Opinion

The possible Outbrain and Taboola merger: ad tech’s next unicorn company?

With rumours abound that two of the biggest ‘content discovery’ platforms are about to merge, Mumbrella Asia’s editor Eleanor Dickinson considers whether this really is the industry game-changer it seems to be

Let’s be honest, as a reader on a news site, the related links at the bottom of a page are more often than not a nuisance.

Popular clickbait-style headlines range from things like the run-of-the-mill 11 child celebrities you would not recognise today to occasionally the downright gross (one appearing to sell a product for bum tightening cream springs to mind, I kid you not).

And nine times out of 10, you probably clicked on them accidentally. Of course, there are other occasions when seeming serendipity strikes (it is not, it’s an algorithm) and the related links produce an unexpected gem of content.

At other times, a shameless listicle is used as a hook to sell you something – usually something you don’t want – or to keep you on a website where you didn’t plan to be for a bit longer in order to boost said site’s traffic numbers.

Whichever side of the fence you fall on, external links are now big business. In fact, if TechCrunch is to be believed, we could be about to see the next ad tech unicorn with Taboola and Outbrain in talks to merge and become a $1bn behemoth.

The tech news website ran a story on Friday about advanced discussions between the two-Israeli-founded companies, which describe themselves as “content discovery platforms”. They already dominate the space and it would seem to make sense to consolidate when the marketing budgets of their customers, publishers and brands for example, are shrinking at an alarming rate.

And while the related links may not always lead to low-brow content, the possible $1bn valuation still seems somewhat fanciful until you consider that the combined reach of the companies stretches across billions of content suggestions to hundreds of millions of people every single month.

It is no wonder then that just two years ago, Taboola reportedly raised US$117 million in funding at a valuation just short of US$1 billion. Outbrain was also said to be considering an initial public offering that would raise between US$100 million and US$300 million, and value the company at up to $1bn.

Very soon after, Outbrain raised US$35 million in additional funding. Altogether, Outbrain has raised US$194 million from investors – according to TechCrunch. Both companies have also acquired smaller firms in the same space. We have all seen this movie before and we know how it ends. With power concentrated in the hands of very few.

So with such a  dominant force on the horizon, could this deal be a game changer for the media and marketing realm?

Former journalist and now newsroom consultant Alan Soon remains dubious about the value of the service provided by these firms. Speaking to Mumbrella Asia, he said: “The product does what it does well: It helps publishers surface stories within their own site as well as to surface stories from the wider network of publishers. Everyone gets clicks and a revenue stream as a result.

“But publishers need to think clearly if the trade offs are worth it. First, it confuses your reader — are these stories yours or someone else’s? Many users can’t tell the difference.

“It sends the reader off your network in exchange for cash. What does that do for customer loyalty? Could you have monetised that session better by giving the user a better reason to stay and read another article? And are the external articles aligned with your brand values? Are you sending your reader off to another site for the right reasons?”

Despite such questions around the products though, the service can be lucrative for publishers – who are either paid to host the widget links on their pages or paid based on the traffic they generate. United States magazine publisher Time Inc was reported to have signed a deal with Outbrain in 2014 that was worth US$100 million over three years.

Here in Asia, both platforms have been on the scene for nearly four years. Across the Asia-Pacific region, Outbrain has offices in Singapore, Japan and Australia. And it recently signed a deal with one of India’s biggest digital media companies, SVG Media, as it was acquired by Dentsu Aegis Network.

Taboola is active in Thailand, India, Australia and Japan. It also recently expanded its presence in New Zealand through a deal with independent broadcaster MediaWorks. Should the merger go ahead, Asia will no doubt be high on the agenda as perhaps the biggest growth market globally.

You could argue that  the ‘content discovery’ sphere will essentially become a monopoly with no room for smaller players, if the merger is a real possibility and goes through. However, you could also argue that this is already the case.

Although disagreeing with the term monopoly, Soon says, the two platforms “appear to have the majority share of the market”. Other commentators suggest GroupM’s platform Plista will remain a strong alternative for publishers in Asia.

Meanwhile, founder and CEO of Tickled Media – which publishes The AsianParent – Roshni Mahtani thinks the trajectory ahead is clear “It’s inevitable that we see mergers and acquisitions in this space, as it’s getting crowded with new competitors in the market,” she said.

“At the same time, this challenges new players to come up with better offers. For example, one thing publishers would like to see though is more integration with Facebook Instant Articles.”

So Unicorn or not, the potential merger should be on the radar for all publishers and marketers. If this particular pocket of ad tech was once considered niche, that is no longer the case. You only have to look at the metrics, the audience, the deals and the suggested valuation to realise that Outbrain and Taboola are searching for greater critical mass. Ultimately, they are going mainstream whether together or apart. Of that there can be no doubt.

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