Commentary

Taboola's Nixed Merger With Outbrain Highlights Pandemic Disruptions

Update, Sept. 10: Taboola and Outbrain announced they canceled their merger amid regulatory hurdles and disagreements. 

Taboola and Outbrain, the "clickbait" companies that share advertising revenue with publishers, were said to end their merger plans amid a dispute about the deal valuation. The broken deal is another sign of how the economic consequences of the coronavirus pandemic have disrupted the digital ad market.

Taboola sought to cut the amount of cash it paid to Outbrain shareholders to $100 million from $250 million in the cash and stock deal, according to reports in the Israeli press. Taboola also had offered a 30% interest in the combined company in what was considered a blockbuster deal for two Israeli tech startups.
The companies' fortunes diverged this year as Taboola experienced stronger sales growth -- likely the result of homebound consumers spending more time reading online news.

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Thousands of websites carry Taboola and Outbrain's content feeds, which include a mix of native advertising and editorial content. The feeds are designed to grab attention with eye-catching headlines about celebrities or offbeat imagery that practically invites clicks.

When the merger was announced, Taboola CEO Adam Singolda said the new company would have about 2,000 employees and $2 billion in yearly revenue. He also said the combined company would give advertisers another alternative to the "duopoly" of Google and Facebook that dominate the digital ad market.

The pandemic hasn't spared those companies. Google repored the first decline in ad revenue in its 26-year history, while Facebook's sales growth slowed somewhat in the second quarter. A key test will be holiday shopping season that's typically the best quarter for advertising.

The broken deal between Taboola and Outbrain is positive for publishers that want more choice in content recommendation companies that provide ancillary revenue for their digital properties.

It's also possible the companies will return to the bargaining table, having avoided the objections to antitrust authorities in the U.S. However, U.K. and Israeli regulators had yet to approve the deal.

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