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Recommended links on web pages have come from virtually nowhere to near ubiquity in the last two years. Is this the birth of a new ad format? Tom Lytton-Dickie talked to Adam Singolda, CEO of Taboola…

If you’ve visited a media publisher’s web site recently ¬– and who hasn’t? –you may have seen a bunch of links at the bottom headed ‘you might also like’ or ‘more stories around the web’. You may even have clicked on one. They’re pretty irresistible.

Many of these recommended links come from Taboola, which offers them to publishers as another revenue source. It calls the concept ‘a reverse version of search’. That is, information looking for people rather than the other way around. And so far, it’s proving incredibly successful. The online advertising market is worth $140bn a year. According to Taboola CEO, Adam Singolda, the majority of that spend is dominated by two main categories: search and display. Singolda and his company Taboola are betting on the emergence of a third – discovery.

The fact that the company recently announced sales of $250m (partly through the acquisition of Perfect Market), suggests content discovery might just have been discovered. Taboola now reaches over 400 million monthly unique visitors and serves 1.5 billion content recommendations each day.

Predictive engine

It’s taken Taboola seven years to get to this point. Singolda himself describes the founding group as “a bunch of geeks in the Israeli army, passionate about the unique problems that can be solved with advanced mathematics”. In July 2007, the founders began thinking about content consumption patterns, and ways to predict the videos people would like before ever expressing an interest in watching them.

They developed a predictive engine called Taboola EngageRank to calculate the best content to show to the right user. This became the foundation for the recommended articles and slideshows we now know so well and falls into a category named as content discovery.

Singolda explains the difference between the traditional advertising approach and Taboola’s. He says: “They run a few hundred campaigns at any moment whereas in the world of content discovery, Taboola’s algorithm chooses thumbnails from its index of over five million sponsored articles. The underlying technology allows a high degree of accuracy in terms of personalization and localization.” Naturally, the contextual information is critical as it improves results. It includes: time of day; whether the user is on mobile; whether they have come to the article through search or social media and more.

Reader control

It is then up to the user to determine whether the experience is positive or negative. Part of that will be judged by whether a consumer actually clicks on an article but they can also ‘ex out’ a particular thumbnail, since the introduction of Taboola Choice in September 2013. A similar article will then never be shown to that consumer again.

The algorithm is constantly being updated with user data, increasing the chance of a successful match. Singolda reveals that “we only get paid if we do a good job of matching content to consumers,” which in practice means when a consumer actually clicks on a given article. Taboola commits significant resources to improving its algorithm, and Singolda describes the group as “one of the most technologically innovative you can be a part of.”

Around half of Taboola’s 200 employees are engineers and the beauty of the platform is that it requires no human interaction, meaning the company can scale quickly whilst remaining relatively lean.

A global opportunity

This is important since Taboola has ambitious global pans. Singolda explains that a problem of more traditional online advertising is that it is very difficult to get advertisers to pay high prices outside the key markets: US, UK and Canada. That form of advertising has very low click through rates but a high CPC (cost per click). In contrast, he says the opportunity with content marketing is that everyone pays a lower CPC but the click rates are always high. “People in India are as interested in great content as someone in London or New York,” he says. This is why Taboola is taking content discovery rapidly into new markets, launching a dedicated office in the UK for example, and forming strategic partnerships with Gruppo Editoriale L’Espresso and Yahoo! in Italy and Japan respectively.

Challenges

Whilst Taboola continues to grow, it faces stiff competition from fellow New York based Outbrain, and there are rumours that Google is testing a content recommendation algorithm. There is also an increasing amount of negativity around the quality of content that is served by both Taboola and Outbrain.

VC Marc Andreessen has been typically forthcoming with his opinion, stating that publishers “should be shot” for using related content links. His belief is that they degrade user experience and are a short-term revenue fix, which should not be a substitute to building a long-term quality business.

Singolda points to Taboola Choice as a defence, putting the decision on what is quality content in the hands of editors and ultimately consumers. He’s confident Taboola will prosper. But what are its prospects in the longer term? Singolda says: “The question is how will marketers reach consumers 10 years from now. How will things work when most of us consume the web on a four and a half inch screen?” Taboola is already mulling this. Singola says seven per cent of the company’s 2012 revenues stemmed from a mobile device. It is now up at around 40 per cent.

That shift, according to Singolda, creates a massive potential for content creation. “It’s hard to imagine display in its current format getting high clicks on mobile and mobile is such an amazing content consumption device,” he says. The opportunity for marketers is therefore to become storytellers. The shift to mobile has affected monetization strategies for advertisers and the revenue potential of banner advertising is decreasing by the day. Content is the way forward but as Singolda says, creators must be able to measure the return on their content.

He says: “Companies who were spending $200m a year on banner advertising that now want to create content need to be able to see the return on their efforts. Also, consumers need choice too. They will want to participate in the conversation around what content they are served.”

It will remain to be seen if companies like Taboola are just a short-term fix, but it appears the era of content discovery and marketers becoming storytellers is here to stay.

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