nRelate shutters: Content recommendation shakeout coming?

“Simply put, nRelate, the entity that provides recommendations to sites across the web, will no longer be a stand-alone business,” the founders wrote in a blog post on Monday.

Like other content recommendation companies, nRelate offers readers “suggested reading” or “recommended for you” links at the bottom of pages. Some of those links were from advertisers, which generated revenue for nRelate and its partner publishers when readers clicked them. In one deal, NRelate offered a publisher desktop CPMs between $2.50 and $3.00, taking a 30 percent cut from ad revenue.

The news of nRelate’s closing apparently came as a surprise to nRelate business development staff, which called its partner publishers on Monday to inform them of the news, according an exec at one nRelate publisher, who asked to remain anonymous.

NRelate’s failure isn’t too surprising considering the intense competition surrounding the content recommendation space. The likes Outbrain and Taboola are constantly to outbid each other in an effort to sign up more publishers, which, while great for publishers, typically means writing massive upfront checks to the publishers they’re trying to woo. NRelate, which was pitching itself on the quality of its recommendations, likely couldn’t keep up. Yahoo has also poured resources into its own network, making the going even tougher for smaller outfits to compete.

“These things are really commodities for publishers because it’s really easy to switch them in and out,” said the publisher, adding that its typical for publishers to jump from Outbrain to Taboola after their exclusivity deals expire.

NRelate’s demise contrast strongly with that of fellow content recommendation company Outbrain, which is looking to go public with a $1 billion valuation. The company has raised $100 million since its founding in 2006. It’s primary competitor, Taboola, is also heavily venture capital-backed, having raised $40 million so far. The pair also compete with recommendation widgets from big companies AOL and Yahoo, the latter of which entered the space in September.

What’s still not clear is whether the content recommendation space can support many companies or whether only a handful of big players will make it difficult to smaller ones to stay afloat.