Outbrain Expects 25% Revenue Hit As It Cuts Off Spammy Content Marketers

Move Seeks to Eliminate Deceptive Headlines and Get-Rich-Quick Schemes to Improve Quality

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Content-recommendation engine Outbrain is banning some of its biggest customers from buying web traffic through its service in a move that could eliminate up to 25% of its revenue, but which it hopes will build more trust with readers long-term.

Backed with $64 million in venture funding, Outbrain is probably the most well-known company that makes content-recommendation engines, with sites such as CNN.com, TMZ.com and NYDailyNews.com using its technology to display recommended links to articles on their own sites and others'.

Yaron Galai
Yaron Galai

The company's publisher partners use Outbrain's technology in two ways. Some pay Outbrain on a per-click basis to place links to their articles next to articles on other sites. On the other side, you have publishers who get a cut of that revenue by allowing links to other publishers' stories to reside on their sites.

But up until now, Outbrain also had customers who paid to drive traffic to websites that peddle some type of product or service. And over time, the company realized that some of those sites were deceitful either in the headlines they were displaying or in the businesses they were marketing. CEO Yaron Galai is now putting an end to that by enforcing a new set of guidelines to rid the recommendation network of such customers. As a result, Outbrain is expecting to lose between 15% to 25% of its current revenue.

"At the end of the day we compete with anyone else that 's monetizing a publisher page," Mr. Galai said. "Everyone else is based on squeezing as many cents out of the lemon. Our business is squeezing more trust out of the audience [so they continue to click on Outbrain links]."

Outbrain won't name specific sites that were kicked out of the network. Instead, it pointed to its new guidelines, which include prohibiting content that has "inaccurate or misleading headlines;" "promotes businesses that appear to be generally deceptive or misleading; or "encourages high-risk investments or money-making schemes with the intention of profiting off user participation in such practices."

Some may commend Outbrain for taking measures that will have such a negative impact on revenue, at least in the short term. Others might ask why a 6-year-old company is just now taking such steps.

"There's a bunch of content that looks like real content, is pretty sophisticated, looks legit, and when you dig into it, it's more deceiving than it seems," he said. "The only reason we did it now is only now we realized what some of these content players and marketers are actually doing."

Mr. Galai is going to have to answer to his board of directors, who had to approve the move, if it doesn't work out in the long run. In a board meeting, two out of four Outbrain investor board members "were absolutely against" the decision initially, he said, but in the end they all agreed to back the move because he and his co-founder pushed for it hard.

"Our board meetings are usually a Kumbaya of everyone being cool with everything," he said. "This was pretty rare; there was a big, big, big debate. It's material. It means there's a good likelihood we miss our numbers, and revenue share going to publishers gets hit as well."

Mr. Galai said Outbrain made another decision about a year ago that also cut revenue at the time by about 20%. At that time, the company tweaked its algorithm to better match recommended links with the editorial tone of individual publishers, he said.

"Before that , the links that worked well were mostly sensationalist ones," he said.

It's still not uncommon to come across sensationalist Outbrain-distributed headlines (see: "Outrageous Photos Of Kim Kardashian See-Through Skirt"), but Mr. Galai says Outbrain has been working to have those types of headlines only show up on sites whose audience has an affinity for those types of posts or if the specific reader has previously clicked on similar Outbrain links.

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