A new ad tech merger is the latest sign rivals need to get big quickly to take on Facebook and Google's dominance

Key Points
  • Digital advertising platforms Taboola and Outbrain are merging.
  • As a result of the merger, announced Thursday, the companies say they'll now reach 2 billion people per month.
  • The combined companies hope to be a bigger contender to take on Google and Facebook.
Taboola founder and chief executive Adam Singolda
Andreas Rentz | Getty Images

Digital advertising platforms Taboola and Outbrain, which provide content recommendation boxes on publisher websites, are merging in hopes of becoming a bigger competitor to digital advertising giants such as Google and Facebook.

Taboola and Outbrain are the companies that place boxes with titles such as "8 Celebs Who Have Severe Illnesses" or "I Gave HelloFresh A Taste. Here's Why I'm Never Going Back." They also deliver traditional web ads. Those bring in revenue for the publisher websites that they sit on.

As a result of the merger, announced Thursday, the companies say they'll now reach 2 billion people per month. Facebook says it has 2.41 billion monthly active users as of June, while Google says its Display Network reaches 90% of people on the internet. The deal comes as the big digital advertising companies face antitrust scrutiny and questions about their use of consumer data.

In a statement, Taboola founder and CEO Adam Singolda said the deal seeks to give advertisers more "meaningful choice" outside of the "walled gardens" of Facebook and Google.

"We're passionate about driving growth for our customers and supporting the open web, which we consider critical in a world where walled gardens are strong, and perhaps too strong," he said. "Working together, we will continue investing to better connect advertising dollars with local and national news organizations, strengthening journalism over the next decade."

The tenor of the statements is reminiscent of a new campaign from The Trade Desk, which hinted that players such as Google and Facebook are threatening the open internet. Though Facebook and Google control a majority of the global digital ad market, with Amazon also catching up, other smaller players such as Snap and Twitter are growing and picking up market share.

Singolda will become the CEO of the combined company, which will be called Taboola. Outbrain shareholders will receive shares representing 30% of the combined company plus $250 million in cash, the companies said.

In July, Singolda said on CNBC's "Squawk Box" that the industry is seeing a slew of companies giving small businesses and brands an alternative to the biggest digital advertising companies. He said having so much ad spend going to so few companies creates a disadvantage from a pricing and data access perspective.

Taboola said its consolidated media buying platform will be more efficient for advertisers and will bring higher revenue and user engagement for publishers.

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