Content-recommendation firm to acquire native-ad specialist

Outbrain’s purchase of Ligatus is bid to work with more high-quality publishers

Outbrain Inc., a company best known for placing ads on publishers’ sites that recommend content elsewhere on the web, said it is acquiring Ligatus GmbH, a subsidiary of German media giant Bertelsmann SE that specializes in native advertising.

New York-based Outbrain has agreed to purchase the Cologne, Germany-based firm, in an all-stock transaction. The deal’s financial terms weren’t disclosed.

The acquisition, which Outbrain says is its largest ever, is meant to help the company capture more of the market for native advertising, or ads that mimic the look and feel of the content around them. Ligatus operates a so-called supplyside platform that helps publishers sell native ads.

Companies like Outbrain, whose recommendations often appear at the bottom of news articles, have faced criticism for promoting low-quality content.

The acquisition is part of a broader effort by Outbrain to work with more high-quality publishers and marketers, said David Kostman, the company’s co-chief executive. He said the criticism hasn’t hurt his business.

“Higher-end brands are more inclined to place native ads rather than be part of the content-recommendation space,” Mr. Kostman said.

Spending on native advertising has grown by double-digit percentages in recent years, though its growth may be slowing, according to research firm eMarketer. The firm predicted native-ad spending would grow by 31% in 2018, slowing from 50% growth in 2017.

Outbrain is also using technology and human teams to screen content better, Mr. Kostman said. And it has shifted its focus from deals that guarantee a certain amount of ad revenue to those that share revenue with partners, Mr. Kostman said, to better emphasize long-term relationships with its clients.

Like its main rival Taboola, Outbrain was founded in Israel and is now based in New York. The company has raised over $150 million in funding from investors such as Index Ventures, Viola Ventures, Lightspeed Venture Partners, Gemini Israel Ventures, Susquehanna Growth Equity and Har- bourvest, Mr. Kostman said.

Outbrain, which has over 700 employees, will absorb Ligatus’ staff of more than 150. Gruner + Jahr, the Bertelsmann company that owns Ligatus, will become a minority stakeholder in Outbrain. Gruner + Jahr Chief Digital Officer Arne Wolter will join Outbrain’s board of directors.

Ligatus Chief Executive Klaus Ludemann will continue to work for Outbrain and will be on the executive team, Mr. Kostman said, though it is unclear what his title will be.

The deal requires regulatory approvals to close.