The news about the Yahoo/ Taboola deal spread fast. “Yahoo is taking a nearly 25% stake in advertising network Taboola. In exchange, Taboola is becoming Yahoo’s native advertising partner through a 30-year commercial agreement.” This was TechCrunch’s coverage of the deal.
Clearly the deal was meant to shore up Taboola’s declining fortunes as its stock price got battered in the last 12 months; starting at $7.64 early 2022 to a low of $1.75 right before the announcement. Once the deal was public, shares “jumped” to about $2.80 but still well below higher price from a year ago.
Normally, this deal wouldn’t get much attention until Adweek’s Catherine Perloff revealed the real context of the deal; Yahoo will pay no cash for their stake in Taboola.
This key detail changes the deal picture dramatically.
This key detail changes the sentiment of the deal from being a smart strategic move on the part of Taboola, to a deal that reveals the full weakness of Taboola as an adtech provider.
Taboola’s start as a native platform held the promise of high-quality, contextual placements. Pretty quickly, it devolved into placing low quality ads in low quality publishers – “at scale.” Now that advertisers are shifting ad dollars from scale buys to real contextual buys, Taboola is in a difficult position. If it pivoted to higher quality ad placements, its revenue would decline putting more pressure on its stock price. If it maintained its current low-quality scale business model, advertisers will continue to flee as they seek quality media outlets.
Any deal where a larger player takes a stake in a smaller company with no cash and a 30-year term, means something is amiss. In this case, the “something” that is amiss is a little thing called quality.