“The Sell Sider” is a column written by the sell side of the digital media community.
Today’s column is written by Alon Rosenthal, CEO and founder of WhizzCo.
Content recommendation is trying to move up.
Market leaders Taboola and Outbrain, now public companies, are looking to expand beyond the content recommendation box to run display ads across the open web.
Both Taboola and Outbrain made their intentions known late last year via public announcements. Taboola teamed with Microsoft to launch an audience network.
Three weeks after going public, Taboola acquired Connexity, a commerce-based ad tech company, for $800 million. With the loss of the cookie and other privacy regulations coming, commerce is a growth engine for publishers, so Taboola’s acquisition makes a lot of sense. Thanks to Connexity’s offering, Taboola’s advertisers gain access to new real estate outside of the content recommendation box, strengthening Taboola’s relationships with publishers who are already seeking commerce-driven revenue.
Outbrain, meanwhile, recently announced the expansion of its offering with a Native Header Bidding solution that would enable bidding on any media partner ad placement. And let’s not forget Outbrain’s acquisition of native DSP Zemanta.
These announcements have caught many in the industry by surprise. After all, most marketing technology companies tend to swim in their own lanes. Furthermore, content recommendation is one of the few segments of digital advertising where ads aren’t served as a result of programmatic auctions. This means that Taboola and Outbrain will need to adjust to working in a programmatic environment. Still, both have the capacity – and seemingly, the desire – to extend their advertising reach.
Can they do it, and will anyone stand in their way?
Assessing the competition
Challenging Taboola and Outbrain requires a public company with significant financial reserves. And the slide of advertising technology stocks – except for Zeta Global – in 2022 won’t make it easier. So who has these kinds of financial reserves?
As of late April, Taboola’s market cap was more than $1 billion, roughly twice that of Outbrain, but somewhat below other public advertising technology companies – including Magnite, Criteo, Zeta Global and Advantage Solutions. Advertising technology companies DoubleVerify and The Trade Desk have a much greater market cap.
From a revenue perspective, Taboola’s $300–$340 million in 2021 quarterly revenue was 2–6 times that of Magnite, PubMatic and Tremor International (the latter two also with smaller market caps). Therefore, these companies don’t have the financial resources to challenge Taboola. Other publicly traded ad tech companies like Zeta Global and Advantage Solutions both have market caps somewhat greater than Taboola. That said, Zeta Global has much lower revenue and is a Customer Data Platform (CDP). Advantage Solutions is more of an agency services holding company. Therefore, neither is likely to challenge Taboola or Outbrain.
Both DoubleVerify and The Trade Desk have the financial clout to challenge the content recommendation companies, but DoubleVerify is focused on digital media measurement and analytics, so any content recommendation moves would conflict with the company’s existing business model. Though The Trade Desk could decide to challenge the content recommendation companies through the company’s DMP and DSP, that too would be a leap from their current business model which could impact client relationships around transparency.
Criteo is probably the most likely challenger, given the company’s relatively high market cap and revenues ($500–$660 million per quarter). Furthermore, the company already offers a broad range of advertising solutions, including retargeting, video advertising, mobile app advertising, contextual targeting, omnichannel, web traffic generation and customer acquisition, not to mention retail media for brands and retailers and direct bidding for publishers. After its recent acquisition of IPONWEB, the company that basically invented programmatic advertising technology, Criteo is best positioned to challenge Taboola and Outbrain.
Google, Facebook, Apple, Amazon and Microsoft all have the financial power to challenge Taboola and Outbrain, but they probably won’t risk incurring the wrath of the government and regulators.
Don’t overlook the underdogs
Taboola launched as a personalized video discovery platform for publishers in 2008 (when the web was less dominated by video). The company pivoted several years later into the content recommendation market, which they now lead. Taboola’s ability to come from behind shouldn’t be underestimated. And keep an eye on Outbrain, too.
Will these content recommendation vendors take over the open web? Will Criteo challenge them? Was that part of the motivation behind Criteo’s Super Bowl ad? Time will tell.
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