Taboola Acquires Connexity for $800M Following SPAC Deal

Taboola Acquires Connexity in $800 Million E-commerce Expansion

Taboola, a leading provider of a grid-based advertising and content recommendation network, has announced the acquisition of Connexity, a marketing technology firm specializing in retail and e-commerce advertising. This $800 million deal, comprised of both cash and stock, marks Taboola’s first significant move following its public listing in June via a SPAC.

Deal Details and Financial Projections

The acquisition will be funded through $260 million in existing cash reserves, $300 million in committed debt financing, and approximately $240 million in newly issued ordinary shares. This strategic move is expected to substantially increase Taboola’s scale and diversify its offerings.

Taboola anticipates a combined gross profit exceeding $500 million for the fiscal year ending March 31, 2021, excluding traffic acquisition costs (TAC). Adjusted EBITDA for the same period is projected at $185 million, representing a 20% growth compared to 2020.

Connexity's Background and Network

Formerly known as Shopzilla, Connexity has evolved through a series of acquisitions, including Become.com, Skimlinks, and PriceGrabber. These additions have enabled the company to establish a robust network centered around e-commerce solutions.

Connexity currently serves over 1,600 direct merchants and 6,000 publishers, including prominent names like Walmart, Wayfair, and Macy’s. Its network encompasses approximately 40,000 retail-oriented publishers, offering a selection of 750 million product offers to an audience of 100 million shoppers.

Synergies and Competitive Positioning

While Taboola concentrates on content recommendations and associated advertising, and Connexity focuses on e-commerce, both companies share a common goal: providing alternatives to dominant advertising platforms like Google, Facebook, and Amazon. They aim to empower publishers and retailers with additional revenue streams and customer acquisition methods.

Taboola and Connexity both strive to offer viable alternatives to major advertising players, allowing publishers and retailers to generate revenue and attract customers independently.

Potential Challenges and Industry Concerns

Despite the potential benefits, the acquisition raises some concerns. Taboola has faced criticism for promoting clickbait and low-quality content. A deeper foray into e-commerce and merchandise sales could also spark debate, as some media organizations prioritize maintaining a separation between commercial interests and editorial content.

Taboola’s Vision for the Future

Adam Singolda, CEO and co-founder of Taboola, emphasizes the company’s commitment to addressing the challenges faced by publishers. He views the acquisition as a key step in expanding Taboola’s reach into new recommendation segments and scaling its overall operations.

Singolda believes that the future of the open web is intrinsically linked to e-commerce, and this acquisition positions Taboola to capitalize on that trend.

Platform Statistics and Capabilities

Currently, Taboola boasts 9,000 digital property partners, 13,000 direct advertisers, and 500 million daily active users. Publishers leverage the platform to recirculate their own content and integrate advertising from the Taboola network.

Connexity offers a range of services, including affiliate links, influencer marketing, in-stream advertising, and shopping search ads. In 2020, the company facilitated over $2 billion in sales for its customers, generating over 800 million shopping leads.

Market Opportunity and Publisher Trends

Although significant, Connexity’s impact represents a relatively small portion of the overall e-commerce media market, estimated at $35 billion in the U.S. alone by eMarketer.

Taboola anticipates that its existing publisher partners will increasingly focus on e-commerce as a revenue source. Approximately 62% of U.S. publishers anticipate e-commerce becoming a major revenue stream.

Integration and Future Plans

Connexity’s multichannel approach, a result of its past acquisitions, will be maintained by Taboola. The company plans to leverage cross-selling and upselling opportunities, expand e-commerce offerings to all publishers on the open web, and empower editorial teams to create e-commerce-focused content.