To quote a Geektime article from July about Israeli mega startup Taboola, a leading content discovery platform that generates those “Promoted Stories” at the end of articles, Taboola’s content recommendations will have “to become much more personalized to increase its engagement rates” in comparison to giants like Facebook or YouTube. Not surprisingly, they knew this too. To help them get there, as well as the news sites they work with, they just bought another Israeli startup.
Early Thursday, Taboola announced that it acquired Commerce Sciences, which provides personalization and on-site optimization tools, for an undisclosed sum. This marks Taboola’s third acquisition, after Perfect Market in 2014 and ConvertMedia in 2016, and its second of a fellow Israeli company. When Geektime asked Taboola about the amount involved and the number of employees working for Commerce Sciences, they declined to comment.
What we do know is that the employees of Commerce Sciences, founded by Israeli intelligence alumni Aviv Revach and Eyal Brosh as well as Omri Yacubovich in 2012, will join Taboola’s Tel Aviv workforce. Commerce Sciences has raised $5.8 million since its founding, including a $4 million seed round in August 2015. Several of its first seed round’s investors participated in the second seed round, including Eric Schmidt’s Innovation Endeavors, Genesis Partners, and LiveRamp founder Auren Hoffman. However, no single funder led this second round, and they only enlisted one new investor — KGC Capital — while half of the first round’s investors did not join in the second round.
Don’t like banner ads? No problem
A screenshot of the Taboola ads that show for this reporter on New York Daily News. Photo credit: New York Daily News
Taboola CEO and Founder Adam Singolda tells us that with Commerce Sciences’ technology, publishers using Taboola’s platform will be able to create personalized versions of their website for free. For example, users that haven’t clicked on banner ads for six months could, depending on the publisher’s preferences, see a website deplete of banner ads. The same goes for “promoted stories.” Instead, publishers can use other ways to engage, such as videos, social media sharing functions, or an invite to subscribe to a newsletter.
When we ask if this could hurt their bottom line, he says no way: “There’s always a tradeoff. If someone never clicks on Taboola, or on banners, it’s a bad use of real estate.”
However, “You make money from banners even if you don’t click, so you won’t give it up so quickly. But you don’t know the tradeoff. If you can get someone to sign up, that person could generate $10 for you over six months. So maybe I would rather get this person to sign up rather than click on banners, which gets 30 cents a click. Now you can test different things. I don’t think it’s a zero sum game.”
Interestingly, Taboola CEO and Founder Adam Singolda notes that Commerce Sciences came from the retail world, where true web personalization began with companies like Amazon. Why, then, didn’t Commerce Sciences seek a much larger company like Amazon as a buyer, even though Taboola is not doing so badly itself, having raised more than $160 million and surpassed Outbrain as the leading content discovery platform? First, he explains that Amazon develops these tools in-house. “In their space,” he says, Commerce Sciences “competes with Oracle, Adobe. It’s very expensive, heavy fee services.” Because of this, Commerce Sciences marketed its services to small- and medium-sized businesses at a lower cost.
Singolda continues, saying, “The reason for this transaction was the biggest trend for publishers in the next 2-3 years, with the risk of Facebook diluting the relationship between publishers and readers, is thinking of the lifetime value of a reader.” Because most news sites “usually change the website once a year, they don’t know the value of putting a banner here, an email sign up there. If you compare that to an e-commerce website, it’s completely different. They collect data about consumers forever and are optimizing it for a lifetime user.”
In a triple-win of sorts, Taboola’s acquisition of Commerce Sciences helps the smaller startup get out of a cut-throat e-commerce space and apply its technology to two markets where personalization is badly needed: news media and native advertising. When we ask Singolda if he sees Taboola as a BuzzFeed for publishers without the budget to develop similar in-house personalization and editorial technology, he answers no. “I think of Taboola as the Facebook for publishers [in terms of] their capabilities of personalization. They do a great job for themselves, but I want to bring all of that to the open web.”
While we’re talking about Facebook …
The main obstacle Taboola faces, it seems, is providing enough quality at a time when fake news spreads like wildfire, readers’ trust in the media is at an historic low, and massive disillusionment with society and politics overall contributed to the sense that 2016 was the worst year ever, even if it wasn’t. (Still, it was pretty bad!) While Taboola has always been more advantageous to publishers than to readers, some publishers are starting to abandon content recommendation widgets like Outbrain and Taboola, even if they help their bottom line at a time of declining print and digital advertising revenue. The New York Times reports that both Slate and The New Yorker stopped using Outbrain in reaction to reader sentiment. While this could be seen as good news for Taboola, since its competitor lost earnings, it does not look like either Slate or The New Yorker are asking Taboola for business.
The larger issue at play is content recommenders’ role in distributing spammy news, including potentially fake news. The New York Times notes that ChangeAdvertising.org, which analyzed the content ads of 41 top news websites, found that 26% of these ads led to “‘clickbait’ sites that were covered in more ads and lower-quality recommendation widgets featuring sexually suggestive or interruptive images.”
To Taboola’s credit, they have policies in place to check for fake material. They also have human account managers who verify content before it is distributed.
And who knows? If news sites using Taboola can personalize their content to give readers as non-spammy an experience as possible, maybe Taboola could help bring levels of reader trust up from historic lows. Or, news publishers could create great investigative journalism alongside listicles, like BuzzFeed has done. Or both.