Advertising platform Taboola’s $250m buyout of rival Outbrain could result in worse terms for publishers who face getting a smaller share of advertising revenue, the UK’s competition watchdog has said.
The Competition and Markets Authority said it has concerns the merger will result in a substantial lessening of competition and that it will investigate further unless the businesses take steps to address them.
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Taboola and Outbrain are native advertising platforms that display boxes of recommended content within news publishers’ pages. Publishers receive a share of the revenue for each clickthrough a user makes.
The companies announced plans to merge in October last year, claiming this would create a “meaningful advertising competitor” to the Facebook and Google duopoly that takes the lion’s share of online ad revenues.
Taboola founder and chief executive Adam Singolda (pictured left, with Outbrain chief executive Yaron Galai) said at the time: “By joining forces, we’ll be able to create a more robust competitor to Facebook and Google, giving advertisers a more meaningful choice.
“We’re passionate about driving growth for our customers and supporting the open web, which we consider critical in a world where walled gardens are strong, and perhaps too strong.
“Working together, we will continue investing to better connect advertising dollars with local and national news organisations, strengthening journalism over the next decade. This is why we’re merging; this is our mission.”
But the CMA said publishers in the UK will have a reduced choice of supplier for content recommendation services, which could result in a “worsening of terms for publishers and a reduction in their share of advertising revenue”.
Many national and local news websites in the UK use one of the two services and the CMA said a “large proportion” of the publishers it contacted as part of its initial investigations were concerned about the potential impact of the deal.
The CMA said Taboola and Outbrain have a combined market share of over 80% in the UK.
CMA senior director of mergers Joel Bamford said: “Online advertising, including content recommendation, is a really important revenue stream for publishers, including news websites.
“Our merger investigation has found that the current competition between Taboola and Outbrain means publishers can negotiate better revenue share deals and contract terms.
“If the companies were to merge, this competition in content recommendation would be reduced, and publishers could lose out.”
Taboola has been contacted for comment on the CMA’s concerns.
It paid Outbrain investors $250m in cash and shares representing 30% of the combined company, and has said it will reach nearly 2bn people every month after the buyout.