Two years ago, Yaron Galai booted 25 percent of his customers, losing revenue and annoying his investors.
Now he’s doing it again. The Outbrain CEO, who makes money by placing ads for “promoted” stories on websites, says he is banning a new group of content-makers — ones who are actually making advertisements masquerading as “real” stories.
Galai says he figures this will cost him a “double-digit” percentage of revenue, but he’s willing to take the hit because he thinks it’s better for his business in the long run.
The move comes as Outbrain, along with rivals like Taboola and IAC’s nRelate, are generating increasing scrutiny — sometimes from regulators, who worry that Web surfers are being bamboozled by links at the bottom of articles. Earlier this month, for instance, a U.K. advertising watchdog declared that Outbrain’s links were “misleading” and said the company had to label them more clearly.
The move also comes as Outbrain, which has raised $100 million from investors over the years, contemplates an IPO; Taboola is headed down the same path. Disclosure: Re/code uses Outbrain links on our pages, under a heading labeled “From Around the Web.” You’ll see them if you scroll down past the end of this post.
If you’re the kind of person who often finds sponsored links — especially those that promise shocking, sexy or money-saving revelations just a click away — distasteful or worse, Galai’s crackdown may not do much to make you feel better: “We’re not looking to be the ones determining the acceptable quality level of every story we accept into the index — that is a subjective matter best left to the audience,” he said via email.
Instead, Galai is specifically focusing on links generated by marketers for “fake” stories — ones that are essentially disguised ads, which often sit on sites created or controlled by advertisers.
Sorting these out isn’t always cut-and-dried, so I asked the Outbrain folks to provide examples of stories they’re no longer accepting. These samples have the name of the advertiser that created the content blocked out, but they do include a sample of the “real” ad they’re supposed to funnel surfers to eventually. You can click on each to see an enlarged image.
The reason that Outbrain and its competitors have taken off in the past few years is that publishers are happy to pocket the cash the content recommenders generate. So it’s entirely possible that the “fake” content Outbrain won’t run will end up showing up in your browser anyway, via other recommenders.
And if even these go away, they are bound to be replaced by other schemes — there’s just too much incentive for advertisers to play whack-a-mole, and for publishers to play along. I wouldn’t be surprised to hear Outbrain announce another purge two years down the road.