Taboola has had a busy month. Three weeks after the company began trading on the Nasdaq, it acquired the commerce-based ad tech company Connexity for $800 million on Friday.
Connexity is a logical and alluring takeover target.
Taboola places recommendation boxes on publisher sites to connect visitors with advertisers and other publishers. Connexity is also rooted in the sell side. It connects visitors on a publishers’ websites to merchants and retailers, with an affiliate link business – Connexity acquired the affiliate marketing company Skimlinks last year – and through its owned-and-operated price comparison and other shopping sites, such as PriceGrabber.com and Shopzilla.com.
There is some overlap between Connexity’s 6,000 publisher clients and Taboola’s 9,000 publishers. But Connexity’s roster of retail partners, including Macy’s, eBay and Walmart, and a stable of smaller merchants, is a net new addition to Taboola, said CEO Adam Singolda.
When Taboola completes the acquisition and integrates the back end between the two companies, product SKUs (“stock keeping units,” the retail lingo for an individual product) from Connexity’s retailer clients can be targeted to Taboola recommendation links. Think: an ad for an individual product in the Taboola recommendation box. That added demand will improve yield for Taboola publishers, Singolda said.
Importantly, revenue from these ads will fall under commerce earnings, not advertising, since it’s paid on a transaction basis, not clicks. Growing commerce-based revenue is a long-term priority for many online publishers, so adding these links will boost commerce growth.
Plus, the two companies can cross-sell and upsell into each other, Singolda said.
Taboola plans to get publishers to adopt Connexity by saying it will work hand in hand on a commerce content strategy and plan for revenue diversification.
“I believe every digital publisher is going to have a commerce section of the site,” Singolda said. Adding Connexity will put Taboola into publishers’ nascent commerce sections, embedding its tech just like Taboola has been embedded in web content pages.
Taboola and Connexity also need to consolidate because walled gardens control more and more of web monetization, and there’s less data available to third-party tech companies outside of those walled gardens.
Last year, Connexity shut down its web analytics business Hitwise, because it could no longer procure cross-site tracking data. Also last year, Amazon removed third-party affiliate vendors from its commission program, so Skimlinks, the affiliate network Connexity acquired, no longer gets a cut of traffic it sends to Amazon (which is to say, it now no longer sends traffic to Amazon).
“Amazon has millions of merchants, but the merchants have mainly Amazon,” Singolda said.
If walled gardens are raising their bridges, it’s up to ad tech and independent ecommerce companies who operate across the open web to build a stronger, consolidated network that spans users, publishers and merchants in order to compete.
“Practically every brand will continue to have a storefront with Amazon,” he said. “We need to bring those ecommerce capabilities to the open web.”
