Taboola's New Ad Products Show Promise, Analyst Foresees Revenue Boost

Benchmark analyst Mark Zgutowicz reiterated Taboola.com Ltd TBLA with a Buy and a $6 price target.

Taboola’s New Products For Advertisers event highlighted its newest ad products, including Max Conversions, GenAI, and Data Marketplace 2.0, and shared progress on Yahoo! advertiser migration. 

Post its general availability in August ’23, Max Conversions is considered Taboola’s default bidding strategy. The company expects >50% of ‘24E revenue from Max.

Many advertisers experienced “up to” 50% conversion lift while maintaining or improving CPA. On average, advertisers experienced a 5-7% reduction in CPA, and time spent optimizing campaigns was reduced by ~50%.

The analyst is encouraged by Max Conversions tangibles suggesting reprieve ahead to platform yield degradation, further bolstered by incremental Yahoo! supply NTM. 

Yahoo! integration has “started to scale up” with positive feedback from advertisers regarding incremental reach across Yahoo’s ~900 million MAUs. 

The analyst awaits more tangibles on Data Marketplace 2.0, noting it will likely launch in 4Q with “high impact” audience-targeting capabilities. 

Taboola’s Generative AI offering, officially released in July, leverages ChatGPT and Stable Diffusion within its ads platform. GenAI is integrated natively into Taboola Ads, enabling the creation of titles, descriptions, and images while leveraging performance insights from its network. Management indicated initial success has been “really high” while stressing that GenAI content has often improved conversion rates. Net-net expects a positive direction on NTM yield improvement on TBLA’s 3Q earnings call. 

Separately, the analyst expects management to address its ~15% gross revenue exposure to Israel.

Zgutowicz projects Q3 revenue of $338.4 million vs. consensus $345.06 million.

Price Action: TBLA shares traded lower by 1.01% at $3.91 on the last check Wednesday.