Commentary

Taboola's Merger With Outbrain Gives Publishers One Less Choice

The Justice Department this week decide against challenging Taboola's acquisition of Outbrain, the "clickbait" companies that share advertising revenue with publishers. The merger means less choice in content-recommendation providers, though publishers have many other ways to generate online revenue.

In October, Taboola agreed to buy Outbrainin a cash-and-stock deal that will give Outbrain's owners $250 million in cash and Taboola stock equaling 30% of the combined company. When the deal was announced, Taboola CEO Adam Singolda said the new company would have about 2,000 employees and $2 billion in yearly revenue. The COVID-19 pandemic's negative effect on the global economy likely has changed that equation.

Thousands of websites carry Taboola and Outbrain's content feeds, which include a mix of native advertising and editorial content. The native ads may appear under a heading such as "trending on the web" and link to more information about a brand's products and services.

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The editorial content tends to get the most attention among consumers, often with eye-catching headlines about celebrities or offbeat imagery that practically invites clicks.

Publishers weighing whether to put a content-recommendation feed on their websites have to consider if they can better monetize the space with their own direct sales efforts or programmatic ad placements. In some cases, publishers have in-house studios to handle content marketing programs.

The Justice Department's antitrust division spent several months reviewing the proposing merger before informing Taboola and Outbrain's management that it wouldn't object to the deal, The Wall Street Journal reported. Officials interviewed customers from both companies as part of the review, though it's not clear which publishers and advertisers were asked for their opinions.

Taboola and Outbrain haven't disclosed their digital advertising revenue, though it's likely to be a sliver of the total domestic market, compared to giants like Google, Facebook and Amazon. Together, the three companies are forecast to generate $80 billion in U.S. digital ad revenue this year and command 70% of the market.

In other words, antitrust officials have bigger targets to scrutinize, including the digital ad giants that publishers have blamed for draining ad dollars out of journalism.

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