Baidu, the maker of China’s largest search engine, has made a strategic investment in content recommendation startup Taboola. The companies declined to name the exact amount of the deal, but said that it is in the “multi-millions.”
Taboola serves up the links in the “Around The Web” and “Recommended For You” sections you see at the bottom of articles on sites such as The Atlantic, Business Insider, and Mail Online. Baidu’s stake is a follow-on to the $117 million Series E round led by Fidelity Management that Taboola (which competes with Outbrain) announced in February at a reported valuation of almost $1 billion.
At that time, chief executive officer Singolda told TechCrunch’s Ingrid Lunden that the company’s top priorities include expanding into more international markets.
The potential synergies between Taboola and Baidu are obvious. Baidu can use Taboola’s tech to build its knowledge graph, while the deal represents a way for Taboola to break into the growing Chinese market, which now has an Internet penetration rate of 47.9 percent.
Baidu claims a 75 percent share of China’s combined PC and mobile search market and says it powers tens of billions of search queries every day. Taboola, which was founded in 2007, says that it now delivers more than 200 billion monthly content recommendations to 550 million users.
While Taboola’s research initially revolved figuring out how to deliver relevant content for users on desktop sites, the company is now trying to figure out how to map data from other sources, including mobile devices, social media sites, and apps.
This aligns closely with Baidu’s current business strategy. At the end of April, Baidu reported in its Q1 2015 earnings report that mobile accounted for more than half of its quarterly revenue for the first time ever, a milestone it spent two years working toward. The transition, however, has had its share of growing pains, with Baidu’s revenue and net profit both declining year-over-year.
Working with Taboola can help Baidu in its aggressive push to get more revenue from its mobile products.
“We’re definitely a mobile company first now and everything we do begins with mobile and takes priority over our PC products,” Baidu spokesman Kaiser Kuo told TechCrunch. “We’re not ignoring PC, but in just eight quarters, we built a mobile business that is the same size as our PC business, which took 15 years to build.”
Unlike the U.S. and Europe, where sponsored links are standard fare for major sites, there are few companies in China that provide the same kind of services as Taboola. Taboola’s other moves into Asia include a strategic partnership with Yahoo! Japan, which it inked last year. The company now powers content recommendations across the Yahoo! Japan News site network.
In a prepared statement, Taboola founder and chief executive officer Adam Singolda said “we believe that discovery has massive growth potential in both existing and untapped markets around the world, and we plan to grow this new category even further with Baidu to help change the way people in China discover content they may like and never knew existed.”
While Taboola is headquartered in New York, its research and development team is based in Tel Aviv. This makes it the third company with Israeli operations that Baidu has invested in so far (the others are music app maker Tonara and video tech developer Pixellot), following a trend that sees major Chinese tech companies pouring serious yuan into the country’s startup scene.