AOL Teams Up to Fight Facebook’s ‘Walled Garden’

Many publishers have reluctantly accepted the fact that social media is the new distribution channel for content. Others, like BuzzFeed, have fully embraced it by launching entire publications that exist solely on Facebook.

But others are wary to give up control over the distribution of their content. In their parlance, they want to “own the pipes.” When publishers control the distribution, they also control how they make money from it. They’re not sitting around idly while Facebook, with its “walled garden” of content inside its app, slowly takes over the Internet.

“We think that this potentially becomes a real challenge today,” says Adam Singolda, founder and CEO of New York-based Taboola. “How do premium publishers fight for people’s attention and get people back, and avoid a situation where your content is only viewed in a feed and that’s where it ends?” He added: “I’m scared of a future where Facebook is getting 80% of your business.”

That’s why Taboola and AOL have today announced a three-year partnership. Terms of the deal were not disclosed, though an AOL representative said traffic to AOL’s properties is “significantly higher” than that of Coins2Day parent company Time Inc., which in 2014 struck a similar multi-year deal with Taboola competitor Outbrain for $100 million.

Taboola, which is known for its content recommendation widgets at the bottom of news articles, has worked with AOL since 2013. This deal expands the company’s reach to all of AOL’s media properties including TechCrunch, Engadget and the Huffington Post.

It’s really a deal between AOL and Taboola, but Microsoft (MSFT) and Verizon (VZ), are also along for the ride. AOL handles the advertising on Microsoft’s media properties, including MSN and Xbox. And Verizon, which last year acquired AOL, is interested in serving more content to its mobile subscribers.

Taboola sees itself as more than a content marketing widget (and the unfortunate host of some of the Internet’s nastiest corners). Singolda frames the company as a recommendation engine and believes that the market for content recommendations will someday be as big as search is today. “It’s more of a discovery platform that works with the entire organization,” Singolda says.

He has touted Taboola’s data tools, which help publishers including salespeople, product managers, editors, and journalists, do things like test headlines and personalize their content for their audiences. (One insight from Taboola’s data: Most people reading the news never watch video and find it annoying. But since video is so profitable, publishers might use data and personalization to show video only to the small part of their audience that likes it.)

Taboola’s deal with AOL, Verizon, and Microsoft allows Singolda to get closer to that goal. The companies plan to use the data it has from AOL’s audience of 500 million and Taboola’s audience of 750 million to create a network where publishers can grow their audiences and make money on them without relying on Facebook (FB). It’s not fully fleshed out yet. “We haven’t 100% defined how it’s going to look. There is tech that needs to be developed,” says Jimmy Maymann, executive vice president of content and consumer brands at AOL. It may be an aggregator app, or an open publisher network. Regardless of the end product, for publishers, “it will be an alternative to Facebook,” Maymann says.

As part of the partnership, AOL has taken an equity stake of undisclosed size in Taboola. Why not buy the company outright? “The equity was just one piece of the puzzle” Singolda says. Taboola has now raised $160 million in venture funding. The company says it is targeting $500 million in revenue this year. Including its prior business with some of AOL’s properties, Taboola reaches 750 million people who click on one billion articles a month, the company says.

Both Taboola and AOL see this partnership as one way for publishers to fight becoming what now deceased New York Times columnist David Carr once described as “serfs in a kingdom that Facebook owns.” The benefits of owning your own content are myriad. For one, you don’t have to worry about Facebook suddenly changing the rules. That happened to Upworthy, which built a monthly audience of 80 million before Facebook tweaked its algorithm to de-prioritize “viral” content. Upworthy’s traffic fell off a cliff, and publishers view the startup as a cautionary tale for relying too much on one source of traffic.

When you control your distribution, you also don’t have to shell out to produce custom content on each platform. Media outlets like Mashable, The Wall Street Journal, and iHeartRadio employ teams of people to customize content each day for their Snapchat Discover channels. (Snapchat has told publishers it prefers video that’s shot vertically, not horizontally.)

Lastly, when you own the pipes, you can control how you monetize your own website. You have access to all the data on your audience. And you don’t have to play by Facebook’s rules when it comes to ads.

While many see a Facebook-dominated media landscape as inevitable, Taboola and AOL are fighting back. “As an industry, you have to find alternatives to help publishers drive growth and audience,” Singolda says. “Beyond hope, [this partnership] will give people practical tools to actually execute on that, in a world where we’re all going into a blurry feed in an app.”