Outbrain Raises $ 160 Million in IPO at $ 1.25 Billion Valuation for News Link Recommendations

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Outbrain, which provides recommended web links at the bottom of the news, raised $ 160 million at a valuation of $ 1.25 billion in its initial public offering today.

The New York-based company sold 8 million common shares on the Nasdaq at $ 20 a share, and the price surpassed this during the first day of trading at $ 20.99 and fell back to close at $ 20.15 per share at the end of the day. . It trades under the ticker symbol “OB”.

Outbrain is the widget at the bottom of news articles, such as those from CNN, that recommends other links for you to click. Some have called this click bait, but the company notes that it is very successful and that many people voluntarily click on recommendations from other Outbrain stories. Advertisers can add their advertising and Outbrain shares a portion of that revenue.

“So much has changed and evolved, because we started before mobile even really existed,” said Yaron Galai, co-CEO of Outbrain, in an interview with VentureBeat. “What I’m most proud of is the vision for this market has remained remarkably consistent. And that was to solve two things. First, the user experience for people to help them discover what and the second is to create a sustainable source of income for media owners, publishers and newspapers.

Origins

Above: Yaron Galai (left), Elise Garofalo and David Kostman of Outbrain.

Image Credit: Outbrain

Galai started the business because of his frustrations as a consumer.

“Today, today we serve over a billion unique users each month who find value in our services,” he said. “The introduction of mobile has been huge for Outbrain. The user experience of a news feed has become a natural experience on the mobile phone, where people on social media and places like this are just used to flipping through a personalized feed of recommendations.

It’s been a long road since the company started in 2006 and launched with its first publisher in 2008. This is when VentureBeat’s Matt Marshall first wrote about the company. This was before the huge opportunities on the iPhone, but now 66% of all revenue comes from mobile.

Growth

Above: Outbrain’s performance

Image Credit: Outbrain

In the first quarter ended March 31, the company reported net income of $ 11 million (up 20%) and adjusted EBITDA (up 34%, earnings before interest, taxes, depreciation and amortization) on revenues of $ 228 million (up 29%).

Outbrain has made five acquisitions over the years to get to where it is today. The company has 300 people in two research and development centers in Israel and Slovenia, with 900 employees worldwide.

“They’re finding new algorithms to make the recommendations smarter for us,” Galai said. “The results we’re seeing in growing the business generating an execution rate of approximately $ 1 billion in revenue are all based on engagement. Advertisers only pay us for truly engaged consumers. And so growth is proof of that.

The company has been profitable for several years and the profitability of EBITDA is accelerating.

In addition to news posts, e-commerce sites and mobile apps are now heavy users of Outbrain.

“It’s gotten a lot smarter than where we were 15 years ago when we started space,” said Galai.

Clickbait and privacy

Above: Outbrain’s reach

Image Credit: Outbrain

As for the reviews alleging that it is click bait, Galai said that this view is quite critical, given that people appreciate the recommendations and consume them.

“What’s quality for me is different from the magazines my wife adores,” Galai said. “What’s really important is personalizing and providing useful recommendations for each user. “

While better data helps with algorithms, Galai said Outbrain is a strong supporter of consumer privacy and the company was one of the first to adopt regulations such as the General Data Protection Regulation. (GDPR).

“We are applying this globally and not just in Europe,” said Galai. “We are big supporters of the fact that consumers control how their data is used. “

As for what’s next, Galai said the company wants to make its recommendations even smarter. Two months ago, Outbrain added a quality rating to its recommendations, along with a new set of data to make its links more relevant to users.

“What really excites us is the next five or 10 years,” said Galai.

Citigroup, Jefferies, Barclays and Evercore ISI were the associated bookkeepers for the offering. JMP Securities, Needham & Company and LUMA Securities were co-managers. It’s nice to see companies that we covered in their early stages move on to the IPO stage.

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