A year after announcing an $850 million merger, clickbait giants Taboola and Outbrain will no longer join up after pandemic-induced renegotiations broke down.
The takeaways:
- The two companies, responsible for many of the ‘You’ll never believe what happened next’ content recommendation boxes across the internet, formally announced a merger last October. The marriage would mean a combined reach of 2 billion people a month; enough to make the new company a ‘meaningful advertising competitor’ to Facebook and Google.
- US regulators approved the deal in late July, but the merger was still under investigation in both the UK and Israel, with the UK’s CMA citing concerns that publishers would have a reduced choice for content recommendation services.
- But it was the pandemic that put the final nail in the coffin. Both Taboola and Outbrain saw advertising rates plummet in spring, and renegotiated payments to publishers meant promised financing fell short.
You’ll Never Guess What Effect COVID Had: The breakup isn’t all Covid’s fault, but it has been cited as a key reason for the companies deciding not to go ahead.
As ad revenue fell, Taboola changed its commitment to publishers in June. Crucially, they stopped offering publishers revenue guarantees, and instead temporarily switched to a shared revenue model. This had two impacts:
- Taboola ended up breaching several publisher agreements, which led to high-profile customer losses, including Fox News and News Corp. This caused tension with Outbrain, who didn’t change any existing guarantee deals.
- It also resulted in Taboola being unable to line up new financing, which was a part of the original merger agreement
The merger was intended to have cash and stock components, but the financiers providing the capital for the cash component allegedly stalled. The original deal expired in August and didn’t get extended, while attempts to convert it to an all-stock transaction didn’t go down well with Outbrain.
- There were also allegedly cultural issues with the merger, which became more evident as the closing dragged out. The cash element of the deal would have reduced the risk of this, so once that fell through, the ‘challenging cultural fit’ became more of a problem.
The point for publishers: There were concerns about a merger, as many publishers have relied on the competition between Taboola and Outbrain to get favorable revenue share terms. Now though, it’s likely both companies will be upping their game – and the money they put on the table – to win back key clients.
Parting shots: Adam Singola, Taboola’s CEO sent round a memo as news of the break-up emerged. He said Taboola chose to call off the deal because “while we continue to grow and do better than ever since the merger announcement, Outbrain’s business continues to stagnate and in fact trend downward.”
Outbrain claimed they were the ones to walk away because Taboola was attempting to change the initial agreements.
