Taboola, a New York online advertising and publishing start-up, has acquired Pasadena-based rival Perfect Market.
The terms of the sale were not disclosed but the acquisition brings together two start-ups that provide services for increasing traffic and revenue on news websites.
The deal, announced Monday, marks the latest sale of a venture-capital-backed company in Los Angeles, where rising numbers of start-ups are being acquired or going public.
It also marked another notch in the belt for Rustic Canyon Partners, which has invested in more local companies that have been acquired or hit the stock market than nearly all other venture capital firms, according to CB Insights data.
Perfect Market's major shareholders are taking stock in the new company rather than cash, according to a person who is familiar with the deal but wasn't authorized to talk about it.
Sun Jen Yung of Headwaters MB, which advised Perfect Market on the transaction, said shareholders were thrilled by the opportunity to benefit from a higher revenue potential of a combined company.
About 400 million people a month see Taboola's widget at the bottom of websites. It recommends articles, slideshows or videos to website readers, and provide links to other publishers that pay to have their content promoted.
Perfect Market has a similar recommendation bar, a social media sharing tool and a widget to help websites promote subscriptions or sign-ups. It has 200 websites as clients.
Taboola's interest in Perfect Market centered on the Pasadena start-up's system for increasing revenue from an online ad by an average of 30% to 50%. That’s even after Perfect Market’s takes its fees.
The ad technology scans the webpage to determine what ads would be relevant to show before connecting with ad exchanges to see which one is willing to pay the most to place a matching ad.
Adam Singolda, Taboola’s chief executive, said that currently an article about cellphones might have recommendations at the bottom that include links to a video that compares an iPhone and a Samsung Galaxy. The Perfect Market acquisition will allow it to place a text ad elsewhere on the page that might say “Buy an iPhone.”
There’s a $9.8-billion industry in such ads, Singolda said. Last fall Taboola reported an annual revenue run-rate of $100 million, a figure that rises to $250 million thanks to the inclusion of Perfect Market and the company's own organic growth.
“We know that when people come from search on the desktop, they are more inclined to potentially buy something,” he said. “But if someone is coming from an iPhone or a Facebook link, they are more likely to peruse content. We’ll be able to show you either content or products and services depending on those conditions.”
The companies had worked together with common clients, including the Los Angeles Times. Earlier this year the firms decided that collaboration would be simpler if they were in the same family. The 20-person Perfect Market team will remain intact in Pasadena, though Chief Executive Julie Schoenfeld is moving to an advisory role. Taboola has 170 employees and has raised $40 million in funding.
Stephen Walker, Perfect Market’s chief operating officer, will head Taboola-X, the new unit created from the transaction.
“We’re excited to be part of something bigger,” he said. “We share aggressive, no-nonsense philosophies and similar visions to drive traffic, engagement and revenue for online publishers.”
The startup had raised $31.6 million from investors such as Tribune Co., former corporate parent of the Los Angeles Times; Comcast Ventures; Trinity Ventures; Square 1 Bank and Idealab.
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