Taboola has almost closed down three times since CEO Adam Singolda founded the Israeli content recommendation company 13 years ago. But each time somebody else saved it and now the company is set to complete the merger with Israeli special purpose acquisition company (SPAC) ION Acquisition Corp. and list on the NYSE with a valuation of $2.6 billion.
"In life you also need karma. Singolda told "Globes from his home in the US in an exclusive interview in which he discussed the difficulties Taboola faced in its formative years, why he chose a merger with a SPAC rather than a regular initial public offering (IPO), the company's mission to take on the Internet tech giants, and future expansion to recommendation and discovery for all devices.
Why is now the right time to go public?
"For many years, I thought that it would be amazing because as a public company, we would have value and we could think bigger and tell ourselves and the world that we believe in this message. We are the Robin Hood of the open and free Internet against the giants of Google, Facebook and Amazon. This is a giant step for the company. 2020 was a very strong year financially and we thought that this is a good opportunity. We have an enormous task to worry about the open web."
All the same you are still a very small company from Israel. How will this struggle against the Internet giants play out?
The biggest struggle ultimately is for the attention of users, and the connection with them. One of the biggest problems that the media has today is to fight for the time of readers and reach them. Facebook wants that the Internet will be within Facebook, but "Globes" also wants people to become acquainted with "Globes" and register with it."
There is a crisis here, because on the one hand they are partners, but they want the complete opposite. That is the main difference between us and them. I don't have a consumer business, my future is completely linked with the partners, and I don't grow if they don't grow. This is the attention economy in which everyone wants to attract people to a different place. We invested $100 million this year in R&D, among other things in order to develop systems that will keep users within the website."
To work like ninjas
Taboola has chosen to merge with a SPAC and not move directly to an IPO
Why did you choose this route
"We looked at the options. We like Gilad (ION Acquisition Group CEO Gilad Shani). We have known him for some years, and I had the opportunity to speak to him about our vision and getting there. Taboola's second chapter is beginning now as a public company and ultimately, after all, it's all about people. Products, technology yes but the genuine innovation is to work together like ninjas. After a public offering all public companies are the same think and it makes no difference if you joined through a SPAC or other offering."
Were there other SPACS that were interested in you?
"Yes but I like the way Gilad thinks about business and partnership so this is a match made in heaven."
Do you feel comfortable with the valuation of Taboola in the merger?
Because sometimes it seems that the market is boiling over and valuations are too generous
"I don't deal with this. As long as you apply the right things, being a good company, profitable, growing - what is around is not important over a range of 10 years."
"You were supposed to merge with your Israeli rival Outbrain but the merger was called off. In hindsight was that move a mistake?
"No it wasn't a mistake at all. The moment that the two companies took the decision together, it was the most correct thing then, and when we decided together to go our separate ways it was also the most correct thing. It's easy to look at things in hindsight but you learn things along the way. We have met good people and learned about ourselves, and that was a stage along the way that we needed to pass through."
According to the figures reported by Taboola ahead of the merger, the company had revenue of nearly $1.2 billion in 2020, or $379 million ex-TAC (after the costs of buying the traffic) - growth of 8.8% and 28% respectively. Adjusted EBITDA rose 212% to $106 million.
Forecasts indicate continued growth in 2021 with expected revenue of $1.28 billion and EBITDA rising to $127 million. Singolda anticipates that 2021 will be "very busy" for Taboola. "It is super exciting. We will continue investing in Israel and I hope that in the future we will have thousands of employees in the country (compared with 600 today out of 1,400 overall), like Wix, Check Point and Fiverr, companies that fascinate me." "In the future we will recommend everything: products, games, phone apps and we will go beyond the browser - we will be in cars, televisions, in every device. People need somebody to recommend for them what they might like, after all in life there isn't enough time to read every book that we want or see every series that we would want. Taboola has an opportunity to help you fully discover things that you didn't know existed."
Like a spaceship flying into space
Taboola was Singolda's first job after the army. "In 2007, after I had been in the army for seven years, I was living with my parents. I looked for something to watch on TV, and I told my mother that a search engine helps when you know what you want to find but what if you don't know? I told her that in the future it would be the opposite: the information would look for people. She responded 'what's going on with you' but set me up with Taboola's first angels."
One of the first investors was Danny Tocatly who he ambused at his daughter's bat-mitzvah. "I invited myself to the bat-mitzvah and I thought when is the best time to go and tell him that I have an idea," he remembers with a smile. "I approached him at about nine or ten in the evening, after he had already been dancing and began to tell him about the idea of a reverse search engine and information that will look for people. He answered, "Who invited you? And that's how we got started."
In the early years, Taboola worked on developing its product and was a long way from revenue. In 2009, Singolda moved to the US in order to be close to advertisers and publishers. In those years, the company almost closed down but he said, "Those initial days of the company help keep a culture of modesty."
Singolda added, "There is something terribly sweet about being naïve. If I had been experienced back then, I would have closed Taboola down a hundred times. There is something very irrational about founding a startup, against all the odds and without any money. I was lucky. In those first years practically everybody we met said no to us. I'm not even sure that I would invest myself in such a situation."
He recalled that in 2009 when he moved to the US, without any money to even buy basic furniture at IKEA, he would go to Starbucks to get a coffee just so that he could practice his English.
In 2012, rapid revenue growth began, from hundreds of thousands of dollars to more than $200 million in 2014. "It was like a spaceship taking off into space," he recalled.
You said in the past that you grew up in a home with artistic performers as the son of famous Israeli musician Avi Singolda. Did that help when you founded your startup?
"Just today I spoke about this with the team. When you grow up in an apartment in Rishon Lezion and your father gets up at six in the morning and comes home at midnight, and works very hard, not for the money - he would agree to perform for free, just to play. That shows a kid how to do something out of pure love. That's the best lesson for businesses."
"My mother was the CEO of the home and it wasn't easy. She managed him and us and worked at an insurance company. My father didn't know the price of milk and she was the anchor. When I was little and I wanted a toy, she would get the cheapest imitation because we didn't have money."
Both of them are with me now and we are very close. By the way I am the black sheep of the family. My brother is a doctor at Ichilov in plastic surgery. Today as a father I think a lot on how to keep the modesty which I grew up with at home so that the children can experience modesty and sanity."
What's the situation at Taboola after nearly a year of Covid-19?
"When it began in March, we work up one morning to find the world falling apart. We had to reshuffle the cards, and mainly to keep ourselves as a group of people working together. Over the past year, we have spoken every week with all the employees with complete openness about what is difficult for them. I have held board meetings on the laptop with one of my children chasing me around the house. That's our new lives. Taboola is more tightly knit than ever before even though we are not meeting, and we ended the financial year very strongly due to our employees."
Published by Globes, Israel business news - en.globes.co.il - on January 28, 2021
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