In March Israeli Internet company Webpals Group closed its doors in Herzliya. The company did not officially shut down but remained with several dozen employees in Israel but management had decided to close the new offices in the Gav Yam building after only one year of operations, leaving the remaining employees to work from home or in shared work premises. The move cost Webpals a penalty to Gav Yam for ending a long-term lease prematurely.
Until three years ago, Webpals was one of the buzz companies in the industry - a large online company led by a charismatic CEO, which was repeatedly ranked as one of the best tech firms to work, and which would throw parties with Israel's top artists performing.
But Webpals fell out with Google and the management chose to move activities abroad and reduce its gambling operations, destroying any future for the company in Israel as an independent and leading center. At its peak, Webpals employed 450 people and between 2017 and 2019 made four acquisitions and looked set for major growth in Israel. But several events in the past two years sent the company in the opposite direction to most of the Israeli tech sector. Webpals sold many of the brands that it owned, gradually fired over 100 employees, saw several hundred more leave, and had a high churn rate of senior managers.
Until the start of 2019, Webpals was one of the leading companies in Israel promoting websites and writing marketing content. The company's main revenue came from promoting casino, poker and various credit product websites. Webpals was part of a long list of Israeli companies that has promoted gambling sites of various kinds through its content over the years including Noam Lanir's Empire Online through to Natural Intelligence and the like. In contrast to Natural Intelligence, which specialized in paid advertising on Google, and was one of Google's biggest advertisers in Israel, Webpals's bread and butter was promoting sites through search engine optimization (SEO). In other words using online articles and ranking tables that resulted in Google presenting sites in a higher position on browsers and search pages, without needing to pay for it.
Webpals developed a system for writing and promoting content based on a network of building Wordpress sites. In the years before 2020, its sites won highest ratings on Google's search pages for users seeking products like Poker, games of chance or credit cards. The business model was based on referring users from content pages to designated websites. Through its high ratings on Google's pages, the endless content that was created and fat contracts with gaming companies like William Hill, and 888 and leading credit companies, Webpals became one of Israel's outstanding companies in promoting websites. It employed major experts in the field as well as an army of content producers in a range of languages including English, Russian and Spanish.
The share price fell and Google cut off the oxygen supply
The controlling shareholder in Webpals when it was seen as an attractive company was XLMedia plc, which was traded on the London Stock Exchange in 2017 and earned handsome profits for its Israeli shareholders who included Tzvika Birnbaum, Ori Weihs, Assaf Levyu, Yaron Nahari, the late 888 founder Shay Ben-Yitzhak, Empire Online founder Avner Yassur and oligarch Victor Vekselberg's Columbus Nova Fund. They reaped dividends of $45 million distributed by the company and sold shares worth $50 million in February 2017, and a further $89 million the following month. In June 2018 the company's share price fell sharply and never recovered and it is today traded 87% lower than its price in December 2017.
The continued sluggish performance of the share also took its toll on management. In 2019 two top executives who had shaped the company left in quick succession - CEO Inbal Lavie and XLMedia founder and CEO Ori Weihs, who moved aside to the board of directors and has remained involved until today. He was replaced by the Englishman Stuart Simms as the company's center of gravity began moving from Tel Aviv to London.
Shortly after Simms took up the reins the company was hit by a thunderbolt in early 2020, which still influences it today. Google significantly lowered the ranking of Webpals's content so that it appeared on back-pages. On the same day Simms sent an email to all the company's employees canceling a planned lavish company party at which Eurovision winner Neta Barzilay was due to perform.
One of the reasons for Google's decision was probably aggressive SEO activity that did not comply with Google's policies, in what has been called by developers as Black Hat-style SEO, for example, setting up a network of thousands of sites, each promoting each other, or using proliferating profiles on social media networks. Google cut off the company's oxygen supply, mainly for the casino market in Europe, and Webpals lost its luster in the eyes of its clients, after their potential customers had more difficulty reaching the relevant content pages.
The Israeli center became an economic burden
Shortly after becoming CEO, Simms asked the company's employees to casino website activities and thoroughly investigate new strategies for promoting the websites. At the same time Simms began developing sports betting operations, which became the company's leading sector until today. The company bought several sports brands in the US and UK including American company Sports Betting Dim for $26 million and CBWG, and this allowed it to eventually expand activities in the US at the expense of Israel.
At the same time, Google also harmed the company's new websites including casino and credit brands. In the months following the outbreak of the Covid pandemic it already became clear that the company was moving towards major cuts at its Israel center, which had become an economic burden on the company's activities. Between April and September 2020 more than 100 employees were fired, and this was only the start of a wave of layoffs that virtually emptied the Israel center of its staff. The department for aggressive promotion of websites was one of the first to go along many development and media positions. The activities for management, design and marketing credit products was moved to a US center at the end of 2021, and 30 employees were fired in Israel, as well as several dozen more from the department for promoting casino sites, which had not recovered from Google's measures against it. "Every two months employees were fired and there was an atmosphere of winding down," one former employee told "Globes."
Simms left XLMedia in April, several months after the decision to close the offices in Herzliya. The company does not deny its plans to substantially reduce its casion promotion activities, which are identified with Israel, and continue sports betting activities, the faster growing sector at XLMedia today. Even attempts to take over the company by external investors like an offer from businessman Shlomi Grandes and the Stars Corporation managed by Israeli Rafi Ashkenazi have failed.
According to LinkedIn, which is based on voluntary reports from employees and is not a precise source, the number of employees at the company has fallen by 56% within two years. According to estimates, the number of Webpals employees left in Israel is just several dozens, with most of them on contracts until the end of June and the rest until September.
Despite lowering its profile in Israel, the company has 267 employees worldwide, and is focused on promoting gaming in the US from its offices in the UK, US, Cyprus, and Israel.
%he company said in response, "Over the past two years, XLMedia has changed its focus to growing and supervised markets. As part of this move, we have implemented adjustments in the costs structure and the organizational structure, which has resulted in changes in the distribution of our human resources around the world.
Published by Globes, Israel business news - en.globes.co.il - on June 23, 2022.
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