Outbrain’s CEO On Its IPO, Ad Quality And Why He Brushes Off The ‘Chumbox’ Label

Yaron Galai, CEO, chairman and co-founder of Outbrain

It’s been a whirlwind year of acquisitions, near mergers, SPACs and pre-IPO filings for companies in the content recommendation space.

In September 2020, the proposed mega merger between Outbrain and Taboola fell apart. In January, Taboola announced plans to go public via a special purpose acquisition company. Three months later, Outbrain filed confidential S-1 paperwork for an IPO of its own. And in early June, RevContent was bought by Star Mountain Capital, a specialized assets management firm focused on the lower middle market of the ad tech sector.

Why so much activity in just ten months?

According to Yaron Galai, CEO, chairman and co-founder of Outbrain, the time is ripe because the markets are mature and so are a lot of the ad tech players eying their exits.

“There are many companies that are both sizable and profitable,” Galai said. “Both are very good reasons to go public.”

Galai is legally required to stay mum on certain details related to Outbrain’s pending public offering until it’s cleared by the SEC. For instance, it was reported that Outbrain is seeking a $2 billion valuation, which Galai couldn’t comment on.

But he did say that the plan is to complete the process and for Outbrain to be a public company by year’s end.

AdExchanger caught up with Galai for a few hot takes.

outbrains ceo on its ipo ad quality and why he brushes off the chumbox label

Why isn’t Outbrain doing the SPAC thing?

YARON GALAI: We did look at all the options – direct listing, SPAC and a traditional IPO – and decided on the traditional route, in part because the SPAC space seems a bit less exciting these days. But really, it’s the end goal that matters, and that is being a public company.

It seems like things got a little bitter with Taboola at the end. Anything else you can share about why the merger deal broke down?

It’s exactly as we said back then. The regulatory process in the US took a year and still wasn’t cleared in some other countries. We didn’t know if we’d get the approvals. And then COVID happened. We started looking at the terms from over a year before and it just didn’t make sense to do a deal anymore.

The end result was quite positive, though, because now you’ve got two profitable companies that can go public instead of just one.

Content recommendation platforms are often accused of purveying chumbox advertising. Basically, clickbait. What do you think of that description?

Obviously, we’re not fond of that type of characterization. What I’d say is that for every chumbox tweet, there are probably somewhere between five and 10 million people engaging with and enjoying the stories we recommend to them. We see repeat usage and people coming back for more. That’s what we focus on, rather than the snarky tweets and articles.

Outbrain recently changed its algorithm. What was the change and what motivated it?

The motivation was looking at the data. The cohort of people who engage with our recommendations engage quite often and we have a very strong data signal from them in terms of engagement. But what about all of the people who don’t engage with recommendations? We asked ourselves what would be appealing to them.

And so we introduced a more qualitative metric into the algorithm that focuses on ad quality and not only on the data signal of existing engagement. We get human feedback on the subjective quality of all of the ads, videos and content in our index which our algorithm then uses to preemptively assign a quality rating to each recommendation.

We now have two buckets of algorithms. One that focuses on ROAS [return on ad spend] and optimizing for advertisers, and another bucket focused on engagement and quality optimizing for the user. Recommendation decisions are made using both together.

How reliant is Outbrain on third-party cookies?

We do use third-party cookies, but unlike most ad tech we power the news feed and the whole user experience for the publishers that work with us, which means that when engagement happens, it’s first-party data for us. This is true not only of the ads, but also of engagement with organic recommendations.

Does that data not belong to the publisher?

I’m not a lawyer, but first-party data can belong to two entities. The engagement is happening within the publisher’s context, but both of us are essentially the first parties, and within the news feed we play a significant role in collecting that data, aggregating it and using it for the publisher’s benefit.

What do you want people to know about Outbrain that they don’t seem to know?

We’ve directly generated over $3 billion in revenue for the publishers that work with us, and that has supported a lot of journalism and local publishing.

It’s easy for people to forget that the content they consume, love and receive for free is not actually free to produce.

This interview has been edited and condensed.

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