Publishers worry Taboola’s SPAC funding could make them more dependent on its ad revenue

raining money

The overall hit that digital publishers’ advertising businesses took in 2020 pushed some to take solace in the revenue they received from content recommendation platform Taboola.

However, beneficial as that relationship has been, now publishers are grappling with the possibility that Taboola’s announced plan to go public via special purpose acquisition company could enable the company to expand its business in ways that make the publishers even more reliant on a revenue stream that they admit compromises the quality of their sites’ user experiences.

Two revenue executives at large news publishers in the U.S. said revenue generated from Taboola’s content recommendations held steady in 2020, thanks in large part to increases in site traffic that the platform was able to monetize.

Taboola plans to raise $545 million by going public through a SPAC. In its announcement on Jan. 25, Taboola stated that it plans to invest more than $100 million “in R&D growth initiatives including AI, e-commerce, TV and device manufacturers” in 2021.

One of the executives said the digital news publisher’s partnership with Taboola resulted in a “remarkable 2020,” with 2021 “off to a really great start” — especially compared to the performance of some of the publisher’s other revenue partners. The executive declined to provide further detail on which partners.

A second revenue executive at a publisher that operates in both print and digital said the company “didn’t experience [Taboola] running and retreating like we did with other parties” in 2020, but did not elaborate on which parties. Taboola “continued to monetize well for us,” this person said. The publisher’s overall revenue from using Taboola was higher in 2020 than in 2019, but declined to give specifics.

As a large digital news site, “we look for when we have big surges in traffic” and see if it correlates with more money made through Taboola, the first executive said. As Taboola has grown, so has its ability to not only meet those moments, but also at a higher return — “both are really valuable to us,” they said.

Neither executive would say what percentage of their respective companies’ overall ad revenue comes from Taboola.

While Taboola as a partner proves to continue to be good for business, both executives stressed a need to balance between Taboola’s contributions to their respective companies’ revenue and maintaining control of the user and ad experience. Relying too much on Taboola for revenue could compromise their sites’ user experience, and “cheapening the advertising experience,” as the second executive put it.

The photo galleries and “mindless ads” served by Taboola at the bottom of many publishers’ pages are “not the best user experience,” the second executive said.

“Like so many publishers we are also thinking: how heavily do we really want to rely on or lean on them?” added the first executive, in reference to Taboola. For this reason, they are “really selective” on choosing recommendations products offered by Taboola, and wary of “how much Taboola sells and controls” on publishers’ platforms. Taboola recently launched Taboola Stories, for example, which can be embedded into publishers’ homepages and mobile articles to serve content recommendations in a vertical format.

A diverse mix of revenue sources is important, the executive noted. “Having everything in one bucket is very dangerous,” they said.

“We’re always looking for ways to provide publishers more ways to keep readers engaged and monetize, in a non-intrusive way,” said Taboola CEO Adam Singolda, adding, “It’s our publishers’ decision as to how to monetize, engage and drive new audiences.”

Both publishing executives noted that, over time, publishers have gained more control over the quality of the ads served in Taboola’s widget. For example, the second executive said that if there was an issue with some of the ads, Taboola was “quick to respond,” and over time that type of request has happened less frequently.

Singolda said one of the things the company is “excited about” as part of going public “is our ability to double down on our publishers’ needs, further expand our editorial tools for writers, keep investing in our AI to drive even better circulation.”

While it remains to be seen what exactly Taboola does with the new funding, the two publishing executives wondered if this war chest could ultimately make it a far more indispensable component of publishers’ digital advertising business, perhaps through another attempted merger with rival Outbrain or by offering more ad solutions to publishers to become a larger part of their advertising ecosystem.

Both executives expressed relief that the merger with Outbrain fell through last year.

“It keeps both sides competitive. I don’t want them to become the only game in town,” said the first executive.

“I think it would not have been advantageous for publishers,” added the second executive. “It would have led to CPM price compression” by reducing the level of competition that would otherwise push up publishers’ ad prices.

Merger speculation aside, Taboola does appear intent on extending its relationships with publishers into other sources of ad inventory. The first executive said Taboola has come to the publisher with offerings that “start to play on the more traditional ad banner types of inventory” usually associated with header bidding.

Singolda confirmed that the company is looking into expanding its work with publishers, saying that the company will not go “into IAB ad banner areas” but will “focus on in-stream experiences.”

“It can be a short feed or a long feed including editorial recommendations, as well as paid,” he said, adding that Taboola is “seeing success and adoption” in areas such as home pages and mid-article placements.

The two publishing executives speculated that one path Taboola may take is to use its existing relationships with media companies to build a data product that may result in publishers becoming even more reliant on the platform for ad revenue. Taboola has said its recommendation platform provides over 1 trillion recommendations a month to approximately 500 million daily active users.

“They sit on our pages, they see a lot of data about our audience [and] with the cookies going away, how do they build up a data product?” said the first executive. “They have a lot of pixels on our page, and a lot of pixels on a lot of other publishers’ pages.”

“They are sitting at the bottom of every single page across hundreds if not thousands of publishers,” added the second executive.

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