The news: Yahoo acquired a 25% stake in Taboola. As part of the deal, Taboola will be Yahoo’s native advertising partner for 30 years across its digital brands, which includes sites like TechCrunch, AOL, and Engadget.

What is Taboola: Most people are exposed to Taboola through “recommended” article links found at the bottom and sides of news articles. These links direct users to other pages in the company’s ecosystem or link to a third party “sponsored” advertiser, and are featured on many major digital publishers, from USA Today and CNBC to our own sister site Insider.

• Like many companies, Taboola has been hit hard by 2022’s ad spending downturn and the decline of digital publishers. Its stock has dropped almost 80% year-to-date, and its market cap of $653 million is a far cry from the $2.6 billion valuation it scored via SPAC last year.
• In Taboola, Yahoo sees a way to effectively target users without the need for third-party cookies. In a blog post, Taboola CEO Adam Singolda wrote that Yahoo and Taboola can create a “Contextual Powerhouse” that lets advertisers target audiences with “complete user privacy.”
• For Yahoo, which has multiple digital media properties under its belt to gather data from and redirect users to, Taboola’s model can find more success than on an individual, independent website that links to third-party articles.

But is Taboola the right bet? A larger company like Yahoo might be a better match for Taboola, but the ad-supported digital publishing model appears to be on its way out.

• Publishers have started moving away from third-party advertisements and companies like Taboola. Bloomberg, a digital publishing heavyweight, recently severed ties with Taboola, ending its reliance on third-party programmatic advertising, which it said diverts traffic away from Bloomberg and creates a negative user experience.
• Programmatic ads like Taboola’s only made up 5% of Bloomberg’s ad inventory, suggesting they are not a major driver of ad revenues for major digital publishers.

• But still, Yahoo CEO Jim Lazone sees an opportunity in the ad downturn. In an interview, Lazone said he sees digital advertising gaining a “huge wind at its back” in the next “five, 10, 30 years.” But 2022 has shown that many publishers can’t survive this year, let alone the next 30.

Our take: Taboola can’t save digital publishing on its own. While a partner like Yahoo may be a natural fit, its format still creates a negative user experience and doesn’t drive enough revenues to prop up a company on its own (though Lanzone said Yahoo will expand revenues in other ways).

• Yahoo’s Taboola deal is a sign of a larger trend beginning in digital advertising. The 2022 downturn has seen advertising companies like Taboola, Roku, and others lose significant market value, making them ripe targets for M&A by larger companies looking to seize share in a time of turbulence and emerge on top.