Web marketing

Content Rec tries to take over the open web, but the jury is still out

Selleris 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.

The content recommendation is trying to increase.

Market leaders Taboola and Outbrain, now public companies, are looking to expand beyond the content recommendation box to serve display ads on the open web.

Taboola and Outbrain made their intentions known late last year via public announcements. Taboola teams up with Microsoft to launch an audience network.

Three weeks after being made public, Taboola acquired Connexity, a commerce-based ad tech company, for $800 million. With the loss of the cookie and other upcoming privacy rules, commerce is a growth engine for publishers, so acquiring Taboola makes a lot of sense. Through Connexity’s offering, Taboola advertisers gain access to new real estate outside of the content recommendation box, further 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 bid on any media partner ad placement. And let’s not forget Outbrain’s acquisition of Zemanta native DSP.

These announcements surprised many in the industry. After all, most marketing technology companies tend to swim in their own lane. Additionally, content recommendation is one of the few segments of digital advertising where ads are not served as a result of programmatic auctions. This means Taboola and Outbrain will have to adapt to working in a programmatic environment. Yet both have the ability – and apparently the desire – to expand their advertising reach.

Can they do it, and will someone stand in their way?

Competition assessment

To challenge Taboola and Outbrain, it takes a public company with significant financial reserves. And the fall in ad tech stocks – with the exception of Zeta Global – in 2022 won’t help matters. So who has this kind of financial reserves?

Since the end of April, Taboola’s market cap was over $1 billion, which is about double that of Outbrain, but slightly below other public ad technology companies including Magnite, Criteo, Zeta Global and Advantage Solutions. Ad tech companies DoubleVerify and The Trade Desk have a much larger market capitalization.

From a revenue perspective, Taboola’s quarterly revenue of $300-340 million in 2021 was 2-6 times that of Magnite, PubMatic, and Tremor International (the latter two also having smaller market caps). Therefore, these companies do not have the financial resources to challenge Taboola. Other publicly traded ad tech companies like Zeta Global and Advantage Solutions both have slightly larger market caps 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 content recommendation companies, but DoubleVerify is focused on measuring and analyzing digital media, so any content recommendation move would clash with the company’s existing business model. Although the trade office could decide to challenge content recommendation companies through enterprise DMPs and DSPs, it would also be a leap from their current business model, which could impact customer relationships around transparency.

Criteo is probably the most likely challenger, given the company’s market capitalization and relatively high revenue ($500-660 million per quarter). Additionally, the company already offers a wide range of advertising solutions, including retargeting, video advertising, mobile app advertising, contextual targeting, omnichannel, web traffic generation and customer acquisition, without forget retail media for brands and retailers and direct auctions for publishers. After its recent acquisition of IPONWEBthe company that essentially invented programmatic advertising technology, Criteo is uniquely positioned to challenge Taboola and Outbrain.

Google, Facebook, Apple, Amazon and Microsoft all have the financial muscle to challenge Taboola and Outbrain, but they’re unlikely to face the ire of government and regulators.

Don’t overlook the underdogs

Taboola was 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 it now leads. Taboola’s ability to come from behind should not be underestimated. And also keep an eye out for Outbrain.

Will these content recommendation providers take over the open web? Will Criteo challenge them? Was that part of the motivation behind Criteo’s Super Bowl ad? Time will tell us.

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