information on outstanding contingent consideration and invested capital in the appendix. And we're happy to take any questions on these at your convenience. In summary, we are delivering strong top line momentum, improved profitability and good progress on strengthening our financial controls and processes. Our expectations for the full year remain unchanged, and I look forward to updating you further at the full year results. And with that, I will pass to Scott.
Great. Thank you, Mary. I have a few slides to run through just updating you on our clients and also the current market conditions and what that means for our growth opportunity. So you're all familiar with our 20-squared client plan, which is our ambition to build large-scale relationships with clients and to have 20 clients of more than $20 million in annual revenue. And as we expand the number and nature of these relationships increasingly in line with other professional service industries, we are bound to confidentiality. As we approach the final stretch of 2022, we have further progress to celebrate with 10 of these scaled client relationships now in sight. We have 9 expected this year and one more recent win that started halfway through the year in fashion and luxury, which is operating at the Whopper run rate. Our Chief Clients Officer, Amy Michaels and her team are building growth plans around these 10 clients and a further 14 clients across various sectors. But as you can see, with a strong continued bias towards technology. Of those 10 clients, 9 of them are engaged with us across 2 or more of our 3 practice areas. When you look at our clients from a portfolio perspective, you'll see that technology continues to dominate with over 47% of our 9-month revenues coming from this sector. The vast majority of our revenue here is with large profitable tech companies such as Alphabet, Meta, Amazon, HP, Salesforce, Adobe, Microsoft and others, which are under NDA. And despite the well-publicized slowdowns in this sector, we should not forget that these companies do continue to grow at significant rates and are, in many cases, both partners and clients for our business. We anticipate continuing to be overweight tech going forward, but we have diversified our client base somewhat as a result of new business wins and merger contributions, particularly in sectors such as financial services, FMCG, fashion and luxury and auto. Given our consistent market-leading top line growth, it's not surprising to see that our large client relationships continue to scale. The average revenue size of our top 10 clients has grown over 85%. For our top 20 and top 50 client cohorts, reported revenues have grown at close to 80% and 75% year-on-year, respectively. The table also shows how much progress we have -- how we've continued to expand the scale and number of major clients in line with the progress in our 20-Squared plan, which I talked about earlier. As with our clients and partners, we're continuing to work on our budgets for 2023 in what's obviously a time of considerable turbulence and uncertainty. The recent challenges of some of the technology platforms have been well covered, particularly in traditional media, but one should not forget that the sector as a whole is still producing and projected to produce growth. This chart illustrates the actuals and projected growth rates for the 8 leading advertising tech platforms, Alphabet, Meta, Amazon, TikTok, Microsoft, Twitter, Snap and Apple. Analyst projections have them doing slightly less than 10% growth this year, following more than 40% growth in 2021. And as the platforms grapple with a lower growth environment, they are still projected to do double-digit growth next year, although you can see from the dotted lines that analysts have consistently downgraded their forecast over the course of this year such that projected ad revenue for the 8 platforms in '23 has declined from 18% to now 10%. As you can see from the bottom line on the chart, growth at the holding companies, which have consistently lagged both overall media spend growth, as well as, obviously, growth in digital spend is forecast to dip below 0 in 2023. A few weeks ago, the World Federation of Advertisers, which is a trade body for our clients, published a report based on a survey of their client base around their thoughts on budgets and spend plans for 2023. The first chart illustrates that around 30% of clients are expecting to cut budgets with 40%, keeping them constant and a further 30% project mainly slight rises. And this breaks out by region, as you can see, Latin America and the U.S., particularly strong. The next chart shows almost half of clients claim they'll be reducing their traditional media spend with 42% saying they will be increasing their digital spend and only 13% suggesting a reduction in digital. Final slide from this survey goes into significantly more detail on which channels we'll see declines on the left, and that's the traditional media channels and then rank the areas of digital, which will see increases. And these channels, these digital channels tie in very well with our service offering and the areas that we at S4 have invested in recently. The next slide have 3 charts, which are from Cowen and speak to the addressable market for tech services and our data practice. It's important to remember that we operate in several multibillion-dollar addressable markets, all of which are growing, many of them beyond and outside of digital media spend. Client spending on technology tends to be less cyclical, although certainly not immune to cycles, and budgets tend to be committed over longer multiyear time lines and projects. As these charts illustrate, they expect demand for engineering services to increase steadily at 20% growth. And the client universe for digital transformation is expanding dramatically. The final charts, their view of revenues for the top 5 pure-play digital transformation consultancies, including companies like Globant, EPAM and Endava. And whilst FY '23 does show a decline in growth, it is still very healthy, and they expect growth to stabilize in the medium term to the mid-20% bracket versus the low 20% bracket pre-COVID. So as we work to finalize our budgets, we believe we're well placed to take advantage of the growth that is available to us. Our diverse exposure to multiple scaled addressable markets, our strong client base with almost half our revenues from the tech sector, which continues to be -- have a strong positioning. Our geographical emphasis on the Americas, which remain the largest and one of the fastest-growing markets for all digital services. And finally, our service offering itself, which is fully focused on areas that clients intend to favor versus those which are short to decline. And with that, I'll hand it back to Martin for the summary.
Thanks, Scott. Thanks, Mary. Just to summarize just the final slide on the presentation or they have the appendix on some other items. We had strong momentum, as you see in Q3, with gross profit or net revenue, up over 29%, which was a slight acceleration over the year-to-date. And year-to-date growth was at just over 28%. The control on costs that Mary is supervising, has started to have an effect. And our people numbers, that's the number of people in the company has stabilized around 9,000 for the last 3 months. And as readout, Q3 profitability has been significantly better than H1. In fact, in Q3, bigger than H1 on its own. And the Q3 exit rate run rate is sufficient to meet the revised target. So we are also seeing continued client conversion at scale. And the biggest metric for that, we think, is the 10 Whoppers that we have inside, although you've also seen that our top 50 clients have grown by 70% year-on-year. The average revenue for each of them. Our addressable market, as Scott has said, which is digital media and marketing services, trade budgets and digital transformation is forecast to grow by 10% to 20% per annum over the next 5 years. So the underlying addressable market growth is significant, and we of course expect to grow faster than that. Our budget process and our 3-year planning process is already underway. And as I've said just before, we expect to outperform the addressable markets. Our guidance for 2022 is maintained in terms of gross profit and net revenue at 25% like-for-like. Our target for expected operational EBITDA is maintained around approximately GBP 120 million. And last but not least, liquidity has improved and net debt continues to be expected for the year-end between GBP 130 million and GBP 170 million, you saw at quarter end it was around GBP 158 million. So with that as background, you have an appendix with some other data on our share capital and contingent consideration. We'll open up for questions. So Marianne, can we have the questions, please?
[Operator Instructions] We'll take the first question from Omar Sheikh from Morgan Stanley.
I've got 3 questions, if I could. Maybe the first one for Mary. Mary, you've highlighted in the release that headcount has gone down in Q3 versus Q2. Could you maybe talk about what your plans are for headcount in Q4? Should we expect another reduction? Or in general, can you talk about the cost measures that you're taking as you go into the end of the year, try and convert revenue growth into profit growth, that's the first thing -- first question. Secondly, maybe for Martin on Q4, the implied Q4 guidance, I think, is about 15% based on what you did in the first [Audio Gap] year. So how should we sort of think about that? Because it looks pretty conservative in the context of what you said on client momentum and macro factors not impacting you. So just wondering whether you could give some commentary on your confidence on Q4 and maybe whether that guidance is conservative? And then finally, maybe again to Martin on '23, I know you're not ready yet to give '23 guidance formally. But could you just maybe lay out some of the benchmarks that we should think about when we try and frame how '23 might go versus '22?
Okay, fine, Omar. Mary, first.
Sure. Thanks, Omar. So in terms of headcount for Q4 and our plans for Q4, so what we intend to do is continue the approach we've been taking during Q3, which is to very carefully manage the headcount that's coming into the business and match it to areas where we see growth and where we see opportunities. So I think it's very important to be clear that we don't have a hiring freeze in place. We are supporting the growth of the business through appropriate headcount adds, where we see the opportunity and where we see the growth. Overall, as we think about Q4, and particularly, as we think about our exit rate from 2022 into 2023, it's important for us to ensure that our resource is effectively utilized and that we're driving the best value we can from our cost base. And so we continue to review the resource allocation, both by client, but also by capability to make sure we're in the best position going into 2023.
Okay. Just, Omar, your other 2 questions, the first one on Q4 and the implied conservatism. I don't think our maths quite are in sync with yours at 15%. I think if you run the numbers and you assume that constantly it will be about 21% for Q4, I think that's conservative too. But we continue to -- as we've done before in the first 9 months of the year, or first -- third quarter and the first 6 months of the year. So I don't think -- I think you shouldn't sort of just extrapolate that conservatism in the figures for the year. So I think we'll continue at similar levels through to the end of the year. I mean one of the things we have seen is, I think clients perhaps being a bit conservative in the first half of the year or the first 9 months of the year. It's crudely referred to, I think, it's budget flushing at the end of the year. And we are seeing a little bit of that people investing in their budgets at the back end of this year in anticipation of what may or may not happen next year. So clients try and build the level in for their budget for next year as they do their own planning. On the benchmarks for 2023, I mean, Scott has gone through in some detail what we see on the sell side for the content and DDM part of our business, which is 90% of the business. And you see there that the sell-side analysts, and they do tend to be more optimistic around 10%, a little bit under 10% in the sort of 8% to 10% bracket for the top 8 or so platforms. So that's 90% of our business. On the tech services side of the business, stronger when we look at the companies that Scott identified such as Globant or Accenture Interactive or Endava or EPAM, I mean some of them have issues, for example, in the Ukraine. But generally, that addressable market next year looks as though it will be -- continue to be quite strong as clients start to try and reduce cost in a more challenging environment. Generally, just to emphasize, we are lower down the funnel. We sometimes obsess about that we should be more up the funnel, but more strategic and more awareness orientated. But having said that, I think the demands for our clients in 2023 and 2024 will be on performance and activation. They'll be looking heavily at measurement on ROI. I was in South America last week and all the clients I saw, so 5 of our major clients in Mexico. And all of them said that they were going to be really highly focused on performance and activation and results, and they were getting significant pressure from the centers of their organizations and the finance functions to do that. So I think the addressable markets will give us in a difficult environment, not avoiding that issue will give us sufficient flexibility next year in terms of top line growth. Is that okay for you, Omar, does it cover what you wanted?
Absolutely, very clear.
The next question comes from Tom Singlehurst from Citi.
First one, I was going to just sort of just double check that we were still on track, but such that the 25% guidance for the full year remains -- it proves to be conservative if you overdeliver, that you'd expect a high proportion of incremental bottom line and drive a beat on the operational EBITDA? Or has anything changed, which also the drop-through profile hereon in, in the event that your fourth quarter expectation proves conservative? That was the first question. The second one, I just wanted to get a little bit more detail on the headcount and utilization, because I suppose [Audio Gap] you've put a lid on headcount for now, and that obviously gives you that sort of better margin performance as we progress through the second half of the year. But all things being equal, I've seen that unless headcount grows, revenue won't grow eventually. So there must be some other moving part on utilization. And I was just wondering whether you could give us some numbers to work with there that sort of help us sort of understand how -- or if headcount growth slowed significantly, revenue growth won't slow significantly?
That's your 2?
Yes, that's 2, just for you today.
I mean, Mary, do you want to talk a little bit -- on Q4, I mean, we think, as I've said before, in relation to Omar's question, continuation. And just on the headcount Mary can fill it out. I mean it could be, Tom, that we had -- we were overpeopled in the first 6 months. So what's happening is a rebalancing happened in Q3. And when you think about Q3 just very simply, headcount was flat, and gross profit and net revenues were up by 29%. I mean, QED. I mean, that's it. But anyway, Mary.
Yes. So just -- I guess just a little bit more in terms of headcount and utilization. So as I said in response to Omar's question, we are continuing to hire. And what you've seen in Q3 is, I guess, the net impact because we have addressed some areas of duplication and some areas, pockets of inefficiency. And then we've continued to hire against the strong business lines. And certainly, Tom, I think the root of your question was really if headcount growth is slower, will top line growth be slower. But actually, what we're doing is making sure we support the business as it continues to grow. So we don't expect to end up in that situation.
Yes. Just to add one thing, in addition to managing the headcount or number of people in the company a little bit more carefully and balancing it better, we are looking at utilization and in terms of pricing and pricing as well. So I think we've tightened up in a number of areas. And just to emphasize, it's the beginning of the process, it's not the middle or the end. There's still an awful lot more to do. I think that the weight of the work is more on the content side of the business than the DDM and the tech services side of the business, but we'll continue to make those efforts. But I think fundamentally, it may well be -- we discussed this in relation to Q1 and Q2, it may well be that we were imbalanced in that, and what you're seeing now is the unwinding of that, and that will continue. Did that cover it, Tom, or you want more?
Yes, it does, it does. I've got -- I just wanted to be specific about that first question, though. So if growth tracks at 29% again in the fourth quarter, does that automatically mean that there is a little bit of upward pressure to the profit guidance as well? Or it's because the growth potentially is coming more through tech services, does that slightly also deviate?
No, I mean we've reiterated our guidance on top line. We've reiterated our guidance on the bottom line. We've reiterated our guidance on net debt and liquidity, and I think that's where we'll stick.
Actually I'm now to the third question, I apologize. But the third question is, some of the other agencies have started to use, I'm afraid that I think I've ever heard before, which is pricing power, which I presume is the ability to pass on the sort of what wage and salary inflation. That is -- can you just talk about the concept of pricing power? or is that -- how much is baked in?
Yes. No. I'm not sure that I understand -- I mean you're making the comparison between us and agencies, and it's not a comparison we like or not a comparison we think is valid, but be that as it may. I'm not sure I agree with that concept. I think probably what's happened is, with inflation running rampant, clients' procurement departments, financial functions as clients themselves have raised prices in order to maintain margins, particularly in the FMCG area. Although my view is they're going to be unable to continue to do that into 2023 because there will be a limit to what consumers -- we're already starting to see in some categories, some trading down to other brands, cheaper brands or private label. I don't think it's pricing power. I think it's just psychology that in an environment where prices are going up by 5% to 10%, whatever it is, more likely the 10% than the 5%, clients' procurement departments and finance departments are more psychologically attuned to the argument that you need price increases. Having said that, the pressures on digital labor have lessened. I mean most of the major tech companies have reduced their hiring similar to ourselves, and they're doing much more balanced hiring. Some have actually cut quite significantly. We've seen that recently. The last one, I suppose, was Disney on Friday, late on Friday. So I don't think I'd agree that it's pricing power. There's a master-servant relationship between clients and agencies. And I don't think the agencies should start to think that they've got this as enormous pricing power. I think what's happening is that there's more acknowledgment of the fact that we live in an inflationary world. And by the way, to reinforce the point, I think times have changed and inflation will be with us for a longer period of time than many -- it's not transitory. But just even when it settles down and it came off, we had a pleasant surprise last week with the U.S. inflationary numbers and hopefully, that will continue. But my view would be that inflation will continue at levels that we haven't been used to for the last few years.
The next question comes from Julien Roch from Barclays.
Yes. On your GBP 120 million of EBITDA guidance, the profit warning was based on the content practice, I think, a very aggressive top line target and hiring in line with this. And you're thinking that this top line target was too aggressive when you revised the budget for the second time at Q2. I don't see a problem with the top line. You're actually seeing -- saying that you're going to still be at like 27%, 28% in Q4. So you're going to do more than 25% for full year '22. So I'm curious what was the guidance in content? Were they expecting like 15% growth or something, because I really don't see the top line problem at the moment, it's all very good. That's my first question. The second one is, if you do consensus of 10% top line like-for-like next year, hopefully, it's going to be better. But as a starting point, if you do that 10%, what margin can we expect? The second question. And then the third question is on M&A. Still no share issue below 4 -- under [indiscernible], as you've said recently?
Yes. On the M&A, let's do it that quickly. Yes, I mean, that's consistent. We've said that we won't issue equity for deals unless merger partners prepare to take it as we saw with XX and TheoremOne. And on the first one, we'll go to Mary for the for next year, if you assume 10% top line, what's going to happen to margins? On the content -- I mean, the answer to your question, Julien, is very simply, probably it's come out midway between the 2. Content probably when we issued the profit warning, the top line anticipation was even higher than we've achieved. So the answer is, it's come out so far, and we have to see what happens, obviously, in Q4, but it's come out midway between the 2. Mary, do you want to say a little bit about margin for next year?
Yes, sure. So Julien, as you've obviously pointed out and Scott's covered when we've looked at the market trends, given the macro conditions and what we're seeing, we would expect growth to moderate next year. Now we will be continuing to manage costs very closely. We're looking at our 2022 to 2023, so our exit rate from this year into next year. And therefore, we would expect margins to improve, but we're right in the middle of our budget process, and we're not ready to provide guidance on 2023 yet. That will come with the full year results when we announced those in the new year.
And then if you're not ready to provide guidance on next year, I mean your historical margin guidance was 20% to 22% EBITDA margin. Is it -- can you get there next year or is it too early and you probably need a couple of years to get back to 20%-22%?
Well, we're going to do our 3-year plan or we're actually in the middle of doing that. And we'll see what -- how that comes out in terms of margin guidance. I think to be blunt, it would be difficult for us to get back -- to answer your question directly, it would be difficult for us to get back to 20%-22% next year. That would be a fine thing if we managed to do it, but I doubt it. So I think there will be more of a progression in margins over the 3-year period. So we'll see how we go. So it won't be 20% to 22% next year, that's for sure.
[Operator Instructions] We'll now take the next question from Matthew Walker from Credit Suisse.
Can you hear me, guys?
Yes, we can hear you fine.
Yes. So the first question is, we get a lot of questions from around, what -- Have you seen any sort of high-profile departures from the group? I just want to check all these acquisitions made over the last years, has there been any one you've lost that is -- there was featured [Audio Gap] or any other key personnel from Media.Monks or [Audio Gap]? The other thing is on growth and you look at the TAM growth, let's say it's 20%...
You cut out, you said on growth?
Yes. On growth, what do you think the balance is for you between the underlying total addressable market growth and your market share gain? Because obviously, your growth is a function of both TAM and market share gains. Like if you look at '22, let's assume you do the 25% and the underlying market growth is around [Audio Gap] and for digital and a little bit more for the other bits. You're doing more than half of your growth is a gain -- so I was just interested in what your view was in that going forward? And then lastly, if you could say anything about the hiring outlook for 2023, because clearly you said you've overhired, now you've got this sort of flattish growth in headcounts. When you look at 2023 to support the growth hiring, how much hiring do you think you need to do in '23?
Okay. Would you want to deal with the first one on the high profile departures?
Yes. Yes. So no high-profile departures. I think we've done over 30 transactions since we started the company. Obviously, as you know, a big part of our deal structure is encouraging entrepreneurs to join S4 and become significant shareholders in S4. And we have -- probably it depends how you look at that list of 30 companies, but we probably have 60, 70 entrepreneurs who were major shareholders in their companies and are now major shareholders in S4, of those around -- we've had around 5 departures, but no high-profile ones and no sort of major unplanned ones. So nothing there.
On the growth question, Matthew, it is quite difficult to figure that one out. Yes, I think we are gaining share. I mean the best way I can put it is, there's a sentence in the report on Q3, which talks about recent wins in FMCG and tech and retail and financial services, which will kick in, not at Whopper level, but at significant levels. And the pleasing thing about those wins is that in all cases, they were not big pitch wins. These were what I would call land and expand wins. I mean, there might have been many pitches in 1 or 2 of them, but they will have an impact next year. So 1 tech company where we have an existing relationship and has expanded, 1 FMCG where we had no relationship, it was a mini pitch, I guess, went on for about 3 months, and we were assigned global content production. So financial services, actually a couple of financial services companies, where we initiated and expanded relationships and then a retail relationship, which has expanded. So I think we're clearly gaining share. It depends on which addressable market you're talking about. On tech services, and we're growing pretty much like the others, our business is smaller. It's only 10%, about GBP 100 million plus of gross profit net revenue. I mean it's relatively small in comparison to the companies that we mentioned as competitors, but it is growing quite fast. But I would say it would be very difficult for us to figure it out. It's a bit of market growth, and it's a bit of market share growth. Do you want to talk about hiring for '23, Mary?
Yes, sure. Matthew, so when we think about hiring outlook for 2023, I wouldn't expect the headcount to remain flat next year. We will be supporting the growth of the business with additional people at just in the same controlled way that we've done through Q3. So it's really important, as I said earlier, that we support the growth of the business and make sure we have sufficient people on board to drive the top line. So I would expect it to continue to grow just in a controlled fashion.
Yes. The only thing I would add to that is, we -- the things that Mary and her team are doing, together with people inside the practices is not just about balancing hiring with net revenue growth. It's about pricing. It's about utilization. So there is -- in my view, there's a way to go yet before we get it right across the whole business.
If I can, just one quick follow-up, which is, when you look at the tech growth, they've obviously been very mixed, some [Audio Gap] -- some pretty bad, to be perfectly honest. When we're looking -- look at your top line, you'd be not so much looking at the top line of Google and Facebook, et cetera, or like what they're spending on sales and marketing? Or do you think the 2 are so closely aligned it doesn't really make any difference and looking at the top line is still the right thing to do?
Yes, I think it's both, but I think the top line drives that. I mean I think you have to remember those tech companies are not just clients of ours, they're partners of ours as well. So obviously, the revenue growth they have from advertising is a strong indicator of the sort of health and growth opportunity, particularly for our content business and for our media business. But we provide services around their products. If you take Google, for example, we provide services around Google Cloud around Google Analytics around their core advertising technology products as well to our other clients as well. So it's all interrelated, I think.
Yes. I mean I just like to say, I mean, when people are down, analysts and media like to give people a good kicking.
Particularly newspapers.
Yes, they like to give them a good kicking. And when you actually look at the numbers, Matthew, I mean, let's get it into perspective. I mean the fact that the world's richest man is buying or has bought a platform which is 1% of global digital revenues. And by the way, in his initial plans, he wanted to increase it to about 2%, 2.5%. So I'm not saying it's a rounding error, but it is relatively small. People look at Snap, which is roughly the same in terms of ad revenues as Twitter, a little bit more, but again, around 1%. The platforms to look at and come back to the basics for a minute. Alphabet, it will go from about 205 billion to 220 billion, 225 billion this year. Meta will be flat around 115 billion, there'll be some currency noise in there that probably makes it look a little bit worse than it is. Amazon is going to go from 31 billion to 40 billion or 41 billion. TikTok, we don't know that there's some varied numbers, ByteDance, 60 billion this year going to 90 billion next year. TikTok, within that, ex China, outside China going from 5 billion to 10 billion. I think the FTE suggested they were going to come off from 12 billion to 10 billion. Those are the ones that made the inroads. Then the -- we mentioned this in the press release, in the Q3 trading statement, there are new entrants. There's Apple, we don't know what Apple's ad platform is, but we guess around 7 billion. There's Microsoft, probably around 10 billion. And if it does the Activision deal, which probably -- well, I don't know, maybe it's 50-50, but maybe it's more than 50-50, it will go through. That will -- you have Microsoft with Netflix now, just launched their ad service, probably at too high a price, but they have the ability to come down. There's Disney+ also coming into the marketplace. These things tend to get, I think, overlooked. And I think the prospects for Meta, for example, I mean, Meta is condemns the source of all evils. I mean it's a nonsense. And I think Meta is in a position now to build. And after all, it will do, as I said, about 115 billion this year. So I think we have to get these things into perspective. And I think that we've lost perspective on this. That doesn't mean that growth hasn't slowed, it has. And it doesn't mean it's not tougher than it was, it is. But I think, again, we've lost perspective on it.
We'll now take the next question from Steve Liechti from Numis.
I've got 3. So first of all, on DDM, can you just give us a little bit more color? I know the growth is still 15%, and it has slowed down from the first half. So just [Audio Gap] there in terms of trends. Because I would have thought that, that business would be doing better, given [Audio Gap] that's the first question. Secondly, Mary, this might have been me just not hearing you, but did you actually say on headcount in the fourth quarter relative to the third quarter. If the headcount was down minus 1% in the third quarter, did you give a number for the fourth quarter, i.e., is it certainly going to be down 1% or did you not sort of [Audio Gap] give us a rough number, I don't know if that's possible? And the third one is, just give us an update on the systems and controls that you're putting into place or have put in place there, where you are referencing the utilization of trying to work out that you know what is best value and [Audio Gap] -- as you just provide this?
Okay. Do you want to do with those last 2?
Yes, sure. Steve, no on headcount, I didn't give a number. We will continue to manage it tightly against the growth of the business during the fourth quarter, but we don't have a fix on the number for the year-end yet. And then on the second question, in terms of systems and controls in terms of utilization. So there are a few things going on. So firstly, as we've said, during Q3, we reviewed any pockets of duplication or inefficiency within the business that had grown up as a result of the very, very fast growth. Secondly, we now have in place a set of processes around the larger deals, so what we call the deal desk where we review the pricing, the utilization, the resource allocation. And then we are expanding the processes we have for managing the larger clients on kind of on a day-to-day basis in terms of ensuring that the resource allocation is maximizing the utilization as we go through. So quite a lot of work going on there. I think as Martin said earlier, we are continuing to work on our cost base and our people, organization, and there is more work to do as we exit '22 and go into 2023.
Yes. Just on DDM, if you were to break it down, I think probably in Q3, they're more affected by what you saw in the platforms, the slowing of growth, I mean, 15% is not bad, even in the context of what's happening in the platforms. But I think the answer, Steve, is they were affected by what was happening in activation and performance and programmatic in Q3. I mean on a geographic basis, it's probably similar to what you saw happening geographically in a sense because China obviously had an impact on Asia Pacific. Interestingly, America grew or was faster in Q3 and EMEA was faster in Q3 than year-to-date. So it will be even better than H1. But I think coming back to DDM, it's more to do what was happening in activation performance and programmatic in Q3. We'll see what happens in Q4 and going into next year.
We will now take a follow-up question from Julien Roch from Barclays.
Yes. Quick follow-up. Could we get the base for net revenue in Q4. So we just have to add like-for-like on that number so taking into account all the M&A?
What do you mean the base?
The pro forma base.
So the like-for-like base in Q4 '21.
Okay. The Q1...
Yes. So Julien, we haven't shared specifically the pro forma number for Q4 2021. What I would suggest is take the figure from last year. And then obviously, there are only 3 mergers this year to adjust for, and there were numbers and indications in the press release associated with those.
So that will be a 4Mile, XX and TheoremOne. Okay. Julien?
As there are no further questions.
All right. Thank you Marianne. Thank you, everybody. Thanks for joining us. Any further questions. Scott is here, Mary is here, I'm here. We look forward to talking to you next year on '22 and beyond. Thank you.