People thought Facebook Inc. (NYSE: FB) and Alphabet Inc.'s (NASDAQ: GOOGL) Google had the advertising market cornered. They're about to be proven wrong.
Have you seen an ad on a website that was just too irresistible not to click? Well, the company with the best ads is set to go public very soon.
Taboola sells online ad "real estate." And according to Taboola's CEO, Adam Singolda, about 50% of the clicks in its ad space are successful in keeping people on its websites.
This is a much more sophisticated operation than many people first assume. And it's destined to be much more than the "clickbait" we're familiar with.
That's why a Taboola IPO is so exciting right now. Traders are lining up to see how they can get some Taboola stock.
They might get it sooner than later...
The Taboola stock ticker will be TBLA. It plans to go public by means of a trend that stole the show last year and will continue to attract investors. It's going through a special purpose acquisition company (SPAC).
A SPAC, or blank-check company, is essentially a shell company listed on an exchange that invests in startups. It's a fast-track to taking those startups public, versus the lengthy, traditional IPO method.
This SPAC is called ION Acquisition Corp. 1 Ltd. (NYSE: IACA), an Israeli company that went public last year. It raised $229 million in hopes of bringing the next big unicorn to the New York Stock Exchange.
That is all is set to go down in Q2 2021.
Now, let's learn a little about Taboola and whether you should buy when it's available.
What Is Taboola?
Taboola exists as an alternative to the "walled garden" advertising venues of Facebook Inc. (NYSE: FB), Amazon.com Inc. (NASDAQ: AMZN) and Google. Of course, this has its pros and cons.
Starting with the cons, "walled garden" advertising has the potential to get extremely high engagement. Facebook, for example, has 2 billion users. They control everything those users see in a closed environment. They know everything about those users, so their ads are incredibly targeted, making theirs an invaluable advertising space.
It would be no good for Taboola to compete as another "walled garden" advertising model. It couldn't compete with the giants. That's why it targets the "open web."
And this is where its business model could pay off. The competition is more diverse outside these close systems, and Taboola is one of the more formidable competitors.
The company reaches around 500 million daily active users. That's more than Twitter (about 300 million) and less than Facebook's 2 billion.
Taboola says it now provides 1 trillion recommendations a month. Even with FAANGs to battle, Taboola projects there is still about a $64 billion market for the open web.
There are not many whales for the company to contend with. And that is only going to get better.
Taboola has been vocal about expanding its content moderation team. It's the right idea for a content company in 2021. We wrote about how companies like Twitter Inc. (NYSE: TWTR) and Clubhouse are putting content moderation first recently. This is not just for censorship, but for overall quality of the experience.
Right now, Taboola has 50 people viewing over 500,000 website pages to improve Taboola's content.
Alongside that, its content has an opportunity to expand to other outlets in the near future.
We'll get to that in a second. First, let's look at its financials.
Is Taboola Profitable?
Yes, Taboola is profitable.
The company ended 2020 with $1.2 billion in annual revenue, and $34 billion in operating income.
For the merger, Singolda said Taboola plans to raise $549 million total - the $259 million from ION and an additional $285 million in PIPE (private investment in public equity) from venture firms like Fidelity and Baron Capital.
It is expected to be valued at $2.6 billion when it hits the public market.
After Taboola merges with ION, it will have $600 million in cash with $100 million going towards R&D - e-commerce, AI, and video capabilities for TV and other devices.
WARNING: It's one of the most traded stocks on the market every day - make sure it's nowhere near your portfolio. WATCH NOW.
These are great signs for a company set to go public. Usually, there's a period of "doubt" where the company struggles to reach profitability, or even make a product.
This is not the case with Taboola, a fully functioning company with a steady business model.
For Gilad Shany, chair of ION, this was a matter of the stars aligning. This merger comes just months after Taboola nearly merged with Outbrain - another Israeli content recommendation company. The $850 million merger was called off.
Now, here's why ION is so lucky to be merging with Taboola, and why you would be lucky to hold Taboola stock...
Why Taboola Stock Is a Buy
The nail-in-the-coffin advantage of Taboola's model over the "walled garden" model is that its reach is virtually unlimited.
CEO Singolda talks about enabling "Instagram-style shopping experiences and possible websites" as part of the strategy going forward.
The company also wants to send its ads broadly across the web - not restricted to any one website. That would mean having its ads show up on Apple news or some other app that is standard across many devices.
Connected TV is another huge avenue for ads via over-the-top media streaming stocks like Roku Inc. (NASDAQ: ROKU) and Amazon.
We've covered plenty of SPAC mergers in the last year - Workhorse Group Inc. (NASDAQ: WKHS) and Nikola Corp. (NASDAQ: NKLA) were products of those.
But Taboola, unlike many SPAC mergers prior, has something better going for it. The company has plenty of revenue and over $500 million in cash to spend on growth.
It's a stable, growing company with a product. And going public will only raise awareness of that fact. The anonymous company that produces your Big Foot ads will be known. It will have scaled to many more devices, and its ads will likely have evolved beyond "Here's What Kanye West Ate for Breakfast."
If you want a hand in the future of digital advertising, Taboola stock is a must watch.
You can buy ION shares now for $13.05. Those will be converted to Taboola shares when the merger is complete.
The Complete List of Best (and Worst) Stocks for 2021
Wall Street insider Shah Gilani says 2021 could be a gold mine for Americans.
He's showing his subscribers exactly which stocks to buy and which to sell.
But you're getting it all for free - no sign-up or credit card required.
Prices, tickers, and company names will be coming your way fast.
Follow Money Morning on Facebook and Twitter.
