Taboola Lowers Revenue Forecast Amidst AI Shifts and Yahoo Dispute
Translated & summarized from Ice by baba
Taboola's Q3 profit rose to $18.4 million, but the company lowered its annual revenue and EBITDA forecasts due to fewer ad exposures per page view, potentially linked to AI summaries. The company is also involved in an arbitration dispute with Yahoo over their advertising partnership. Taboola's ability to monetize content in the age of AI-driven search remains a key concern for investors.
The story in 5 lines · by baba
- Taboola lowered its annual revenue forecast to $1.88-$1.90 billion and adjusted EBITDA to $212-$221 million.
- The company cited fewer ad exposures per page view, possibly due to AI summaries, as a contributing factor.
- Taboola and Yahoo initiated arbitration proceedings against each other over their advertising partnership agreement.
- Yahoo's revenue share for Taboola increased to 14.8% in Q3, despite overall revenue decline.
- Taboola's ability to profit from AI-driven content consumption is still unproven.
Taboola reported a net profit increase to $18.4 million in the third quarter of 2023, up from $5.2 million in the same period last year. However, the advertising technology company significantly lowered its annual revenue and adjusted EBITDA forecasts for the remainder of the year. The revenue outlook was reduced from $1.93-$1.96 billion to $1.88-$1.90 billion, while the adjusted EBITDA forecast saw a cut of approximately 7.5%, from $228-$240 million to $212-$221 million.
CFO Steve Walker attributed the decline in ad exposures per page view to factors beyond Google referrals, suggesting that users might be satisfied with AI-generated summaries, leading to less engagement with full articles. CEO Adam Singolda echoed this sentiment, positing that readers may be scrolling less if they find answers quickly in summaries. Taboola has acknowledged the decrease in exposures but has not quantified the impact of AI summaries.
Adding to the company's challenges, Taboola and Yahoo have each filed notices of arbitration, alleging material breaches of their 2022 exclusive 30-year advertising partnership agreement. This agreement also made Yahoo a significant shareholder in Taboola. The specifics of the dispute were not detailed, nor was the agreement's termination mentioned, nor was the conflict linked to the lowered forecast.
The Yahoo dispute is significant as Yahoo's revenue contribution to Taboola has grown, reaching $68.2 million in the quarter, or 14.8% of Taboola's total revenue, compared to 10.5% a year prior. This occurred while Taboola's overall revenue decreased by 6.9%.
Looking ahead, Taboola faces the challenge of adapting to evolving content consumption habits driven by large language models and AI-powered search. While its own AI engine, DeeperDive, is operational on over 100 sites, its revenue contribution is still in early stages, leaving investors uncertain about the company's ability to offset declining ad exposures.
