Yahoo! purchases 25% of Taboola, but why?

Paid Media

Although its revenues are declining thanks to weaknesses in the digital advertising market, internet giants Yahoo! have purchased a 25% stake in advertising network, Taboola.

As part of the deal, Yahoo! has finalised a 30-year exclusive advertising partnership with Taboola. In addition, the deal also allows Yahoo! to use Taboola’s tech to manage its native ads.

Why has Yahoo partnered with Taboola?

Taboola specialises in native ads. These can be found on popular websites such as CNN and MSN. However, although they’re hugely popular and influential in the advertising space, shares of Taboola have fallen nearly 80% since last year; partially due to underlying market weaknesses.

However, the deal with Yahoo! now offers Taboola a number of benefits. For example, Taboola now has the exclusive license to sell native ads across Yahoo’s sites. As a result, Taboola will be able to reach almost 900 million monthly active users worldwide.

The companies will share revenue from those ad sales, but they did not disclose the terms of the revenue split. That said, the two companies involved estimate that their ad partnership will generate $1 billion annually.

What do others think?

Although Yahoo! and Taboola are both understandably bullish about their newly-formed partnership, other executives in the space such as those at TikTok and Meta are much more sceptical about the benefits both companies can expect to receive. This is due to the fact that advertisers who are skittish about the economy have pulled back on their spending in recent months.

However, Jim Lanzone, the chief executive of Yahoo!, said in an interview that the deal with Taboola puts both companies in a good position for when the ad market revives. He said that:

“Digital advertising has huge wind at its back over the long term.” He added that while the company will continue to try to bring in money in other ways, such as expanding its subscription business or investing in e-commerce, “we have hundreds of millions of people consuming news and sports and finance on market-leading properties that are heavily monetized through advertising — and will continue to be.”

Yahoo’s partnership with Taboola – the view from Spike

Yahoo’s latest business relationship may provide advertisers and brands with a more competitive edge when it comes to choosing which platforms to spend their marketing dollars with.

However, how successful the partnership will be, remains unknown. Although Yahoo! and Taboola have great intentions, there’s currently no doubt that the digital advertising market is going through a downturn, with many advertisers withdrawing funds due to economic uncertainties.

Due to this, Yahoo! and Taboola’s new partnership feels like a long-term bet on the future of the space. While we may not see much of an impact over the next few years, the partnership will span for several decades. When the market does rebound, Taboola and Yahoo! will be well-positioned as differentiators who are focused on improving user, advertiser and publisher experiences across properties. As a result, should funding in the space rebound, both companies will be ideally positioned for success.