Taboola Com

We will discontinue analyst coverage of Taboola on or about Sept. 25.

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Our $3.75 per share fair value estimate implies an enterprise value of 0.42 times our expected fiscal 2026 sales. The main drivers of Taboola’s revenue include publisher engagement (page views), inventory yield, and the value of Taboola’s monetization offerings relative to alternative advertising networks. Taboola’s revenue splits with publishers, or traffic acquisition costs, affect profitability.

To develop our revenue forecasts, we estimate Taboola’s current penetration of the programmatic digital advertising market by analyzing various market size estimates. We combine this sizing estimate with our outlook for Taboola’s products and the relative attractiveness of advertising outside of search and social platforms (also called the open web). We believe Taboola’s market opportunity is roughly $50 billion, but we note that headwinds from AI overviews and a reduction in social media referrals are likely to dampen total addressable market expansion. Taboola increased its penetration of non-search and social advertising from 2023 to 2025 as the Yahoo partnership began to ramp up; however, this partnership remains margin-dilutive. Yahoo-related revenue constitutes a low-teens percentage of overall revenue, while Yahoo-related TAC accounts for a significantly larger percentage of total TAC. We believe decreasing traffic to the open web, a surplus of viable alternatives, and a behavioral shift among younger cohorts away from long-form news toward short-form videos will contribute to a slowdown in growth rates. We project an average growth rate of 5% over the next five years, compared with the 11% average annual growth rate over the past three years.

Traffic acquisition costs are by far the most significant expense in the business, averaging approximately 62% of total revenue since 2021, but increasing in recent years closer to 65% due to what we suspect are minimum guarantee payments to the largest publishers (like Yahoo) in the customer mix. Due to the presence of many viable alternatives (that are often already integrated with the publisher’s content management system), we believe publishers face low switching costs, while the most prominent publishers have high bargaining power over Taboola, which should keep TAC sticky around 65%-68% through 2035, as Taboola needs to share a significant percentage of advertising revenue to entice a publisher to choose it over Google or Amazon. This dynamic results in slight compression of gross margins to approximately 26% by 2035.

Sales and marketing is the next largest expense, mainly driven by salaries. Due to its position within a less relevant layer of the digital advertising supply chain, we expect publisher and advertiser relationship-building costs to remain more sticky as a percentage of net revenue than in the past, hovering around 14% through 2035. Research and development expenses consist primarily of salaries associated with the ongoing development of the Realize performance advertising platform and OEM integrations. These expenses have averaged approximately 9% of revenue since 2022, and we expect these costs to remain around 8% of revenue as the the platform repurposes existing code, utilizes AI code assistants for new product development, but also must continue to invest so it may have a relevant solution within an advertising landscape that prioritizes the newest monetization tools. Overall, this cost structure results in non-GAAP EBITDA margins fluctuating in the high teens to the mid- to high 20s from 2025 to 2034.

We believe that Taboola lacks a durable competitive advantage. Declining returns on capital reflect minimal switching costs for publishers and advertisers, declining open-web traffic, and high publisher bargaining power over low-quality inventory. These factors have produced subdued growth in advertising spending, suggesting there is no moat and that one is unlikely to develop in the future.

Taboola’s returns on invested capital are trending in the wrong direction. Since going public in 2021, invested capital has outgrown earnings for a variety of organic and inorganic reasons. In September 2021, Taboola paid approximately $800 million—over half of its market capitalization at the time—for Connexity, a retail advertising network with stock keeping unit-level product data. Connexity monetized clicks for retailers and had a good sense of which products and advertisements were successful. We appreciate the acquisition’s goal of creating a closed-loop attribution system that allows an advertiser to see whether an ad viewer actually purchased a product. However, there has been no visible inflection in aggregate results. Taboola also paid a little more than four times sales for Connexity, which is a high multiple for a retail advertising network that was in the early stages of being disintermediated by retailers’ homegrown advertising networks.

In 2023, Taboola and Yahoo entered a 30-year agreement giving Taboola exclusive rights to native ad monetization, while Yahoo acquired about a 25% equity stake in the company, worth roughly $288 million at the time of issuance. We like this partnership better than the Connexity acquisition because it secures higher-quality publisher inventory and provides consumer behavior data to train targeting algorithms. However, it also caused significant dilution for shareholders and increased capital intensity through integration costs and the addition of a substantial commercial agreement asset on the balance sheet.

With every ad tech player searching for rapid advances in machine learning for targeted advertising and Taboola facing high publisher bargaining power, we believe the company will continue to invest heavily in research and development, and sales and marketing. Overall, Taboola has front-loaded some of this investment through the Connexity and Yahoo deals, but we expect it will continue investing heavily to secure a viable long-term future. However, the firm faces declining traffic on the open web and lacks pricing power with partners, making it unlikely for earnings to grow quickly enough to achieve ROICs above the cost of capital.

If Taboola had a moat, it would be based on either switching costs or network effects. Switching costs are not present for advertisers, since they have a multitude of alternative performance advertising options and can take their budgets anywhere. Switching costs could be argued for publishers, since there are multiyear exclusivity agreements, and there is some engineering integration between publisher content management systems, or CMS, and Taboola’s native recommendation widget that creates inertia. That said, this switching cost argument falls apart because publishers can delete the Taboola content recommendation integration code and replace it with Google and/or Amazon digital display ads and banners—an integration that almost every publisher already has (90% of web publishers monetize through Google). This “rip and replace” has happened before, when Fox News left Taboola after Taboola reduced its guaranteed payouts.

On network effects, Taboola operates a two-sided network that uses data to select advertisements, so its 600 million daily active users could generate sufficient behavioral data to improve its targeting algorithms, leading to increased conversions. With higher conversions, more publishers would be attracted to the Taboola network. More publishers would increase DAUs, and more DAUs would generate more data, which could theoretically improve the Taboola advertising recommendation engine and encourage more advertisers to spend on the platform. To confirm that this virtuous cycle exists, we would need to see significant increases in advertiser spending and fast growth in the number of advertisers. We are not seeing this in the data. Since 2021, inflation-adjusted revenue per scaled advertiser has been flat, and aside from the quarters in which Yahoo's native ad exclusivity ramped, scaled advertiser growth has been in the low single digits year over year. On top of this, the number of publisher partners has decreased from 16,000 in 2021 to 11,000 today. While some of this decrease is likely Taboola cleaning up low-quality supply, we suspect that publishers are dying off at an increasing rate.

Perhaps the most significant headwind facing Taboola today is the structural decline in traffic to publisher websites. Based on earnings transcripts and publisher surveys, we believe traffic has decreased by 10%-30% year over year for many publishers, and we anticipate further declines. The decline in traffic is multifaceted: AI summaries are reducing click-through rates to publisher sites by 15%-40%, and social media giants are deprioritizing referrals to external publishers to retain (and monetize) as much of their users’ time, attention, and behavior data as possible. According to Similarweb, social media traffic referrals to the top 100 global publisher sites have dropped about 30% over the past three years. This is a major headwind for Taboola’s revenue trajectory.

Examining the components of Taboola’s revenue—engagement (page views) and yield (the negotiated percentage of revenue share from publisher partnerships)—we don’t believe Taboola has any meaningful pricing power over major publishers to the point where it is highly doubtful that there may be an increase in its yield that can offset the expected decline in engagement. Said differently, major publishers can easily replace Taboola native ad integrations with larger advertisers (Google, Amazon, and so on), which the publisher likely already has integrated into their CMS—this limits Taboola’s ability to negotiate favorable revenue splits and ultimately limits Taboola’s future ROIC growth.

Realize, Taboola’s new performance advertising platform, uses first-party behavioral data to train targeting algorithms. If successful, it should increase conversions and revenue.

Taboola’s deal with Yahoo grants 30 years of exclusivity for native ad monetization and secures higher-value publisher inventory to attract bigger-budget advertisers.

Taboola’s acquisition of Connexity provides the advertising network with transaction-level data. This data can attract advertisers because it creates a closed-loop system that lets them see whether an ad viewer purchased a product.

Social media referrals are decreasing, and artificial intelligence overviews are replacing visits to publisher websites. This reduces engagement on Taboola monetized webpages and limits revenue opportunities.

Taboola’s customers have technologically sophisticated, data-rich, viable alternatives from scaled players like Google and Amazon.

Taboola’s native advertisements occupy some of the lowest-value real estate at the bottom of a publisher’s webpage and often require clickbait headers to induce conversion. This monetization style can destroy user experience.