- Needham analyst Laura Martin reiterated Buy on Taboola.com Ltd (NASDAQ:TBLA) with a price target of $5 (95.3% upside).
- Martin cited the eMarketer report that advertising revenue on the Open Internet (excluding Walled Gardens like Amazon.com Inc (NASDAQ: AMZN), Meta Platforms Inc's (NASDAQ:META) Facebook, Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) Google, YouTube, Snap Inc (NYSE:SNAP), and Roku, Inc (NASDAQ:ROKU)) is about $40 billion in the U.S. and about $75 billion globally in 2021.
- She saw that the tech stack required to build and maintain a best-in-class personalized recommendation engine is too complex and expensive for most Open Internet websites to create in-house.
- Interestingly, TBLA's 9,000 clients solved this personalization problem by allowing TBLA to be their recommendation engine and back-end tech stack.
- TBLA spread the costs of building and maintaining a personalized recommendation engine across many clients and took a 35% rev share from each of them, Martin noted.
- TBLA's learning algorithms improve with revenue size, which continuously widens the gap between a single website's ability to generate ad revs from its site compared with TBLA's ability to pay it more, even after taking its 35% rev share off the top.
- Growth creates a positive earnings flywheel for TBLA, observed Martin.
- Adding clients brings more consumers and their data, improving TBLA's personalization algorithms, resulting in better ad targeting, generating higher revenue per page for the website owner, and attracting the next website owner, she added.
- Price Action: TBLA shares traded lower by 1.57% at $2.51 on the last check Tuesday.
