Taboola's transformational year: Revenue soars, losses narrow
Taboola's transformational year: Revenue soars, losses narrow
Revenues up 29% in Q2, operating loss narrows significantly as Yahoo deal begins to pay off
The stock of online advertising company Taboola surged on Wednesday after the release of strong financial results for the second quarter of 2024. "2024 is a transformational year for Taboola," noted the founder and CEO of the company Adam Singolda upon the publication of the reports, just a few days after the merger between its two competitors, the Israeli company Outbrain and the French company Teads.
This merger is expected to create a large player in the online advertising field. The combined entity will now compete head-to-head with Taboola for the open internet advertising market (meaning advertising outside of social networks and tech giants like Google and Amazon), a market estimated at $80 billion and growing at an annual rate of 10%.
Taboola's revenues stood at $428.2 million in the second quarter, representing a 29% growth compared to the corresponding quarter last year. Despite this rapid increase in revenues, the company is still operating at a loss, with a net loss of $4 million in the second quarter. This lack of profitability is attributed to the rise in traffic acquisition costs (TAC), which increased at a higher rate than revenue growth, even though Taboola managed to reduce expenses in other areas. On a positive note, the operating loss significantly decreased from $25 million to $7.6 million in the second quarter. Despite the accounting loss, Taboola's operations generated $26 million in cash flow.
Taboola expects a slight increase in revenues in the current quarter, projecting between $416 million and $446 million, which would reflect a more moderate 20% increase compared to last quarter’s growth. For the full year, Taboola improved the previous forecast, expecting gross revenues of $1.73-$1.76 billion in 2024 and net revenues, excluding advertising purchase costs, of $667 million. These numbers would position Taboola on par with Outbrain and Teads in terms of net revenue but still lagging behind them in profitability.
Taboola also noted that the process of transferring Yahoo's advertising to its platform has been completed and is beginning to generate revenue, with the annual forecast already accounting for this activity. According to an agreement signed at the end of 2022 between the two companies, Yahoo became the largest shareholder in Taboola with a 25% stake, and in return, Taboola received the exclusive license to sell advertising on all Yahoo-related websites and platforms. The companies estimated that once the integration and full implementation of the agreement are complete, annual revenues could reach $1 billion. Additionally, the integration of Taboola's advertising into Apple's News and Stocks apps, as part of an agreement announced earlier this year, has also been completed and is expected to start generating revenue later this year.
