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Clickbait mega-merger called off

Peter Griffin, Contributor. 10 September 2020, 9:25 am

They've built thriving global businesses serving us a diet of gossip, sex and outright pseudoscience, but for now at least, Taboola and Outbrain have scrapped their plans to form a content recommendation monolith.

Taboola had announced a plan back in October to buy Outbrain, its fellow Israel-founded company, for US$250 million and 30 per cent equity in a merged entity that would have 2,000 employees and be run by Taboola CEO Adam Singolda.

But the world has changed since October thanks to the pandemic and its severe impact on digital advertising. That made the equity aspect of the deal less attractive to Outbrain with less certainty around the future prospects of the company.

Looming legal action was also considered a factor as regulators in Israel and the United Kingdom examined whether the merged content recommendation empire would lead to reduced choice and potentially higher prices for internet publishers.

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The Outbrain content recommendation engine on NZ Herald.

Big local players

We know Taboola and Outbrain here from the "recommended content" that greets us at the bottom of articles, mainly on news websites. Outbrain counts NZME as a major client, with Outbrain content recommendations appearing on the NZ Herald, NewstalkZB, Hauraki and Flava websites, among others. 

Stuff also runs Outbrain content recommendations while Newshub has opted for Taboola. It is hard to know the local market share of the two companies, but content recommendation has become a more lucrative source of revenue for publishers as the appeal of display adverts has decreased.

Outbrain and Taboola realised a that while web surfers had grown immune to banner and sidebar ads, we are still suckers for great headlines. So they cultivated content recommendation engines to serve up clickbait to take us to spammy websites clogged with adverts paid for by their clients. The power of the services lies in their ability to track your website activity to determine your interests and to serve up clickbait and adverts you are likely to engage with.

News websites get a commission for sending the traffic to those third-party websites to end up at. But it is considered a devil's bargain, with many news readers put off by the sensationalist and outlandish stories and the horrible user experience on the destination websites.

In 2017, the Press Council ruled that Outbrain stories running on NZ Herald and Stuff were "deliberately designed to deceive" and breached professional standards. The publishers responded by putting "paid content" tags on Outbrain-supplied articles to better distinguish them from real news stories.

More recently the two companies have gained traction using their remarkably effective content recommendation engines to serve up recommendations from publishers' own content networks, including "sponsored content" articles. 

That's seen as a more legitimate activity and one that publishers have warmed to as an alternative to feeding Google and Facebook, which have claimed around 70 per cent of the digital ad market between them.

Taboolabrain is off

A merged Taboolabrain, it was argued, would have given the company more muscle to compete with the massive digital platforms. Now the two companies, already bitter rivals, will need to forge on alone with a slightly better understanding of each other's financial position thanks to the merger due diligence process.

But most will breathe a sigh of relief that the mega-merger is on the rocks.

As The Next Web writer Matthew Hughes put it last year:

"They're making us dumber and meaner. Both startups make money from spoon-feeding millions a diet of clickbait and dross. And far too much of the content they 'recommend' is at the expense of other people."

While the so-called "chumbox" remains on many New Zealand news websites, there's a growing realisation among publishers that low-rent clickbait isn't a sustainable way to engage audiences, with paywalls and reader donations increasingly supplementing higher-quality display advertising. 



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