Company behind 'chum-box' content recommendations Taboola gets $2.6bn valuation ahead of listing

Taboola adverts on the Metro news website

Ad-based content recommendation platform Taboola has been valued at $2.6bn (£1.9bn) as it goes public via a merger with ION Acquisition. The move comes less than six months after a proposed merger with rival ad-tech firm Outbrain fell through, which would have valued it at $2bn.

ION, a special acquisition corporation (SPAC), is putting up roughly $545m in funding for Taboola – half of which is from a handful of investors. A SPAC is an alternative to selling shares to the public through an Initial Public Offering (IPO), which is what Facebook did in 2012.

The deal is expected to close next quarter.

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Taboola provides ad space on news websites. Its sponsored ads appear as thumbnail images with headlines, which are typically embedded below an article, and are designed to look similar to a host publisher’s own “related content” story links.

Taboola’s content recommendations are generally a mixture of links to other news websites and advertorial features. Publishers and advertisers pay Taboola a price-per-click which it shares with the host publisher.

The company was founded in Israel in 2007 and now has more than 1,000 employees in 18 offices worldwide, with headquarters in New York.

It claims to have 1.4bn users a month and reach 516m daily active users across its network, which it says is powered by artificial intelligence technology to drive content recommendations.

Taboola reported revenue of $1.2bn and adjusted earnings (EBITDA) of $106m for the year ended 31 December 2020.

Founder and chief executive Adam Singolda said: “Taboola’s success is built on a simple idea – deliver value to our partners in a way where we only grow if our partners grow, in a true win-win manner. This is in stark contrast to ‘walled gardens’ of closed ecosystems that don’t always have their partners’ best interests in mind.”

Content marketing provides a means for news publishers to earn a share of advertising revenue in a digital marketplace that is dominated by Facebook and Google, known collectively as The Duopoly.

Taboola adverts appear on The Independent, Mail Online, Metro, Daily Mirror, The i and Huffpost UK. The Independent is also a partner publisher. Taboola’s US partners include CNBC, NBC News and Business Insider.

But the ad-tech company is not without controversy.

Its adverts have been given the nickname ‘chum-box ads’ because of their use of clickbait techniques – e.g. shocking or bizarre images and teasing headlines with questionable claims – to lure readers into clicking on them.

Recent headlines seen by Press Gazette include: “Seniors Aged 50-79 Are In For A Treat This January”; “Doctor Reveals: It’s like a Pressure Wash for Your Insides”; “Forget Prescription Hearing Aids – Use These Instead”; and “Diabetics: Here’s How to Lower Blood Sugar (It’s Genuis!).”

The Guardian stopped running these types of ads in April last year, following the New Yorker and Slate magazines who removed them in 2016 at a time when “fake news” was a growing concern for publishers. The Covid-19 pandemic has only heightened misinformation fears.

[See more: Fight the Infodemic: Press Gazette launches campaign as thousands voice concern over spread of Covid-19 conspiracies]

Press Gazette asked UK publications if they had any concerns over the content Taboola promoted and if it met their own editorial standards. Only Reach, publisher of the Mirror, Express and Star websites, responded.

It said: “Like many commercial news publishers we have agreements with third-party advertising providers allowing them to embed their inventory on our websites. Editorial and commercial colleagues work together to ensure that advertising is relevant and appropriate for the wide range of topics Reach titles cover.”

Responding to concerns about moderation and regulation of its content, Taboola CEO Singolda told CNBC: “Taboola is a leader in moderating content.

“We work with the best publishers on the planet, such as CNBC, The Today Show, The Independent in the UK… where you see Taboola, it’s side-by-side to high-quality premium editorial content.

“In terms of what we recommend, we have a public policy, we have a team of humans that reviews every single URL that we recommend. We now review over half a million URLs a week.

“So if anything I think that Taboola is ahead of the game in terms of moderating content and the most important [thing] is being consistent… With Taboola everything is public, we have a human team that’s backed by AI and software and you can always expect us to be consistent.”

Taboola said it plans to invest more than $100m in research and development growth initiatives including AI, eCommerce, TV, and device manufacturers in 2021.

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