In a major move within the AdTech industry, Outbrain today announced its acquisition of Teads for a staggering $1 billion, primarily in cash. This strategic acquisition creates one of the largest end-to-end platforms for open Internet advertising, adding Teads’ upper-funnel advertising capabilities to Outbrain’s lower-funnel strengths.
Outbrain’s net revenue in 2023 was $227 million. With Teads’ estimated revenue last year being $334 million, the new Outbrain will boast about $561 million in net 2023 revenue. This positions Outbrain just ahead of its main competitor, Taboola, which reported $508 million in net revenue.
The acquisition comes at a critical time for both companies, which have recently faced revenue declines. Even though one might be tempted to attribute Outbrain’s revenue losses mostly to a normalization of business after a huge revenue jump in the second Covid year 2021, it’s important to note main competitor Taboola largely managed to retain its gains from the Covid bump. Overall, Outbrain’s net results for the past two years can at best be described as stagnant. (See first chart below.)
This also explains why Outbrain’s stock price has performed somewhat worse than that of its main competitor Taboola lately. (See second chart below.) A $1,000 investment into Taboola a year ago would now be worth $1,217, the same investment into Outbrain, $880.
The consolidation of Outbrain and Teads should generate synergies that will drive revenue growth and reduce overhead costs, improving profitability. The market responded positively to the news, with Outbrain’s stock price rising by more than 4% by end of trading.
Altice bought Teads for $307m in 2017 but needed to sell it to service debt – with a neat 3x exit.
Outbrain enables publishers to drive traffic to their websites (or increase subscriptions, boost online sales, or encourage app installs) through native ads that surface their content on popular, high-traffic apps and websites like CNN, the Washington Post, and People Magazine. These publisher-advertisers only pay for clicks on their content, with Outbrain sharing a portion of this revenue with the sites carrying the ads. The placement of ads is determined by contextual targeting, providing insulation from signal loss due to third-party cookie deprecation, a feature powered by AI. Like Taboola, Outbrain has been the target of criticism for running ads for low-quality publications and has tried, with some success, to weed those out.
While Outbrain targets the lower funnel—focused on performance and conversions—Teads targets the upper funnel, offering a suite of display, video, social, and native ads.
The acquisition of Teads marks a transformative moment for Outbrain. By integrating Teads’ upper-funnel capabilities with Outbrain’s lower-funnel expertise, the combined entity is better-positioned to drive growth and innovation. The market’s positive response underscores the potential of this merger to enhance profitability and competitiveness, with the potential to surpass its main competitor Taboola. As Outbrain and Teads unite, they are set to deliver a more comprehensive advertising solution, promising a better future for the combined outfit than Outbrain and Teads would have had separately.
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