The merger between Taboola and Outbrain, two long-time rivals in the online content-recommendation business, has collapsed. The two companies have decided to not go through with the deal, initially announced in October 2019, after failing to reach an agreement regarding its terms.
In recent weeks, the sources say, Taboola had sought to reopen the original deal and reduce the amount of cash they were expected to hand over as part of the transaction.
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According to the original deal, Taboola agreed to acquire Outbrain for $250 million in cash, and Outbrain stockholders were to retain 30 percent of the newly formed company. The merged company was to retain the Taboola branding and was supposed to be headed by Adam Singolda, it’s current CEO.
The deal was valid until October 2020 but, as the agreement was still waiting regulatory approval, Singolda wanted the cash payment reduced from $250 million to $100 million, due to an improved performance on Taboola’s part.
"2020 turned out to be an excellent year for Taboola, better than its last three years combined. The two companies show positive earnings, but Taboola makes in a month and a half what Outbrain makes in a full year,” the source said.
Another source claimed that Taboola offered Outbrain to completely forgo the cash part of the deal, saying the reason was funding issues on Taboola’s part, with the bank allegedly refusing to extend its support for the deal. Singolda said in response to the claim that “I do not want to go into detail, but to say we had fund raising issues is just a lie.”
The deal has received regulatory approval from U.S. authorities but failed to anticipate the delays in getting the greenlight from European and Israeli regulators.
TheMarker has also revealed earlier Tuesday that antitrust investigators raided the offices of Israeli news-site Ynet in central Israel, confiscating computers and taking in its top executive, Barak Kalmanovitch, for questioning. The antitrust authority is looking into claims of price fixings between the two firms and Kalmanovitch is suspected of playing a role.
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The merger would have created a global giant in an industry internet users encounter everyday in recommendations attached to articles and videos coming “from the web” or “you may be interested”. It was also considered a massive company in Israeli terms – with 2,250 employees (62 percent of Taboola employees), some 900 of them in the companies' Israeli development centers in Netanya (Outbrain) and Ramat Gan (Taboola).
Both companies have developed algorithms that gather and analyze users’ online preferences to suggest editorial content that matches their interests. Their respective operations bring more traffic to websites and extend the time users spend on them, by offering more of what users were clicking for to begin with.
The two have also faced criticism for promoting content so-called clickbait or even false content. In some cases, advertisers have used these companies to harm competitors by promoting content casting them in a negative light. Over time, the criticism has faded as the companies have made efforts to address the issues, for employing dozens of content moderators, who manually go through advertisements before they are approved and promoted, making sure they are not fake or include copyright infringement.
Another negative effect of these platforms which is less discussed is that they encourage sponsored content. Why would advertisers choose to depend on uncontrollable media outlets, when they can write their own articles glorifying their products, and promote them on the same prestigious outlets?