POV: Taboola and Outbrain Merge

Background:

Taboola is acquiring Outbrain to create a $2 billion company. The two former rivals both operate advertising-based content recommendation engines for publishers.

Details and Implications:

The deal is still subject to regulatory approval, but after years of rumours, the two digital advertising companies are coming together in a cash-equity deal under the Taboola brand. Reports suggest Taboola has agreed to pay Outbrain shareholders $250 million and hand over a 30% stake in the new firm. Taboola’s founder, Adam Singolda will continue as CEO.

According to Singolda, the deal is the result of a desire to establish a company that could provide an alternative to the power of Facebook, Google and Amazon. In a statement, Singolda said: “We’re passionate about driving growth for our customers and supporting the open web, which we consider critical in a world where walled gardens are strong, and perhaps too strong”.

Taboola said its consolidated media buying platform will be more efficient for advertisers and will bring higher revenue and user engagement for publishers.

Taboola said the new company will reach 2 billion people per month. Google says its Display Network reaches 90% of people on the internet and Facebook says it has 2.4 billion monthly active users on Facebook and more than 2.7 billion people use at least one of its family of services each month.

Taboola and Outbrain do not have the best reputation amongst internet users, with many associating their bottom of the page content recommendations with ‘spammy’ links. However, between Taboola and Outbrain, the companies now have ties to a list of the biggest online media properties including CNBC, NBC News, USA TODAY, BILD, Sankei, Huffington Post, Microsoft, Business Insider, The Independent, El Mundo, Le Figaro, CNN, BBC, The Washington Post, The Guardian, Spiegel Online, El País and Sky News.

Taboola believes the combined audience scale will give it the leverage to help these publishers generate revenues on their own sites, as well as on the networks of Google, Facebook and Amazon – the three of which collectively account for around 70% of all online advertising revenues.

There is also some difference in the technology that has been developed by each of the companies, with Outbrain having acquired a programmatic advertising company called Zemanta in 2017 and Taboola having focused on developing its video offering.

Summary:

The user perception of links offered by Taboola and Outbrain is of low quality and at worst, spammy links to loosely related content. That will be the biggest hurdle for the new combined company to overcome as it convinces publishers they are better monetizing their site using their services than handing over revenues to the world’s largest advertising platforms. The combined company will offer publishers a more scaled way to generate revenues, but the user experience will need to be part of the decision-making process.

Further Reading: Forbes | Digiday | TechCrunch