Stop the Squeeze! The End of Exclusive Advertising Contracts
Israeli publisher Walla recently won a supreme court case against Taboola. Walla wanted out of their contract, which specified that they were required to exclusively use the Taboola content recommendation widget on their site. Despite the termination letter Walla sent, Taboola slapped them with a suit.
Is it fair and necessary protection for a native ad vendor to require exclusivity? Well, if we look at other areas of advertising to gain context – then the answer would be a definitive no. Every other digital advertising channel is programmatic, managed by real-time bidding and fair competition.
Let’s look at the contract.
“Publisher will not engage any 3rd party, including, without limitation… (they now list all their competitors)… To make recommendations, play video advertisements, or provide any service that is similar to the Services on any property owned and operated by the Publisher, including, without limitation, the Property”
The contract forces publishers into exclusivity not only on the property on which there will be content recommendations but for every property a publisher owns (wow!), as well as forbidding video advertisements of any kind from other vendors. Hmm.
And Outbrain (a major competitor, with whom they almost merged), gets special attention.
“Publisher may not use any services provided by Outbrain (or its parent or any of its subsidiaries or affiliates) , directly or indirectly, at any time during the Term, (except that Publisher shall be permitted to buy traffic from Outbrain) (thank goodness!)
This particular paragraph can cause serious problems for publishers, as highlighted in a recent Reddit thread. The frustrated thread author has been issued a warning letter from Taboola for allegedly using an SSP that feeds to an Outbrain subsidiary. He calls Taboola’s practices “predatory” for their insistence on asking SSPs to block Outbrain subsidiaries – which apparently is difficult, or impossible, to do. The contract levies heavy penalties (an immediate injunction, etc.) and fees with regard to breach of exclusivity or what they deem fraudulent traffic, which can only be determined as such, by Taboola itself.
“Traffic shall be deemed fraudulent or invalid if (i) it does not convert above a certain threshold as determined by Taboola in its sole discretion…..”
And then this, just for good measure:
“Taboola may waive, modify, or amend any provision of this Agreement from time to time at its sole discretion.”
What are they afraid of? Losing.
Our data shows that no vendor, not even the biggest ones, performs best all the time, not even 40% of the time. Meaning, when native ad vendors don’t compete for traffic, publishers leave money on the table. A lot of money. Even with strong terms, exclusivity simply doesn’t pay.
Of course, it takes two to tango. So why do publishers agree to exclusivity?
There’s a technical reason. Content recommendation wasn’t “built” for programmatic advertising so the normal rules don’t apply. Only one vendor’s script could be placed in a given location at a time…until now. The WhizzCo platform has solved this problem, allowing true and transparent competition among the 40-or-so existing content recommendation vendors around the world.
Also, we must point out the difference between exclusive agreements with guaranteed rates and exclusivity with rev-share, which is like giving away the cow without being sure you’ll get milk.
Always exclusive…some of the time
As it turns out, when stronger publishers insist, Taboola has agreed to work with them in parallel with other vendors. What’s fair about that?