Giving up its cash cow paved ironSource's way to NYSE

ironSource management  credit: Adam Frimer
ironSource management credit: Adam Frimer

ironSource's highly profitable installCore product, a survivor from Israel's notorious "Download Valley", was discontinued late last year.

Eleven years after it was founded, ironSource will make history when it starts to be traded at the highest ever IPO valuation for an Israeli company - $11.1 billion. The company's accession to the New York Stock Exchange in a merger with a SPAC will bring to a peak a long period of dividend distributions and private sales of stock that has produced hundreds of multi-millionaire workers and turned some of the founders into billionaires.

To reach this sought-after status, however, ironSource had to make a major concession: the sunsetting of its flagship product - the installCore installation and content distribution program, which enabled users to install programs such as antivirus, Zoom, a music player or Chrome on their personal computers. Sources inform "Globes" that ironSource shut down this activity late last year.

The big money came to ironSource through the additional programs that "rode" on the installation, offering the user more and more programs. A user who installed Zoom, for example, would receive a suggestion to change the default search engine on his browser. For every change that users adopted, ironSource received a commission from the provider: Google, Yahoo! or Microsoft.

Such services led many users to download many programs that they didn't necessarily need, just because they didn't bother to read the small print or didn’t understand what exactly they were agreeing to. The practice is legal, but has been widely criticized. Microsoft and Google started to oppose the phenomenon and to restrict it. Companies that developed such products in the past and went public - Perion Network, for example - derived little joy from them. Companies that used to occupy the Israeli "Download Valley" with similar developments: Babylon, Conduit, WebPick and Superfish, either changed their ways or closed down. It therefore became necessary to cut back the installation engine activity and present a broader services portfolio in order to embark on a flotation, ironSource's ambition since it was founded.

Over the years, ironSource enriched its portfolio such that the proportion of its revenue accounted for by the installation engine shrank, while it continued to ride the wave of its success, at the same time as revenue from personal computers declined. The cutback, which made the IPO possible, eventually led to the closure of the installCore brand. With the huge flotation, it seems that the move paid off.

Many founders, little ego

Almost from the outset, ironSource was set up as a company born to grow: it had an appetite for acquisitions, a healthy business understanding of the value chain in software installations, and a great deal of cash. As early as 2012, two years after it was founded, it had become a cash machine generating $50-70 million annually on about 80 million downloads, thanks to an agreement with It was backed by Shlomo Dovrat's Viola Ventures (then called Carmel Ventures), and with the capital it accumulated it made a long string of acquisitions, all of them of small, early-stage Israeli companies.

Among other things, it bought a company that specialized in presenting advertisements while software was being downloaded, software for linking to other computers remotely, and several programs for distribution, such as a browser add-on for embedding emoticons in chat, and a consumer products price comparison add-on. It later bought a games studio. ironSource thus gained control of the installation process from end to end, from advertising the software, through the downloading process and its monitoring, to development of programs for downloading.

No fewer than twelve Israeli companies were merged into ironSource, and their founders became entrepreneurial partners in an Internet giant. At the time of the flotation, no fewer than eight co-founders are active in the company and have always held the majority of its shares.

The quantum leap came with Supersonic, merged into ironSource in 2015. ironSource had already developed and launched an applications advertising platform for mobile devices, but Supersonic held a larger and faster growing market. The platform gives app developers a marketing toolbox, from distribution of the app and analysis of distribution, to creative tools and generation of additional revenue from advertising. In many ways, the business now being floated is a continuation of Supersonic, with the addition of new products developed later on the basis of that company, among them Aura, a product that enables telecommunications companies to offer customers content and apps on their home screens.

Unwritten alliance with Google

In the middle of the last decade, dozens of Israeli companies were active in software distribution, browser add-ons, and toolbars, in what was known as "Download Valley", then a market worth hundreds of millions of dollars. ironSource is one of the few survivors, and not by chance. Its CEO Tomer Bar Zeev and co-founder Itay Milrad nurtured a special relationship with Google, which in 2016 decided to introduce internal regulation of the distribution market, which had started to harm its revenue.

The forum of Israeli and US software companies that Microsoft had set up a year earlier to regulate software distribution, which had become anarchic at that time, received a serious boost when Google joined it. The conferences that the forum held around the world brought together Bar Zeev, Milrad, and a senior Google employee called Nav Jagpal, several times. Jagpal ran internal regulation of Google's Chrome browser and its app store. The connection between the three became closer, to the point that ironSource became the main representative of the industry vis-a-vis Google, frequently influencing Google's policy.

"ironSource had a special status in the joint forum with Google," an employee in one of the Israeli software distribution companies familiar with the activity of the forum told "Globes". "ironSource and Google's policy teams worked hand in hand. Itay Milrad was seen by them as one of the most brilliant technology people in the field, and when he spoke, everyone listened. And he was someone who didn’t always talk to Google nicely."

The confidence and the close ties that ironSource's people won at Google remained even during the critical period in which Google started to change its policies to the detriment of the distribution companies and to prohibit more and more activities that the Israeli companies had become used to, something that confirmed ironSource as the unofficial leader of the downloads industry in the previous decade.

The program that got it into trouble

ironSource's software installation engine was, as mentioned, its flagship product, but it aroused considerable criticism in the industry. Because of the way it installed many programs on a PC and its intimate way of operating, even if with the user's consent, it was designated malware by several antivirus services.

In 2016, Microsoft warned against installCore: "This application was stopped from running on your network because it has a poor reputation. This application can also affect the quality of your computing experience…. These applications are most commonly software bundlers or installers for applications such as toolbars, adware, or system optimizers. We have observed this application installing software that you might not have intended on your PC. If you were trying to install an application, you might have downloaded it from a source other than the official product's website." Sources close to ironSource have claimed in the past that this was Microsoft's way of combating an engine that frequently helped users to change their operating system definitions to those of its rival Google, to its chagrin.

Two events exposed in the past few years revealed the vulnerability of ironSource's downloads engine to various kinds of swindles by external software providers making illicit us of it. Even if ironSource was the victim of these attacks, it had an obligation to monitor such activity and prevent it being repeated. One of the reasons for the closure of installCore was the decision to transfer the monitoring and control department to mobile, ironSource's new growth engine.

In both events, ironSource's installation was abused in a similar way: hackers created many sites designed to encourage users to download a program via the installation engine. In 2018, cyber blog Infrostruction identified about 3,500 web addresses that it claimed were connected to ironSource and that encouraged users to download the Chrome browser through a campaign on rival search engine Bing.

Two years later, when the coronavirus pandemic broke out, cyber researchers at Check Point Software Technologies Ltd. (Nasdaq: CHKP) looked for instances of fraud connected to downloads of Zoom, which had begun to gain popularity. According to the study published in 2020, installCore was involved in an anonymous email campaign for distribution of Zoom from several domains.

The coronavirus year was one of the best for ironSource, if not the best. Millions of computer users stranded at home downloaded programs that would connect them to the world, and the use of mobile telephone games boomed, as did exposure time to mobile advertising. The company's revenue almost doubled, from $181 million in 2019 to $332 million in 2020, a rise of 83%.


2020 was also the year of change for ironSource, as it sought to grow through its new activities, Supersonic and Aura. These grew phenomenally, almost tenfold, to revenue of $225 million, while the computers activity shrank by about a third, to $106 million.

With the decision to hold a flotation this year, it was decided at ironSource to spin off the computers activity to a company founded for the purpose, Rise, but, as mentioned, without installCore. Rise is owned by some of the shareholders in ironSource, and 150 of the employees in the personal computers division transferred to it.

Rise, which is in the process of being set up, will apparently deal with the advertising and monetization activity for programs and add-ons. It has partnerships with Microsoft's search engine Bing and with Yahoo!. According to the IPO prospectus, there will be no relationship between the two companies other than a rental agreement.

Published by Globes, Israel business news - - on June 29, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

ironSource management  credit: Adam Frimer
ironSource management credit: Adam Frimer
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