The Israeli War Over What May Also Interest You

Outbrain and Taboola, two industry giants specializing in content marketing, are engaged in a battle for local clients.

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The two biggest companies in the field of content recommendations – those referrals to other content at the bottom of stories you read online – are both Israeli startups and they are now at war with each other on their home turf.

Until now Outbrain, the older of the two, has had a lock hold on the Israeli content-recommendation market, but Taboola has begun a foray into the local market with an aggressive campaign aimed at getting web publishers to adopt its service.

One of its main weapons is to offer an upfront payment sometimes amounting to millions of shekels, which has turned into a boon for Israeli content providers.

Outbrain and Taboola both use behavioral targeting to recommend interesting articles, slideshows, blog posts, photos or videos to users as a way of encouraging them to stay on the site. Web publishers buy and sell traffic through “recommendation” widgets that run beside the articles they publish.

“It’s a crazy war. Taboola offered us a check in advance if we would work with them,” said a senior executive at a major content site in Israel, who asked not to be identified.

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“Taboola told us they are sending a messenger over to us now in a taxi with a check for several million shekels if we move over to them. It’s completely irrational competition from my point of view,” said another.

The two content-recommendation giants have also been engaged in a bitter war overseas, where the stakes are much higher. Both companies, which are based in New York, have raised lots of venture capital — $99 million for Outbrain and $40 million for Taboola – and are using those funds to secure large, multi-year contracts. Last year, Outbrain announced an exclusive deal worth $100 million over three years with Time Inc.

Outbrain, which was founded by Yaron and Eytan Galai with Ori Lahav in 2006 and pioneered the content-recommendation sector. Taboola was founded by Adam Singolda a year later, but is regarded as the younger upstart. Outbrain counts among its customers CNN, ESPN and Fox News while Taboola’s roster includes USA Today, Fox Sports, Business Insiders and the Chicago Tribune.

“The reason we hadn’t been operating in Israel is that we wanted to succeed first in the American market,” Singolda told TheMarker. “Now that our model is working there, we can go and bring our technology to other markets. In our last fundraising, we said we would address new world markets, like Asia and Israel.” The heart of our company is Israel. We have a research and development center here and it’s an interesting and growing market.”

Taboola has scored some early successes with the website Horim (www.horim.org.il) and several niche sites. “The pre-payment we got was very important to us,” said a manager at one of the sites. More recently Taboola scored a huge success winning over the Walla website, Israel’s biggest, and the website of the Globes financial daily is expected to follow.

Against that, Outbrain still has most of the big players in the online world – the news sites Ynet, Mako and Haaretz-TheMarker.

All of them have renewed their contracts recently, but at a cost to Outbrain, which had to make concessions, including much bigger guaranteed minimum payments — sometimes as much as 5 million shekels ($1.3 million) a year in the case of major sites.