If you’re familiar with the name Taboola, you probably associate it with those “from the web” or “recommended for you” modules that show up on dozens of different sites, from The Atlantic to the Weather Channel — the ones that link to posts with titles like “10 Hot Celebrities With Ugly Spouses.” But Taboola wants to be much more than just a click-farm, and it announced Tuesday that it has closed a $117-million financing round it hopes will help it become a recommendation engine for all kinds of content.
In contrast to some of Taboola’s rather low-rent content recommendations, the funding round was led by the well-respected Wall Street research firm Fidelity Management, and included private venture funds such as Steadfast Capital, as well as Comcast Ventures, Advance Publications (the parent company of magazine group Conde Nast), Groupe Arnault — controlling shareholder of luxury-brand holding company LVMH — and Yahoo Japan.
Those investors were likely attracted in part by the kind of reach Taboola’s platform has: although many readers may never think to look at whose name is on those content modules, founder and CEO Adam Singolda said that Taboola serves more than 200 billion recommendations to over 500 million users a month on dozens of influential websites such as USA Today and The Huffington Post, and that the company reaches more Americans than anyone apart from Google:
Started with video
Although Singolda wouldn’t say what kind of valuation the funding puts on Taboola, there were reports from a number of sources before the financing closed that the company was looking for a valuation as high as $1 billion. The Taboola CEO, who started the company in in 2007 after he left the Israeli military — where he worked in the intelligence unit doing encryption — said that his company has been profitable from day one.
Coincidentally enough, one of Taboola’s main competitors, Outbrain Inc., was also founded in Israel around the same time. It has also raised about $100 million in financing as it has grown, and recently filed for regulatory approval for an initial public stock offering, which could value the company at $1 billion or more. Outbrain has about 450 employees while Singolda says that Taboola has about 250, and an annual revenue run-rate of about $250 million.
While Outbrain started doing content recommendation (including sponsored content) from the beginning, Singolda says he decided to work first on perfecting video recommendations, because he thought if he could do that properly, then he could build a similar engine for other types of content. Taboola didn’t start doing non-video content or articles until 2012, but now it is the bulk of the company’s business.
What Singolda says he really wants to do with Taboola (whose name comes from the Latin term “tabula rasa,” meaning blank slate) is to become so good at recommending content that the platform can build a business recommending all kinds of things — including products and services. Taboola’s first acquisition, a company called Perfect Market, which it bought last year, was designed to help build out that business and was originally part of the Idealab incubator.
As the content world becomes increasingly mobile, Singolda says he sees content recommendation as a kind of brand new third advertising category, next to search and display. Since so much of content discovery happens via social networks instead of search now, and display advertising doesn’t really work well on mobile, there is room for a new category that shows consumers what they want before they want it, the Taboola CEO says.
Taboola isn’t the only company trying to do this, obviously. In addition to companies like Outbrain and Gravity (which is owned by AOL), some not-so-tiny competitors like Google and Facebook have their sights set on the same goal: what Singolda is describing is essentially what Google wants to do with its smart assistant Google Now, which it recently announced will start recommending content from specific partners like The Guardian. The Facebook newsfeed algorithm is designed to do the same.
Singolda freely admits that Taboola doesn’t have access to the thing that both these companies see as their main weapon — namely, detailed biographical and demographical data about their users, their likes and dislikes, their social networks and their online behavior. So how is Taboola going to compete? The CEO maintains that his company’s reach and algorithms give it the edge when it comes to content recommendations.
The secret is to create “dotted lines” between what the platform knows about a user and what they might like, Singolda says — so Taboola looks at what device he or she is using, whether it’s a tablet or a desktop browser, what time of day it is, where they came from (search or social or a direct link) and then does its best to try and figure out what to show them that will get them to click. If readers don’t like a piece of content they can indicate that and will never see that recommendation again.
Google and Facebook may be huge, says the Taboola CEO, but “if you have the scale and you have good technology, you can create very good recommendations — and we have indexed hundreds of millions of articles and videos and slideshows. It took us seven plus years to do it, but we have the technology to build the recommendation engine the web needs.” And now the company has $117 million with which to prove that it can do so.