A deal has fallen through to merge longtime rivals Taboola and Outbrain that would have created a global giant in online content recommendation, had both sides managed to reach an agreement on terms.
Both companies were founded in Israel, but are now based in New York. They each developed algorithms that collect and analyze user preferences online to suggest editorial content that matches users’ interests. Their operations bring more traffic to websites and extend the time users spend on the sites by offering more of what users were clicking on to begin with, HaAretz reported.
Both have been criticized for promoting clickbait or even false content.
The internet’s two largest content-recommendation companies, Taboola and Outbrain pay publishers for the right to have a feed of third-party content featured at the bottom of news stories. They personalize their recommendations based on users’ browsing history, Wall Street Journal reported:
“They in turn are paid by the groups whose items they promote — often clickbait-style slideshows designed to be hard for readers to resist. On Tuesday, Outbrain’s content feed included such headlines as ‘These Are The World’s Richest Royal Families’ and ‘Try Not To Smile When Looking At These Tattoo Fails.'”
Publishers that feature feeds from Taboola or Outbrain on their websites include CNN, ESPN, HuffPost and The Weather Channel.
Originally, Taboola agreed to acquire Outbrain for $250 million in cash, with Outbrain stockholders retaining 30 percent of the newly formed company. The plan was for the merged company to keep the Taboola branding under the leadership of Taboula founder and CEO Adam Singolda.
However, Taboola wanted to reopen the original deal, which was valid until October 2020, and reduce to $100 million the amount of cash it was expected to hand over as part of the transaction.
This was due to due improved performance on Taboola’s part, HaAretz reported.
“2020 turned out to be an excellent year for Taboola, better than its last three years combined,” a source told HaAretz. “The two companies show positive earnings, but Taboola makes in a month and a half what Outbrain makes in a full year.”
When the companies announced the merger in October 2019, they said they would reach a combined 2 billion people a month and give advertisers more “meaningful choice” outside of the “walled gardens” of Facebook and Google, which dominate the digital advertising ecosystem, CNBC reported. The merger was also expected to enable both firms to better compete against Amazon, which increasingly dominates the online advertising market, HaAretz reported.
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The U.S. Department of Justice investigated the deal and decided not to challenge it, but Israeli and U.K. anti-trust scrutiny delayed the deal after concluding it could pose anti-competitive harm to publishers.
The Israeli antitrust authority is looking into claims of price fixing between the two firms, HaAretz reported.
The merger would have created a massive company in Israeli terms with 2,250 employees.
Some of the past criticism of Taboula and Outbrain involved advertisers using them to harm competitors by promoting content casting them in a negative light. “Over time, the criticism has faded as the companies have made efforts to address the issues … employing dozens of content moderators who manually go through advertisements before they are approved and promoted, making sure they are not fake or include copyright infringement,” HaAretz reported.
