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Outbrain CEO: publishers should break away from short-term focus on ad revenue

Can publishers reframe the discussion around short-term ad revenue to one around long-term engagement?

For years now publishers have focused on short-term revenue at the expense of long-term engagement. That’s the contention of Outbrain chief executive officer and founder Yaron Galai – though he believes the pendulum is swinging back to perceiving audiences as the core of publishers’ future success.

Outbrain has been around for many of the seismic shifts in how content is surfaced and published online. In the 15 years of its existence the recommendation technology provider has seen the shift from distributed publishing across social back to a renewed focus on publishers’ owned and operated platforms.

For many publishers, the focus in 2021 is on increasing engagement on their own sites. A lot of work goes into creating proprietary systems designed to keep users from leaving the site, and serving them up relevant or linked content. The Independent, for example, has acknowledged the role of its recommendation tech in the success of its Independent TV content.

For Outbrain, which completed its IPO in July, that has created a new opportunity to provide publishers with the tech they need to foster that engagement. Its chief executive officer and founder Yaron Galai tells The Drum that the time is ripe for publishers to create environments that benefit their audiences, rather than bombarding them with irrelevant MPUs and other interruptive elements.

He says: “The clear thing that’s important to us is publishers that create journalism ... that has to have a sustainable business model, and it wasn’t going to be display advertising. It has to be consumer-driven.

“Any sustainable model in our industry has to be consumer driven; by giving a good consumer experience, having people come back and stay longer. If that doesn’t happen, it doesn’t matter how many advertiser dollars funnel themselves in different ways.”

Galai believes focusing on engagement above all else is critical to providing the open web – outside of the walled gardens of the social platforms – with a viable and sustainable future. While he says there are semantic discussions around whether subscriptions and paywalls truly embody that ethos of the open web, the reality is that publishers need to be able to monetize themselves directly from consumers.

Consequently, he believes that Outbrain’s revenue growth is predicated on it providing publishers with the opportunity to do that through supporting their consumer revenue strategies, from metered paywalls to paid links. He states that those are ultimately the publishers’ decisions, but that it grew its net revenue retention from existing partners by 50% year-on-year in its latest results in part by allowing that flexibility of goals through its tech.

The primacy of publishers

Galai believes that the pandemic, in no small part, provided some significant tailwinds to publisher revenue over the past year. It certainly helped boost subscription sign-ups, particularly around tech and gaming and home and leisure publishers in the UK. He does note, however, that there are some headwinds approaching from changes in the wider internet ecosystem – though he stresses those are also opportunities for publishers: “Third-party cookie targeting is eventually going away at some point – it has been going away for the past couple of years. It’s not something new. Outbrain is not in the ad retargeting business which I think is where ... some of that bad [consumer] experience comes from.

“The realization we’ve been preaching at Outbrain for 15 years since we started ... is if you focus on user engagement, even if the price of that is you took less ads at lower prices, that is a trade-off that is well worth it for publishers. Almost ignore the price of ads, and prioritize every pixel that you have based on what’s going to be most valuable and engaging for the consumer. That, in the long term, pays off. It pays off in more page views, which can bring more ad revenue, it pays off in registrations, in metered paywalls ... and all of the above.”

Galai believes that as a result of the tailwinds of the pandemic around subscriptions and native advertising, publishers are now better placed to prioritize their on-site engagement. That’s buoyed further by the renewed recognition that their own first-party data is an inherent strength that they have not used as effectively as they could over the past few years.

All those, he believes, provide the foundation for publisher strategies that recenter the user at the heart of the revenue mix: “The regained sovereignty over audiences and what that means with premium advertising, combined with finally rethinking the consumer as a user and not as a product ... that combination of shift to native, better ownership of data, and therefore premium advertising and the move to subscriptions are all three great trends for publishers.”

Publishers are better placed than most digital businesses to provide contextual advertising for their audiences. That expertise is now also serving on-site engagement, whether through in-house tech or through providers such as Outbrain. If, as Galai hopes, those tailwinds remain strong, publishers are likely to be able to focus more on the long-term benefits of engagement and stop chasing the diminishing returns of short-term strategies.

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