Participants

Lin Song; Co- Chief Executive Officer; Opera Ltd

Matthew L Wolfson; Vice President and Head of Investor Relation; Opera Ltd

Frode Jacobsen; Chief Financial Officer; Opera Ltd

Eric Sheridan; Analyst; Goldman Sachs

Naved Khan; Analyst; B.Riley

Lance Vitanza; Analyst; TD Cowen

Mark Argento; Analyst; Lake Street

Alicia Yap; Analyst; Citi

James Callahan; Analyst; Piper Sandler

Presentation

Lin Song

Welcome to the Opera Limited 4th quarter 2024 earnings call. (Operator Instructions).
I would now like to turn the call over to your speaker today, Matt Wolfson, head of investor relations. Please begin.

Matthew L Wolfson

Thank you for joining us this morning. I am joined by our co-CEO Song Lin and our CFO Frode Jacobsen. Before I hand over the call to Song Lin, I would like to remind you that some of the statements that we make today regarding our business operations and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially.
Please refer to the Safe Harbor statement in our earnings press release, as well as our annual report, including the risk factors we undertake no obligation to update any forward-looking statement. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of non IFRS to IFRS measures is included in today's press release, which is distributed and available to the public through our investor relations website, located at investor.opera.com.
Our comments will be on year over year comparisons unless we state otherwise. With that, let me turn the call over to our co-CEO Song Lin, who will cover our 4th quarter operational highlights and strategy, and then further to Jacobson, who will discuss our financials and expect expectations going forward. Song.

Lin Song

Sure. Thank you, Matt, and thanks to everyone joining us today. We have certainly been looking forward to giving you a business update and sharing our first caller results.
In terms of business and revenue momentum, it's failed to say that the equal opportunities we have been focusing on, have driven and acceleration well beyond our expectations and guidance.
Combined with a great product lineup, user growth in high up regions, and our ability to operate as a fast, independent player in an ecosystem with accelerating innovation, this totality makes us even more excited about the opportunities ahead for opera.
Our year over year revenue growth went from 17% in the first half of 2024 to 20% in the third quarter. We had guided to 21% growth in the fourth quarter and ended up beating our own guidance by 800 basis points coming in and 29% year over year.
Yes (inaudible) give us comfort to guide for a continuation of this elevated growth trajectory into the start of 2025.
Adjusted EBITDA also came in above the high end of our guidance range and sorted $3 million or a 23% margin.
Advertising revenue was $93 million, growing 38% year over year, and accelerating further from the 26% growth rate we saw in the third quarter.
As then, revenue performance was led, in particular by e-commerce opportunities raising opera ads.
Such revenue was $52 million in the quarter, up 17% year over year, and also accelerating more than expected. This is the so holder's 13% growth rate.
As our strategy is to focus on growth efforts around the highest Apple potential users, which continues to drive healthy revenue from both search and advertising partners.
In fact, during the 4th quarter, we were able to grow euros in Western markets, a proxy for high-value users by 3.5 million.
North America and Europe now represents almost 19% of our user base, up from 16% a year ago.
Our annually apple growth started 3% year over year to $1.98.
Another record and the highest Apple growth in 2 years.
Our mobile browsers for Android and iOS had a tremendous 2024, with the most pronounced growth in the EU with the introduction of the DNA and the choice screen for iOS users. Total iOS user growth was over 50% in 2024 and we more than doubled our number of users in the EU.
We are coming from a small iOS base, but as discussed in recent quarters, the EU is driving an agenda of more open competition within both iOS and Windows, and we are certainly working hard to give those incumbents a failed challenge.
During the 4 quarter released the latest versions of both Opera GIFs and Opera One
New product releases solve multiple photos. The most obvious is to offer our users the latest visuals and design elements, investing in our position as their preferred browser among field competition.
New releases also generate exciting media and the influence of coverage, which benefits the inflow of new users and partnerships. And finally, and each iteration we get one notch better and new. The stickiness and new releases include our latest lessons around the user journeys and optimize the onboard experience to make it as easy as possible for new users to make the browser a part of their life.
The Opera R2 launch brought a revamped look, dynamic scenes, soundscapes, as well as split screen and enhanced tap management officials, make it the best and most beautiful opera browser to date. Opera One also received many of the AI officials tested within the officials job program throughout 2024.
The AI official jobs program continued evolving in a developer browser version with the introduction of a unique Opera AI tap commands.
On the mobile browser site, both opera for iOS and Android gained AI image understanding capabilities.
We continue to pioneer new innovative AI officials. We are very excited about agent tech browsing and believe there is a smart way how this may be best implemented, allowing AI to perform tasks for the results on the web with efficiency.
As one of the most tech rooted browser companies, we are positioned to differentiate in this space. So, stay tuned for exciting announcements to come.
Opera GX popular gaming browser, also received its first major facelift since its launch in 2019 with a new design language and then expanded molding universe. The Q4 user base grow to 33.9 million MEUs, up 2 million, this is Q3, and up 22%. This is Q4 last year.
Analyse A to gaming and $3.58 Cents quite stable on a per-user basis as we continue to expand our user base into new regions.
The GX community continues to grow as well. In 2024, we saw a 36% increase in the number of games available on our GX game site with time spent up 50% and the number of GX.me accounts up 80% to over 10 million.
Although this month, we introduced our latest PC browser, Opera-L, which is the first browser built around the concept of mindfulness.
While it shares its text platform with Opera One, this beautiful browser is designed to make its users feel better, be more focused, and even more productive.
The browser integrates mindfulness tools such as bracing exercise, meditation, and stretches, as well as soundscapes with binaural beats. We have already seen this browser received great acclaim by the tech press.
iOS had an incredibly strong force for driven by our intent-based audience monetization offering where we leverage our vast amount of interest and intent signals to connect the business with end users.
Browser usage is a lean forward experience where high internet activities can be monetized not only by our social and our start page inventory, but also across personal inventories that is proficient in our audience extension platform.
The combination of false party signals and expanded inventory creates a very scalable channel for performance advertisers, especially within the e-homos and the travel verticals, where we experienced great success in the call.
Thanks to our investments in priority AI algorithms and in our own data center, we have developed ports-built AI models that help operate ads, identify interest and user intent.
Performance advertisers, it is important to reach the user at the right time in the right context.
This is exactly what our algorithm has been trained to do.
Coupled with our advanced dimension bid technology and high performance global infrastructure, we are able to deliver superior res, meaning return on a spend for advertising partners across both owned and operated as well as. Inventories.
With our data center investments earlier this year, we captured the benefit of the extended shopping center in Q4 that spanned well beyond the Black Friday peak with many local and regional sales events throughout the whole season.
Our rapid growth in Western markets is also creating a flywheel effect to the audience platform offering, helping us to further elevate our efforts in acquiring high up users in an ROI positive manner.
To summarize, we are very pleased about the high activity level across our company and how we also draw strength and seize new opportunities by being leaner and faster.
As we enter 2025, our baseline is very healthy and our ambition level is high.
We have shown what we can do, and it's still only on so many fronts.
With that, I will hand it over to Frode.

Frode Jacobsen

Thank you. The 4th quarter really crowned the year as a whole with a substantial payoff to our strategy, both in terms of our focus for product development and user growth, as well as on the monetization and partnership side.
Our 29% year over year growth was 12 points higher than the growth rate at the start of 2024 and well ahead of what we had guided for the fourth quarter as well.
As we scale, we unlock new opportunities and partnerships that can create these outsized trajectory moves for an agile company like Opera.
And as you started to see in the 3rd quarter also, when that happens, we double down to seize it.
The strong overperformance versus guidance was predominantly fuelled by the 38% annual growth of advertising revenue, though it's worth highlighting search as well that ended the year at an also impressive 17% annual growth rate.
In isolation, our rapid quarterly scaling of advertising revenue, including on third party inventory, comes with a margin percentage headwind, though of course a dollar wise profit tailwind.
Still, we achieved a quarterly adjusted EBITDA margin percentage in line with our guidance.
And with that, the dollar amount of EBITDA exceeded the high end of our guidance range as well.
In terms of cost, we raised our marketing spend to $41 million on the back of our new Opera one, GX, and iOS releases in line with expectations.
After working to ramp our marketing activities throughout the year, we were pleased to find sufficient opportunities to scale at attractive ROI in the seasonally important 4th quarter.
Cost of revenue items came in at $48 million or 33% of revenue, scaling with the revenue over performance.
Compensation costs reduced a bit more than expected versus the prior quarter to $17 million and all other OpEx items before adjusted EBITDA also reduced slightly to $7 million.
With these results, Q4 marks our 15th consecutive quarter as a rule of 40 company, and yet another quarter of meeting or exceeding our guidance.
Taken together with our material step up in scale over the past years, with the revenue run rate now exceeding the half a billion dollars dollar mark, as well as healthy profitability and cash flow generation, we believe that opera benefits from increasing interest and awareness also within the investor community.
Taking a step back, we can compare actuals for the year to our initial guidance.
At the start of 2024, we guided for 15% annual revenue growth with a stable EBITDA margin.
After a year of successful execution, we saw revenue growth accelerate to 21% for the year, and our EBITDA margin expand from 23.6% in 2023 to 24% in 2024.
That overperformance versus initial guidance resulted in $23 million of incremental revenue for the year, of which we converted $7 million or 32% to incremental adjusted EBITDA.
Our operating cash flow was $21.7 million in the quarter, representing 66% of adjusted EBITDA, which was ahead of what we had expected following the unusually strong cash flow in the third quarter.
On a four year basis, we converted 91% of adjusted EBITDA to operating cash flow compared to our most recent expectation that we'd come in at about the level from 2023, which was 88%.
Free cash flow from operations came in at 61% of adjusted EBITA on a full-year basis, or 77% is excluding the $19.1 million Q1 investment in our AI cluster in Iceland.
And finally, more of a housekeeping note. As of early December, the ratio between opera's shares and our publicly traded ADSs has become 1 to 1, which we achieved by merging 2 and 2 underlying shares. While it had no economic impact to any shareholder, it simplifies the structure and aligns amounts on a per share per ADS basis in this report and going forward.
With that, I'll turn to guidance, most specifically for the first quarter, but will also provide an initial perspective on 2025 as a whole.
On the revenue side, we are excited to see the major step up we drove in Q4 continue into the 1st quarter.
That is advertising at a new scale for Opera fuelled by opera ads on both our own and third-party inventories.
Within this e-commerce continues to be the vertical that explains the bulk of the realized revenue growth, acceleration and near-term potential.
All in all, we are guiding to a continued 29% year over year revenue growth in Q1 at the midpoint with a range of $130million to $133 million.
As you see from the guidance range, the growth rate might even tick up a bit from Q4.
With the confidence of nearly 2/3 of the quarter already behind us, that certainly represents a great start to the new year.
We guide Q1 adjusted EBITDA to be in the range of $28million to $30 million or a 22% margin at the midpoints.
In line with the elevated growth rates, Q1 is expected to over index on ad tech growth, and consequently, we allow for cost of revenue items as percentage of revenue to come in around the Q4 level.
We expect marketing costs in the mid to low $30 million, and we expect cash compensation costs to increase about $1 million versus the Q4 level to be more similar to the recent average quarterly cost level.
Other items combined are also expected to tick up slightly versus Q4.
Beyond Q1, moves like this would really compound, if directly translated to guidance for the full year.
Our initial 2025 guidance certainly reflects a higher than anticipated growth rate multiplied by a higher than anticipated 2024 revenue base.
At the same time, and as you know from prior years, we prefer to leave room in our guidance so that we could revise upwards as trends mature over time.
As a result, we indicate $555million to $570 million revenue for the year, a 17% year over year growth rate, and adjusted EBITA of $132million to $138 million or a 24% adjusted EBITDA margin at the midpoints.
I'll underline the initial nature of the full year guidance as we are in the midst of a period with rapid scaling and with limited historical reference points.
To set a reasonable opening expectation for the year, we had modeled a more normalized sequential growth from Q1 to the later quarters of 2025.
That results in a relatively stable trend of quarterly revenue growth measured by a 2-year CAGR which captures the scale we have built in recent quarters while also evening out our forward-looking growth profile.
In terms of cost and margin assumptions for the year, I'll share some directional perspectives.
Our baseline expectation for 2025 is that the margin headwind from growth in cost of revenue items will be offset by a margin tailwind from economies of scale in the remainder of our cost base.
We expect that cost of revenue items combined will reach about 30% of revenue in 2025, up from 27.6% in 2024.
We expect that marketing costs will grow at a year over year percentage in the low 10s with dollar amounts increasing quarter to quarter from the 11 starting points in a step-wise fashion and in a way that supports continued healthy ROI on this band.
We expect both cash compensation and all other OpEx items pre-adjusted EBITA combined to grow at year over year percentage rates in the mid to high single digits.
In other words, marketing, compensation, and the sum of the other smaller OpEx items are all expected to continue declining as percentage of revenue in 2025.
In conclusion, that's a wrap on yet another year that came in well ahead of expectations across financial KPIs such as revenue, profitability, and cash generation.
We are excited about the speed with which we enter 2025 and look forward to giving you more colour and how the year and outlook evolves with our Q1 release, which is just two months out.
With that, I'll turn the call back to the operator for questions.

Question and Answer Session

Operator

Eric Sheridan with Goldman Sachs.

Eric Sheridan

Thank you so much for taking the question building on the remarks, and thank you again for all the detail you guys always give you talked a little bit about the rise of agentic AI and obviously we've seen a lot of beginnings of innovation around deep research. Can you talk a little bit based on the investments you've already made in AI about what you're learning about how the product and the platform might evolve and develop in the years ahead? I'll leave it at that.
Thank you.

Matthew L Wolfson

Yes, so it's only how, I guess I will try to take this. It's, I understand it's a very big question. So, there's many things which we can elaborate, but I, I'll try to also be slightly briefer. So, I think there are several trends. So, first of all, of course, there's two levels of things. So, from any digital level, we as a browser, I think it's of course, super interesting, and, like, there's so many things can be done.
I guess our position would be that as a browser, we are perhaps less, concerned about which particular and the big language models we are using, but more how browser can design the best way to allow users to interact, and also perhaps allow, the, let's say the potential agent to fully using the browser architecture to do things much more efficiently, maybe 10 times more efficient than some of the other players in the field, right?
So, for instance, we saw some of the demos out there for potentially using, the browser agent to Help you to buy stuff. But the problem, of course, is that the current implementation, which has been demoed, are all based on a picture-based, frame by frame you send out the picture to the cloud to analyse, and then to return some move of cursors or whatever.
So, the benefit of those of course is that it's more like, it's really not a browser, but more like a system and solution which you can use in any interface, but the problem, of course, is that it's not really usable at this point because it's too heavy, way too heavy, and, not really efficient and not really accurate.
While, of course, as a browser, you have access to all the web elements, right? Like, for instance, you can really access all the web, elements in a doomtree, that you don't really have to go to compose some graphical models. So that's why we believe that as a browser vendor, there is a chance for us to make this maybe 10 times more efficient, and make it actually relevant to for the end. To allow the agents to make many real tasks in a browser for real way.
So, I also mentioned a bit on the script, we have some upcoming PR release, that, and demos, and, could be of interest. So, I think just stay tuned for that. And then maybe I'll just also super quickly click on, from other aspect, right? So, I think AI is really is agent I really have deeply penetrated into every aspect.
Of the life, right? So, on top of what end users see, interact, of course, it's also equally important how company can incorporate that into all the aspects of workflows, from, of course, we are developing company.
So from how they actually coding, how we can make our developers maybe even more efficient, to the fact that how we can, use them to create app creatives. For instance, so our app platform can be so much more efficient, how to, do proper categorization of User intent, for instance, to make sure that the more accurate ad has been sent to the users in a more relevant way.
So, I would almost say that that is what we also see make a big difference, on the background, and probably helpful to our growth, even beyond our guidance, as was indicated in our Q4, even though maybe not directly visible from any user point of view. So I think, all those aspects are becoming irrelevant, and it's very interesting to see how this develops.

Operator

Naved Khan with B Riley Securities.

Naved Khan

Great, thank you very much and congrats on the good execution here. I have a couple of questions. One, surprised by, the strength in search, because this is, a relatively older business, but, surprised with the pick up and, wondering if.
What kind of drove this trend and the and the and the growth that we can maybe assume for it into 2025, your Q1 guidance kind of implies that there's probably not going to be a whole lot of slowdown in search and maybe on a related topic just talk about the Google, renewal.
The second, question I had is around the at tech business, it's growing really strongly. And I'm wondering if it's what are the biggest drivers is it addition of more advertisers or is it expansion of the program into more regions? Thank you.

Matthew L Wolfson

(inaudible). okay, sure, further, maybe you should begin.

Frode Jacobsen

Down surge. I think we commented last quarter that we expected it to come back up from the 13% over year growth rate we saw and we saw the year come in and at about 15%, I believe, search growth rate. So I think, as you say, it is a more mature revenue stream and 15% growth in search. I think is a very strong result for the year. It's certainly within advertising that we have the more degrees of freedom in a sense.
So as we look ahead, I would at least start with the growth of the year as a whole and then sort of project from there. In terms of the Google renewal, we're now in the year of extension that Google elected to exercise early in 2024, which I think was a positive signal that they shared with us, back in April.
I think we expect that during the second half of this year we'll, extend the partnership. As we typically do every 3years to 4 years.
I'll hand it over to you Song for ad tech.

Lin Song

So, yes, quick comments for Epic. So I guess maybe to answer your question, right, so I would almost say it's, probably.
Not as important as the region because we have already present before the kola, before Kola also in those key regions, but rather, I would say, deepening the relationships, especially around e-commerce, as we also have commented a bit, in the scripts and press release that, of course, Q4 are traditionally a very strong shopping season, so some of them are expected, but I guess.
Even a bit beyond our expectation is, the actual execution and how we are able to fulfil performance. So, maybe I'll just comment that the, also the key aspect is that most of our advertisements are performance-based. So we want to get paid, is a good performance.
But the good part of it is that, of course, if there's a good performance, there's almost, then we can get the Lot of budget, right? So I think what happened is just that, I think we have the execution well, also with the help of and a few others that, we actually are getting more budget than we previously estimated and that's actually resulting exceeding, largely exceeding we have been anticipated even internally, for Q4 and looks like we will also be able to continue that trend into Q1 as well.

Naved Khan

Great, thank you.

Operator

Lance Vitanza, TD Cowan.

Lance Vitanza

Hi, thanks guys for taking the questions. I've got a couple if I could. The first, on the iOS penetration in Europe, it's great that you're seeing so much progress there, but is it still sort of fair to think that your penetration, so to speak, of iOS users even in the EU is still, rather de minimis and closer to zero than the 1%? Is that right? I mean that's not a bad thing in my mind, but I'm just trying to get a sense for where you are today.

Matthew L Wolfson

Yes, so, okay, so it's only again. Yes, I think it's failed to say, I don't know about like 0.1, whatever, but I think I guess at this point, of course, everyone.
Except Apple, because of the policy, right? Because of limitation, whatever, everyone are still in a very unfavourable status, in iOS, which means everybody has also a lot of room to grow. And we also see that, to be fair, we see that, with every iOS update.
Apple has been trying to comply some of the aspects of, the requirement from You, for instance, which leads to higher and higher penetration of the other browsers, and, I guess our hope would just be that we will be one capture most of the benefits. But you are right that it's super hard. There's many times potential we can grow, and we believe that will happening. So that's what we're working on.

Lance Vitanza

Okay great and then I wanted to ask you about penetration in the US on the iOS side and I might be mixing up my markets here, but I've heard some anecdotes that the downloads of opera browsers on the Apple App Store have spiked here in the first half of the 1st quarter. I'm wondering if you can comment on that or is that or was that spike taking place in in Europe?

Matthew L Wolfson

Both actually, so, first of all, there are good spikes, in Europe for sure. But as I would say, almost a silo effect, that I think the key is the user awareness that, of course, when most people are aware that there are actually third party browser options. Even available in iOS, right, because of, I guess, some of the things happening in Europe, we also see, we definitely see a spike of downloading and iOS penetration in the US, which of course is very positive and also give us a boost. So I think, Europe, for sure, US, yes, we also see that.

Lance Vitanza

If I could just get one last one in back on the sort of the search versus advertising revenue split.
When I had launched coverage, it was sort of like 60% search, 40% advertising, and I'd just gotten used to thinking of it as having reversed to 40%, 60% and now at least in the fourth quarter it was 35%, 65% advertising if I if I'm doing the math right.
So the question is that trend likely to continue in 2025? I mean, do you see could we could we get to 30, 70 for the year or maybe as a run rate by the end of the year and really I'm just trying to think about how we should model the two revenue line items in the context of your consolidated revenue guidance and you know put another way, maybe I'll ask the question this way the ad revenue grew twice as fast as search in the 4th quarter.
Do you think that that ratio holds throughout 2025 or should we expect a more of a, mean reversion for both of those two growth rates?

Frode Jacobsen

I would, headlines for here. I would forecast search as a revenue stream of somewhat less volatility.
Look at how we grew for 2024 as a whole and sort of, and then do classic forward-looking projections. And then I would say that the variance in the forecast is more likely going to be due to advertising revenue growth, and we certainly expect that the growth rate of advertising will stay higher than the growth rate of search also next year.
You're right, search used to be the bigger revenue component, and now we're down to 36% in the fourth quarter. It's still 39% for 2024 as a whole, just keeping that in mind, down a couple of percentage points from the prior year. And sort of by the diverging growth rates, we expect that trend to continue.

Lance Vitanza

Thanks guys.

Operator

Mark Argento with Lake Street.

Mark Argento

Hi guys, good morning. Congrats on some strong results. I just wanted to drill down a little bit more on advertising just given the significant performance, could you, obviously, you said that you should, we're going to see continued growth at elevated levels in the Q1, maybe taper down to the year just given a lot of larger numbers. But could you, maybe help us think about the seasonality of that business?
I know, obviously the e-commerce piece of that which is obviously has plenty of seasonality, is a bigger piece but just help us maybe understand that incremental revenue a little bit, the contribution, maybe, concentration levels, anything you can kind of help us better understand how that might look as it rolls, into the model of the year.

Frode Jacobsen

Yes, Mark, thanks. I'll comment on that. Of course, we put behind us a year of tremendous growth and very positive incremental growth versus expectation from one quarter to the next as the year has. Progressed.
As I, mentioned in my prepared remarks as we defined the initial guidance level for 2025, we tried to take a more normalized sequential move from where we see Q1, where we expect Q1 to come in and throughout the remaining quarter. So then it's sort of nicer step-ups from Q1 to Q2 and then onwards to, and then bigger increases from Q2 to Q3 and Q3 to Q4. So the bigger, sequential moves will take place in the second half of the year, most likely.

Mark Argento

In terms of the customer concentration or relationship concentration, are you guys selling, the e-commerce relationships are you selling those direct or you know how concentrated are those, revenue streams?

Frode Jacobsen

I'll let Song comment on the details of the business at a broad level, of course, the broad topic is with the growth of advertising, which has many more players in the ecosystem. Our customer concentration is also declining or being more diversified.

Lin Song

So, yes, I can add a bit there, right? So, I guess, so, for that's saying, of course, the concentration are definitely more diverse than say such, for sure. On the other end though, just to comment that we typically directly work with each e-commerce partners, no, not really with so many agencies, or even if it's agency that's on behalf of us really.
So, I would say, that is fine. We're not really dependent on one or two agencies. I guess, it's not an issue, but more like, of course, the other fact that we typically only want to work with the biggest e-commerce playoffs because that's, where you have the mass effect of scale that could be relevant to us, which, also indicating that for a particular reason. Regions or countries, of course, the, there are a limited number of top e-commerce players.
So we have some limitation there like our solution for now, I definitely focus on the big ones which can give us the benefit of scale. So just to take that into mind. But overall, of course, it's still a lot more diversified than such or analysing we used to have.

Mark Argento

And then one on this last quick follow up is from a geographic perspective is it mostly Western US Europe what's the you know the key demos that you guys are focused on?

Lin Song

I can answer So, sure, go ahead for that.

Frode Jacobsen

Okay. We see, revenues in Western markets grow faster than our revenue growth overall. So that is North America and Western Europe as the faster growing regions, representing well over half of our revenue, even though, as we point out in our investor presentation, they represent 19% of the user base which is substantially.
But still today a smaller footprint than our emerging market user base. So of course with that also lies a lot of our potential as we continue to invest in growing those regions as the by far highest RRU regions.

Mark Argento

Great appreciate it guys thank you.

Operator

Alicia Yap, Citi.

Alicia Yap

Thank you. Good evening, management. Congratulations on the strong set of results and also the guidance. Thanks for taking my questions. I have a couple follow up on the guidance and then I have a question for some.
So first of all, I think you just mentioned, on the sequential basis, the second half, the sequential growth is stronger. But then if we look at what your, on the year or year basis, your first quarter. Versus your full year if you take the midpoint.
Is that suggesting the second half, the year over year will be slower than the first half a part of it obviously is the basic effect, right? And then just kind of curious, why would the, why won't the re-acceleration of the growth that we saw, in 4Q and imply in your 1Q to sustain, into the second half as well.

Frode Jacobsen

Hi, Alicia. I'll begin there. So you, you're right, of course, in your observation, I just want to point out that, the fourth quarter in isolation lifted our full year revenue growth from 19% to 21%. So that added $10 million to our, base, 2024 base looking at into next year. So as we guide, we don't want to bet that we're going to have a similar outsized move from Q3 to Q4 in 2025.
We'd rather base our initial full year guidance on a more normalized move from one quarter to the next and then of course work very hard to bring more good news as the year progresses.

Alicia Yap

I see. Got it. And then, the EBITDA trend is actually a little bit reversed, right? Because you got the first 2 is 22% and then the full year is 24%. So is that assuming we actually will be spending maybe quite a bit of, let's say the marketing and all that, but then second half, we're going to enjoy quite a bit of leverage.

Frode Jacobsen

I would say it's almost keeping with our tradition because last year when we started out 24, we guided our EBITDA margin to stay stable with sort of these offsetting moves. And when we guide now for 2025, we do the same thing again.
Of course, it, it's at a slightly higher level now than. Before, so I think we are seeing economies of scale as I walk through a bit on the call in our cost base, but as we are generating this tremendous growth within opera ads that does come with cost of revenue, that in terms of like percentage margin is an offsetting factor to the economies of scale.
So as we start the year, we say, let's expect that the two effects will be of about equal magnitude in terms of percent. But then, of course, driving more dollar, than otherwise, and then we'll see, we'll learn more as the year progresses.

Alicia Yap

I see, got you. Thank you. And then, so questions for song, just wondering if you can share, what's your view, of deep sea and will Opera also consider incorporate the R1 into your browser? And follow up on that is that how are we, or how should we be thinking about the longer term position of the search function within the browser? Do you think over time, as user, switching, to AI chatbot to get their queries and all that, it will be a diluted impact to the search function of the browser positioning. Thank you.

Lin Song

Sure. So, yes, so I guess one, we have already incorporated the Deep sea, into, our models. So, I think we made an announcement earlier on last week, I believe, that we actually, not only have Deep sea Incorporated, that we actually has, place it in a local model support, which means, develops, can actually download the deep model themselves and run locally on the machines.
And the best of that, of course, it For protect of Users privacy because no data will ever leave [Yall's] computer. And this actually also works quite efficient because the [DCR] are actually very good at, have a very small consumption of computer powers. This is how strong it was to be able to perform the tasks. So you can try that. Quite exciting. And then I guess for your question of, what, what's your view on, so this chatbot or whatever. So, I guess to ask.
We believe that, I think it's maybe less about chatbot, right? So I think in the end, so will becoming smarter, right? With the enhanced of AI and how you interact with the web page and with information will also becoming smarter.
So I think this will evolve, such will becoming more, smarter, and then there will also be new ways of. But for us, the most relevant is how to make sure all those happen in a browser context, right? Because it doesn't matter which way, as we also demonstrated, the key is that we want to make sure the whole user intents and the whole user engagement are actually happening inside the browser because as far as this is happening.
Then we are confident that we would be able to find a way to monetize and And we also see the similar trend that the advertiser, they are also focusing on where comes the highest user intent and who can capture it. And as this is happening in our browser environment, we're very positive. So we are almost a bit neutral about, whether that happens, purely on the social context or our smart social context or in some other forms which are to be evolved.

Alicia Yap

okay. All right. Thank you song and Thank you Frode.

Operator

Jim Callahan, Piper Sandler.

James Callahan

Hi, thanks for taking my question. First is just a question on sort of the audience extension piece. So you're seeing really strong advertising growth in 4Q, and we're also seeing sort of a big uptick in in Western market users I guess is the audience extension revenue piece we're seeing today is that a function of the users you acquired last quarter two quarters ago? Or are you like, is there a lag effect we should consider here or are you able to monetize those users on the audience extension piece right away?

Lin Song

Yes, so I guess I'll give it a try. Yes, so I guess high level, not necessarily. So I think, yes, there is a flying wheel effect that the modules we acquire in relevant markets. It's allow us, to actually build up the models which would work also in the about the inventory, right?
So it always helpful, but I don't think it's necessarily, I would say, A lag effect per se, more like, let's say a cumulative effect is probably a better way to say it, that of course the more way down. Then the better we can do and the better we can do, the more, and then we can get better ass which allow us to also performing even better. So it's more like a flying whale, but slightly less about lagging, but more like a cumulative. I don't know if that answers your question.

James Callahan

That does that that's very helpful, thank you, and then kind of just curious on obviously you're seeing success with the marketing spend, you could just kind of talk about, what was most successful in sort of driving some of the strong user growth. Thank you.

Lin Song

Yes, okay, I can sign in For that.
You can just and then, yes

Frode Jacobsen

and you can talk. So I think, throughout the year we kept guiding for greater marketing spend in the following quarter than what we ended up doing. Because we always, we want to allow to spend marketing dollars, but we are quite restrictive until we see that the ROI is satisfactory, then we dial up. So very pleasing to see that in the 4th quarter, we had good ROI.
We scaled our marketing. It was on the back of very key product releases. Of course, that. Revenue impact is less pronounced in the fourth quarter itself, but it's a, it was and it's a good investment in where we are today and, sort of trajectory leading into 2025. So, but Song, I can hand over to you more from an operational view as well if you want to add something.

Lin Song

Yes, so, yeah. But I think you've done well, right? So, I guess maybe I'll just add that, of course, in the end of the day, it's still the product itself, right? So that's partly why that you see, we have an uptake of marketing spending Q4, it's just because we have launched the opera one R2 and also, we also have launched. GXX.
And that's also part of why we probably also guided a bit higher marketing spend in Q1. This is, the previous trend is because we launched Opera Air. So just want to double down that. Of course, it's not only a normal game, but also a matter of having the right product, which we are rather confident about.

James Callahan

Great, very helpful. Thank you.

Operator

Thank you. And at this time there are no further questions in the queue, so I would like to turn the call back over to Song Lin for any additional or closing remarks.

Lin Song

Sure. So, like again, thank you all for joining us today and following us in this, exciting, perhaps the people the times for the how the broader internet economy will evolve. We are very excited, to be exactly where we are and with your confidence that products for the videos and the launches we are working on will set us up for a healthy 2025 at baseline, and hopefully something even bigger as potential. So, wish you a good rest of the day and look forward to reconnecting on Q1 results and to the end of April.

Operator

Thank you ladies and gentlemen. This concludes today's presentation and we appreciate your participation. You may disconnect at any time.