Can the Taboola-Outbrain merger scale up content discovery and native advertising?

Facebook and Google, almost always in our conversations known as the duopoly, have long been known to get the lion's share of digital ad dollars.  But looking to tackle that, is Taboola and Outbrain with their recent merger, which aims to offer a "meaningful competitive alternative" to the duopoly, as well as enhance advertising efficacy and reach to marketers globally. The merger will see a formation of a US$2 billion company with Outbrain's shareholders getting 30% ownership in Taboola.

While the advertising and marketing industry is still trying to make sense of what this will mean, Serm Teck Choon, Malaysia country head/head of product, CtrlShift and president, Malaysian Digital Association, said Taboola and Outbrain have often competed for native ad space for several years. This has resulted in ad buyers normally choosing either Taboola or Outbrain if the native buy is required for their media plans.

According to Serm, the merger will give ad buyers a larger scale of audience based on the audience aggregation from both sides, with a unified buying platform that will provide buyers with greater efficiencies. "This definitely uplifts its competitiveness against other players in the native advertising sector. With that being said, IPO is also one of the potential moves for the combined company in the next 18 months," he added.

The combined company claims to be able to reach about two billion people a month, according to a blog post on Taboola, which makes it one of the largest players in digital advertising space, apart from the duopoly. This then provides an option with scale to the market. However, at the end of the day the merger must bring better user experience in content discovery and native advertising to consumers.

"Most Internet users, including myself, do not like those low-quality native ads that appear alongside editorial recommendation such as 'Recommended For You' boxes, which sometimes lower the quality of content presentation for some renowned publishers," Serm said. Nonetheless, he adds that the combined resources will potentially create more advanced content discovery technologies - which will benefit both the ecosystem and consumers.

Also weighing in on the issue is Amit Sutha, group managing director of Ensemble and UM Malaysia, who said the solution offered by the newly combined company is differentiated as compared to the other digital inventories in the market. He explained that content discovery as a format, is different from standard ad inventories that form a majority of digital inventories offered to clients. But if brands want to succeed in the "discovery" phase their perception of content marketing has to change to be more creative, journalistic and immersive in nature.

"The business of content discovery requires marketers to take a back seat and allow consumers to choose to spend time with our message, rather than interrupt their consumption process," he said. Sutha added that if the merged company can bring scale and integrate its data and measurements with other forms of media, it can prove to be strong competitors to the existing digital ad behemoths.

However, to date it has still only played a small role. "I am hopeful that a merger of this scale will spur development in both content type and measurement. As a result, we might see huge disruptions in paid marketing-media investments," he added.

MightyHive’s APAC director of analytics Jakub Otrzasek added that the merger is a “sign of the inevitable consolidation” in advertising technology and digital privacy changes taking the toll on third-party cookies.

“In markets such as Southeast Asia and Greater China, there hasn't been as much conversation around the challenges to third-party cookies, but changes are coming,” Otrzasek said.

He added that the benefit to marketers is the ability to promote branded content or ads alongside relevant articles on publisher pages. To the extent that Taboola and Outbrain can hone their contextual targeting capabilities, it may benefit marketers as cookie-based targeting becomes more challenged with privacy updates from browsers and legislation such as GDPR is further enforced. But merger or not, Otrzasek was of the view that Google and Facebook have nothing to fear.

"Both companies have access to billions of people through their 'free' services, creating an enormous advantage and insight into user behaviors," he added.

Impact of merger on publishers

On the publishing front, Sutha said there are both positives and negatives. While this will definitely boost the quality of advertising solutions on offer, and present publishers greater opportunities to monetise their platforms, the industry is expected to see a fall in per unit profitability given reduced competition.

Meanwhile, CtrlShift's Serm said the merger may potentially give publishers lesser options now and hopefully, this would not cause publishers to have lesser bargaining power when negotiating with the newly merged company. Meanwhile, publishers should push the merged company to work on better content discovery technology providing a more brand-safe environment for both publishers and advertisers.

Ramakrishnan CN, partner at Entropia added that the merger was on the cards “for a while” and believes it will be good for the overall scene. While publishers may feel the thinning of some of their deals initially, ultimately it will settle down to an acceptable level, he added.

But Ramakrishnan didn’t completely bite into the positioning of the merger being a meaningful competitor to the duopoly. He explained that the budgets that the duo would fight for, hardly compete with other display networks. "I don’t see the share of budgets increasing towards content discovery, with this merger,” he said.

“Taboola and Outbrain merged have a lot more cut out for them in the coming days in defining the role that they play in the overall communication funnel. The relevance is currently skewed towards a few categories such as finance, auto or travel and they need to work more to showcase effectiveness and efficiency across other categories,” he added.