Taboola (NASDAQ:TBLA) stock jumped as much as 60% after privately-held Yahoo signed a long-term ad deal and took a 25% stake. Yahoo was acquired by Apollo Global Management last year for $5 billion. TBLA stock closed Nov. 25 at $1.84 per share with a market capitalization of $455 million and now trades for $2.84.
Taboola came public through a special purpose acquisition company (SPAC) in early 2021 that valued it at $2.6 billion. The company delivers ads that look like content, often combining advertising and information in long strings of pages.
Facing the Future
The deal offers a long-term vision for both partners. The advertising side has a 30-year term. It puts Taboola ads on Yahoo’s news, sports and finance platforms. It also makes Taboola a standard offering through Yahoo’s advertising network.
Yahoo gets a steady stream of advertising that isn’t built on past user behavior, and a cut on getting other websites to use it. CEO Jim Lanzone said Taboola will let Yahoo take advantage when digital advertising growth returns. He said Yahoo’s long-term plan also includes subscription revenue and e-commerce.
Taboola was started in Israel before moving to New York. It announced, then backed away from, a merger with rival Outbrain before taking the SPAC deal. At the time it hoped to become a global network against Meta Platforms (NASDAQ:META), Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
In its most-recent quarter, Taboola lost $26 million, or 10 cents per share, on revenue of $332.5 million. Revenue was down 2% from a year earlier. But it reported positive operating cash flow of $23.2 million and $308.3 million of cash and equivalents on the books.
The deal comes just weeks after the business credit card firm Ramp reported a big jump in Taboola bookings, even as spending at the larger networks fell.
What Happens Next for TBLA Stock?
Advertisers are taking a much harsher look at digital advertising, which is under pressure for violating privacy and being difficult to measure. Systems like Taboola and ByteDance’s TikTok, which measure impressions and audience reach without using the wider web, are gaining favor. By striking a deal with Taboola, whose stock is down by half this year, Yahoo maximizes its potential gain.
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On the date of publication, Dana Blankenhorn held long positions in AAPL and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.