Israeli startups Taboola and Outbrain, both of which have developed technologies that direct users to related content on the internet, signed an accord Thursday to merge their activities.
Both companies’ boards of directors have approved the transaction, the companies said in a statement Thursday. The aim of the merger is to create more robust competition to Facebook and Google, which dominate the digital advertising market.
As part of the deal, Taboola will pay Outbrain shareholders $250 million in cash and hold a 70 percent stake of the newly formed company, which will operate under the Taboola brand name. The new combined company will be headed by Taboola founder Adam Singolda. The valuation of the merged units will be around $2 billion, the statement said.
Outbrain shareholders will hold the remaining 30% stake in the newly formed firm, the statement said. The co-founder of Outbrain, Yaron Galai, “will actively assist with the transition for the 12 months following the close,” the statement said.
Taboola, one of the best-known Israeli brands in the web world, is notable for its “You may also be interested in” additions to innumerable internet content pages. Its system is used to drive traffic from one site to another, or to keep readers on a site by offering them more of what they came for.
The other Israeli firm, Outbrain, has developed software that allows publishing sites, including CNN, Fox News and Slate, to offer viewers “smart content” that is relevant to their previous searches.
“By joining forces, we’ll be able to create a more robust competitor to Facebook and Google, giving advertisers a more meaningful choice,” said Singolda in the statement. According to eMarketer, almost 70% of total US digital advertising revenue in 2019 is controlled by only three companies — Google, Facebook and Amazon.
The combined company will have over 2,000 employees across 23 offices, serving over 20,000 clients in more than 50 countries across the North America, Latin America, Europe, Middle East and Asia-Pacific regions, the statement said.
“We see a tremendous opportunity in joining forces in order to bring the next wave of innovation to our publisher partners and advertisers,” said Galai.
The two firms dominate what is officially known as the “content discovery” industry. Taboola was founded in 2007 and has raised $160 million to date from investors including The Daily Mail, Fidelity Investments, China’s Baidu and Italy’s Carlo de Benedetti, according to the database of Start-Up Nation Central, which tracks the industry. Outbrain was founded in 2006 and has raised $195 million to date from investors including Vintage Partners, Lightspeed Venture Partners and HarbourVest Partners.