Business Overview

Taboola.com Ltd. (TBLAW) is a global leader in powering performance advertising solutions for businesses across the open web. The company has pioneered the native advertising market for over a decade, helping digital properties and advertisers achieve their goals through its innovative AI-driven platform. However, Taboola's latest strategic move signals a significant expansion beyond its native advertising roots, positioning the company to capture a much larger share of the performance advertising market.

Taboola.com Ltd. was founded in 2007 and began operations that year, incorporated under the laws of the state of Israel. The company's core focus has been on developing an artificial intelligence-based, algorithmic engine that powers recommendations across the open web. Taboola partners with websites, mobile apps, and other digital properties to recommend editorial content and advertisements, helping these digital properties achieve business goals such as driving new audiences to their sites and apps or increasing engagement with existing audiences.

In addition to serving digital properties, Taboola provides monetization opportunities by surfacing paid recommendations from advertisers. The company's early years were dedicated to building its core technology and establishing partnerships with digital properties. This strategy has paid off, with Taboola growing its network to approximately 11,000 digital property partners globally by the fourth quarter of 2024.

On the advertiser side, Taboola has worked to expand its client base, defining "scaled advertisers" as those spending over $100,000 on its network in the trailing year period. By the fourth quarter of 2024, the company had achieved approximately 2,100 scaled advertisers. Throughout its history, Taboola has faced various challenges, including changes in the advertising industry and increasing regulation around privacy and data use. However, the company has adapted by continually investing in its AI-powered technology platform and building direct relationships with both digital properties and advertisers.

Expansion into Performance Advertising

In February 2025, Taboola announced a major strategic shift, unveiling its new "Realize" platform. This industry-first solution moves the company well beyond its native advertising roots, allowing it to serve the entire performance advertising market - not just bottom-of-article placements.

Realize leverages Taboola's unique data assets, AI capabilities, and extensive publisher relationships to deliver outcomes at scale for advertisers, spanning a wide range of ad formats and placements. This expansion positions Taboola to capture a much larger share of advertising budgets as brands increasingly demand performance-driven solutions outside of the major search and social media platforms.

The rationale behind this pivot is clear. While native advertising has been a strong business for Taboola, the company recognized that the total addressable market is limited. In contrast, the performance advertising space, encompassing display, video, and other formats, represents a $55 billion opportunity that Taboola is now squarely positioned to capitalize on.

Taboola's Competitive Advantages

Taboola's transition to Realize is underpinned by several key competitive advantages:

1. Unparalleled First-Party Data

Through its deep integrations with thousands of digital properties, Taboola has amassed an incredibly rich dataset on user interests, behaviors, and engagement across the open web. This proprietary information powers the company's AI-driven personalization capabilities.

2. Robust Publisher Relationships

Taboola's longstanding partnerships with premium digital publishers provide it with predictable, exclusive access to high-quality advertising inventory - a critical asset as it expands into new performance ad formats.

3. Seasoned Sales Force

Taboola's global sales team of over 700 professionals are well-versed in performance marketing and have established trusted relationships with advertisers worldwide. This sales infrastructure will be pivotal in driving adoption of the new Realize platform.

4. Culture of Innovation

Taboola has a track record of developing industry-leading solutions, from its pioneering native ad technology to the new Realize platform. The company's engineering-driven culture and focus on continuous improvement position it well to stay ahead of the competition.

Financial Performance

Taboola reported strong financial results for the full year 2024, with revenues reaching $1.77 billion, representing 22.7% year-over-year growth. The company's ex-TAC gross profit, a key metric, increased by 25% to $667.5 million, while adjusted EBITDA more than doubled to $200.9 million.

Free cash flow was particularly impressive, reaching $149.2 million - 49% above the company's original target and nearly triple the prior year's figure. This robust cash generation allowed Taboola to strengthen its balance sheet and announce a $200 million expansion to its existing share repurchase program.

For the fourth quarter of 2024, Taboola reported revenue of $491 million and net income of $33.1 million. The company's gross profit for 2024 was $534.2 million, up 25.5% compared to 2023.

Taboola's cost of revenues, which primarily consists of traffic acquisition costs paid to digital properties, increased 21.5% year-over-year to $1.23 billion in 2024. The company continues to invest significantly in research and development, with R&D expenses reaching $142.4 million in 2024, up 4.5% year-over-year. Sales and marketing costs also increased 9.0% to $268.5 million as Taboola expanded its global sales and customer support capabilities.

Looking ahead to 2025, Taboola has provided guidance that reflects a more conservative growth outlook, with ex-TAC gross profit and adjusted EBITDA expected to increase by low-single digits. Management has attributed this to the time needed for the new Realize platform to gain traction with advertisers, a prudent approach that provides flexibility to invest in the initiative's long-term success.

For Q1 2025, Taboola expects revenues between $407-$427 million, ex-TAC gross profit between $142-$148 million, and adjusted EBITDA between $22-$26 million. For the full year 2025, the company projects revenues between $1.84-$1.89 billion, ex-TAC gross profit between $674-$690 million, and adjusted EBITDA between $201-$209 million.

Taboola is introducing two new metrics to track progress: "scaled advertisers" (any advertiser spending over $100,000 in the trailing year) and "average revenue per scaled advertiser". The company has grown its base of scaled advertisers to approximately 2,100 in Q4 2024 compared to 1,800 in the prior year period. The average revenue per scaled advertiser increased from $198,000 to $199,000 over the same time frame.

Liquidity

Taboola's strong financial performance has contributed to a robust liquidity position. The company's impressive free cash flow generation has allowed it to maintain a healthy balance sheet while also funding strategic initiatives and returning capital to shareholders through share repurchases.

As of December 31, 2024, Taboola had $230.4 million in cash, cash equivalents, and short-term investments. The company also has a $90 million revolving credit facility, which was undrawn as of the end of 2024. In 2024, Taboola generated $184.3 million in cash from operating activities, further strengthening its financial position.

Industry Trends

The digital advertising industry has seen strong growth, with a compound annual growth rate (CAGR) of approximately 15% over the past 5 years. This growth has been driven by the continued shift of advertising budgets from traditional to digital channels. Taboola's expansion into the broader performance advertising market positions the company to capitalize on this trend and tap into a $55 billion opportunity beyond its traditional native advertising focus.

Risks and Challenges

While Taboola's transition to the broader performance advertising market presents a significant growth opportunity, the company faces several risks and challenges:

1. Competitive Landscape

Taboola will be competing with established players in the performance advertising space, such as The Trade Desk and Google's PMAX, which have strong brand recognition and market share.

2. Advertiser Adoption

Convincing advertisers to shift budgets from social media and other channels to Taboola's new Realize platform will require significant sales and marketing efforts, as well as demonstrated performance improvements.

3. Regulatory Landscape

Evolving data privacy regulations, such as changes to third-party cookie policies, could impact Taboola's ability to target and measure the effectiveness of its advertising solutions.

4. Execution Risk

Successfully integrating the Realize platform into Taboola's existing operations and realizing the anticipated benefits will require flawless execution by the management team.

Conclusion

Taboola's strategic pivot to the broader performance advertising market represents a bold and potentially game-changing move for the company. By leveraging its unique data assets, publisher relationships, and sales expertise, Taboola is positioning itself to capture a much larger share of the digital advertising landscape beyond the confines of native advertising.

While the transition will not be without its challenges, Taboola's strong financial profile, culture of innovation, and experienced leadership team suggest the company is well-equipped to execute on this ambitious strategy. Investors should closely monitor Taboola's progress in driving advertiser adoption of the Realize platform, as well as the company's ability to maintain its competitive edge in the evolving performance advertising ecosystem.

With its robust network of approximately 11,000 digital property partners, growing base of scaled advertisers, and innovative AI-powered technology, Taboola is well-positioned to capitalize on the expanding digital advertising market. The company's focus on performance-driven solutions and its ability to leverage first-party data in a privacy-compliant manner could provide a significant advantage as the industry continues to evolve.

As Taboola invests in its Realize platform throughout 2025, the company aims to return to double-digit growth by leveraging its first-party data and AI capabilities. While near-term guidance reflects a conservative outlook, the long-term potential of Taboola's expanded addressable market and enhanced product offerings presents an intriguing opportunity for investors willing to weather the transition period.