The rumors are true: Outbrain is acquiring Teads.
On Thursday, the content recommendation platform announced that it would buy Teads, an SSP and video monetization startup owned by European telco Altice. The deal brings an end to extensive talks between the two companies, which Business Insider first reported on in July.
Altice, which paid $307 million for Teads in 2017, is now receiving the around $1 billion sale price it was reportedly looking for. Altice had been aiming to transfer its ad tech to help pay off its massive multibillion-dollar debt.
Outbrain will pay $725 million in cash up front, with a $25 million deferred cash payment, and issue 35 million shares of stock to Altice for about $169 million.
Outbrain CEO David Kostman will become the newly combined company’s CEO after the transaction is completed. Teads’ co-CEOs, Bertrand Quesada and Jeremy Arditi, will act as co-presidents.
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Outbrain’s goal is to create a “end-to-end, full-funnel platform for the open internet,” Kostman told AdExchanger. Kostman further stated that Outbrain sees this purchase as a merger between two significant companies rather than a simple acquisition of one by the other.
The Case for Outbrain and Teads
Altice is hardly the first telecom to spend millions, if not billions, of dollars, attempting to realize failed ad tech dreams.
Verizon, AT&T, and others have already made large bets on ad technology, only to exit stage left. In 2022, Singaporean telco Singtel sold Amobee to Tremor for $239 million, approximately $100 million less than the original 2012 transaction price.
When Altice first acquired Teads, the aim was to use its first-party subscriber data to create more revenue from the combined assets.
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Fast forward to now, and the strategy for Outbrain and Teads is very different.
Outbrain, with shares down 76% since its IPO in 2021, looks to benefit greatly from Teads. The SSP grants Outbrain access to TV and video publishers, allowing it to expand beyond the much-maligned chumbox area and into the more lucrative CTV space. According to Outbrain, the merged platform would reach over 2 billion people each month.
Outbrain had been looking to expand into upper-funnel advertising, and the expansion of Teads’ CTV business piqued their interest, according to Kostman.
Outbrain’s New Horizons
Content recommendation tools such as Outbrain and Taboola are under fire for funneling traffic – sometimes even invalid traffic – to made-for-advertising publishers by rewarding clicks on less attractive site placements with lower CPMs.
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With the ad tech sector on a mission to stop the flow of wasted ad revenue, it’s understandable that web content recommendation companies would want to distance themselves from any potential link with MFA. Owning Teads could help Outbrain diversify its revenue strategy beyond click-based ads.
Access to CTV and long-form publishers, which comes with the gold glow of a “premium” designation, is effective at enticing advertisers to spend more money.
Proximity to premium publications also increases Outbrain’s opportunity to monetize traffic through more expensive supply, attracting higher-paying advertising. Furthermore, unlike click-based advertising, TV and video function as a reach vehicle, increasing brand affinity and customer value over time.
According to Arditi, Teads’ video and CTV business complements Outbrain’s performance-based marketing approaches.
Outbrain and Teads collectively employ almost 2,000 people.
Outbrain, which had a market capitalization of $231 million as of March, needed financial backing to make this purchase possible, and it received commitments from Goldman Sachs, Jefferies, and Mizuho Bank in the form of a $100 million revolving credit facility. Some of that money will be used to fund the cash portion of the transaction, which includes related fees and expenses.
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