Outbrain CEO: On (Rumored) IPO, Coming Wave Of Content Marketing Consolidation

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YaronContent discovery company Outbrain has allegedly flirted with an IPO for well over a year now, with the most recent report claiming a target of around $100 million.

CEO Yaron Galai did not comment on a potential IPO, which is expected to materialize in the first half of the year. Instead, he focused his attention on the company’s historical and continued investments in building and acquiring for algorithmically fueled content recommendations.

The eight-year-old startup is among a string of Israeli companies that have considered public life on US-based exchanges. Others, like performance-based media network Matomy, looked to the London Stock Exchange before scrapping those plans due to what it said was technical issues.

Galai spoke with AdExchanger about Outbrain’s breadth as a publisher-centric content discovery network.

AdExchanger: What is Outbrain exactly?

YARON GALAI: We’re a content discovery platform. We help people discover what they should be reading or watching next. For many publishers, we power their entire content discovery experience. I like to think of this as powering the flipping of a page in a magazine – the equivalent of that on the Web.

Will you IPO?

The best I can give is no comment. Historically, we’ve raised about $100 million privately. We love the optionality of any form of raising capital as needed. [This is] a marketplace where one big [company] will be the winner. We’ve historically invested in both building and acquiring, and that takes investment and that’s what we’re doing – building to be the big independent leader.

Most know Outbrain for widgets on publisher sites recommending similar articles. What problem do you solve?

The beauty of the space is it’s one of the first ones that helps publishers monetize and is creating value to both sides of content discovery. Usually monetization comes [via] interruption and distraction to the user, whereas we create value. We’re helping people discover what’s next. That’s why publishers find so much value in this. It’s a form people are paying attention to that’s pretty unique and rare these days. People are usually tuning out and being banner blind.

What’s the revenue share split between brands and publishers?

We generate over half of our revenue from publishers, but brands are absolutely starting to play here. Brands are spending over $12 billion a year on brand CPA/CPM display advertising, which is a lot of money going in to trying to tell a story in a format that is pretty poor for telling a story. Branding is all about telling a compelling story about your brand or service or having someone else tell your story, amplifying that and show it to other people and I think brands are starting to get smarter and say, “We need to be where people are paying attention to, not where we’re spending a lot of money and people are ignoring us.” We’re seeing a lot of brand dollars moving from poor formats to content marketing.

What is a good form of storytelling?

A great example of good content is late night TV. When I go to watch these shows, I know 95% of the content I watch there is content marketing. Everybody is there promoting something. It’s people talking about movies or books coming out, but it’s great value for me as a consumer to see what’s coming out. The fundamental currency of what we do [at Outbrain] is user trust. Once people stop respecting that and just say, “This is just a different way to capture brand dollars, and make it look like a story,” that’s where this will eventually be less effective.

Are you seeing dollars shift from display to “content” budgets yet?

I think they are. Dollar-wise, probably what a lot of brands and agencies are still doing is incremental in this space. When you look at the things The New York Times is doing, those are still experimental. It’s not the majority of [the advertiser model] on publisher sites.

Will content measurement ultimately be more click-driven or engagement/interaction-based?

There’s some natural beauty to [the click] that’s unrelated to measurement and analytics. I think it’s a model that shares the risk-taking and value-creation between the party that spent the money and the publisher that received it, whereas in other models it’s usually one side takes all the risk and the other side is free to manipulate or create less value. There is a piece of measurement in the click. It means someone found this interesting enough and engaged with a link in a story and they landed on the story.

Even for brand marketers?

As far as measurement, it of course depends on who the marketer is. If they’re a publisher, the best way to measure results is how engaged the audience stayed. Did they just click on the link and bounce out? Or did they stay and consume more stories? That’s what we measure and report to for our publishers. And for brands, it’s looking at pretty basic metrics – change in brand awareness, change in brand favorability and change in intent/consideration. Those are the ways brands have been measuring their storytelling forever in TV or outdoor or wherever.

Speaking of brands and publishers, how many are you working with and what sort of volume are you seeing?

We serve over 150 billion recommendations every month. So, that’s about 5 billion daily served. [For] publishers, [the count is well over] 100,000.

Some have predicted mass consolidation among content marketing vendors. NewsCred’s CEO even said there’s too many, noting $100 million in VC-backed deals in one quarter alone. What do you think?

There are two submarkets here, and one points to the content discovery space and the other is the broader, vaguer term of native advertising. Which to me is really just…advertising that is made to look like something that is new, cool and trendy.

Content discovery is much like search. We’re not a product business. We’re a marketplace business where we power the content discovery for great publishers like CNN, FOX News and ESPN. On the other side we have great storytellers, brands and publishers that want their stories shared and discovered. So it’s a two-sided marketplace and we manage both sides directly end-to-end.

CNN wants the best links and best recommendations to be on their site and folks promoting their content want to be on the CNNs and ESPNs, so they tend to aggregate around a single marketplace, kind of what happened in search. Eventually there will be consolidation around the biggest content marketplaces.

You’ve made a number of acquisitions over the years. How have these companies changed your product?

We have over 110 engineers (out of 330 people) focused on making recommendations better and be able to serve them at scale. We’ve invested to date over $50 million purely in [building] technology and algorithms, and that doesn’t include acquisitions we’ve made for technologies we felt we needed. Algorithms are just as smart as the data you feed in to them, otherwise they don’t really know what people will find to be interesting and compelling, and to us the way to improve recommendations is build great technology or acquire great technology and feed more data than anyone else into these algorithms to keep making recommendations better.

 

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