Shahar Solomianik

Since Twitter allows only 140 characters…

So What’s Outbrain’s Business Model?

with 50 comments

Recently I wrote about two companies, Weebly and Widgetbox, that launched their for-pay services after they had run only free services for some time. I believe that was each company’s first public appearance with a formal revenue generation model.

Whether a sign of times or not, it is interesting to examine a company’s business model, especially when that company’s initial launch was as a free service. I think we can expect more of these launches to come shortly. There is one in particular that I am waiting for with a great deal of curiosity: the public release of Outbrain’s business model.

I first heard about Outbrain a little less than two years ago when LGILab announced that they had invested in Outbrain. Overwhelmed by the idea that around a million dollars could be invested in what then looked like a silly widget, it was easy for me to miss this line from the announcement post:

…a service to deliver personal content recommendation with a secret but really innovative business model… But this will be more powerful than that and the secret-for-now business model is really smart.

I didn’t really see the value in it back then. Ok, so I am a blogger and I can put this rating widget that looks sooo web1.0 on my blog. Big deal. What’s next? Another widget? Is this like a JS-KIT competitor?

Then I forgot about Outbrain for a while, although its widget started popping up on many blogs that I read regularly. Great strategic marketing team, that’s for sure. Then, Outbrain received a second injection of funds, this time five million dollars, and a bit more of the service’s value was revealed.

Any time you rate a blog post using Outbrain, it recommends relevant links, whether in the blog you are reading or on other blogs that embed their widget. There is something in it not only for the publishers, but also for the content consumers. Now Outbrain started to sound better, and I began to see the “win win” model.

Not only will publishers get feedback, but links to their post will also appear on other blogs and posts. Content consumers, on the other hand, will have a chance to make their opinion count, and they will get other relevant content delivered to them because Outbrain learns what they like and dislike.

They’ve found a way to satisfy both publishers and consumers. And – the byproduct creates a recommendation engine. That’s nice.

Still, how they intend to make money?

I had several ideas. The most obvious one was ads embedded within the widget. After all, one of Outbrain’s founders is Yaron Galay, who recently sold Quigo to AOL. He must know something about advertising. However, this doesn’t seem likely. Moreover, they state on their site:

No marketing on your blog!
We don’t stick our logo or any ‘powered by Outbrain’ stuff through the widget. We are a guest on your blog and don’t intend to use it for our marketing purposes.

Another revenue model could be that they expand their content rating system into a product rating one. Then they can start making CPA e-commerce money. This comes to mind considering that another Outbrain founder – Ori Lahav – has a few years with Shopping.com on his resume. But this model seems too far fetched. They would have initially started with this method if that was their initial intention, right?

So what else can it be? I think it will be one of two models:

First, they can charge for inclusions in their relevant content box that is exposed to millions of users daily, much like Stumbleupon does. (Yes, not many people are aware of the fact that you can “buy” category-based stumbles. How else did you think Stumbleupon makes their money?).

Or perhaps they can try to somehow monetize their growing database of consumer preferences. After all, every time you rate a post, Outbrain collects another tiny bit of information about you, which could be used later to identify your preferences in a commercially effective way. I think this falls under the behavioral targeting definition. Exelate does something similar.

Like I said, these are just my predictions. Time will tell what Outbrain is really all about.

Written by Shahar Solomianik

February 3, 2009 at 1:34 pm

Posted in Web

Tagged with ,

50 Responses

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