The funding announcement comes as something of a surprise in light of media reports in September stating Outbrain had hired its first CFO and planned to go public in 2014. The IPO reports came via numerous stories in the press in Israel, where Outbrain is based in part, and the company didn’t deny them at the time.

The company declined to comment on Tuesday on whether it had made a filing under new SEC rules which allow firms to file for an IPO confidentially if its revenues are under $1 billion year. The confidential process allows firms to test the waters with regulators and, if they wish, withdraw without media scrutiny.

In a Tuesday phone interview, CEO Yaron Galai said the company is focusing on expanding Outbrain’s tools for mobile devices where more and more people now consume news. He also reiterated the company’s commitment to making quality story recommendations and building trust with readers and publishers.

In the last year, a flood of competitors have followed Outbrain into the content recommendation business. The companies earn their money by including paid “stories” along with a publishers own content, and then taking a cut of the revenue.

“There’s ways to manufacture numbers and growth, some related to click-baiting. It doesn’t build a good relationship between users and publishers and brands,” said Galai.

paidContent caught up with CEO Yaron Galai in Outbrain’s office near New York’s Union Square this month to hear about his plans to stay on top. In the (likely) event you’re not sure what Outbrain does, here’s a screenshot from Time that shows how and why people and publishers use it:

The business model is pretty simple.  Outbrain helps publishers keep readers on their websites by giving them a tool to surface related content that they’ve published in the past. The company’s “From Around the Web” tool also provides a way for publishers to buy and sell traffic — in the example above, if someone clicks on one of the related stories links, Time might get a referral fee from the outside publication (of which Outbrain would take a cut). Small publishers can use the service for free to surface their own content but once they reach a certain volume of traffic, they’re obliged to add paid links. Outbrain claims its tools are installed on more than 90,000 blogs and websites, including big names like CNN, the New York Post and Slate.

So far, Outbrain has done pretty well. The company is backed by $64 million in venture funding and claims its recommendations are clicked on billions of times a year.

But now competitors are arriving, including comment site Disqus , which has relationships with millions of websites, and Wordnik, a dictionary site that says its semantic knowledge lets it offer better recommendations. The would-be rivals could undercut Outbrain by copying its service and offering it for a lower price or even for free. Meanwhile, Outbrain must also contend with the enormous referral power of little companies with names like Google, Facebook and LinkedIn.

Yaron, however, has had to defend his turf  before (most famously while closing a funding deal as an officer in a combat zone). In doing so, he’s made some very bold decision such as firing legions of his own customers for furnishing spammy content. The decision may eliminate up to 25 percent of the company’s revenue but Yaron thinks it will pay off as a long-term strategy. ”A lot of the clones will show good results for the short term [but will soon fade],” he says.

Yaron believes Outbrain has deeper relationships with major publishers and advertisers like GE that make higher-quality ad content– and that that will allow Outbrain to become the go-to place for industry leaderes to do business with each other. To boost the effort, Outbrain is also starting to brand the recommendation with its logo in the hopes readers begin to notice it.

Yaron compares Outbrain’s situation to the early days of search advertising when dozens of competitors scrambled for a piece of the action until Google AdWords finally blew them all out of the water. It’s an impressive vision — but, at this point, it will be at least a year before we know if it can come true.

(Image by ollyy via Shutterstock)

In the past, Gorman would have been out of luck. That’s because, despite the internet’s rapid growth, most small and medium businesses had few viable online ad options beyond Google or Bing. This is changing, however, as upstart ad companies tap into new publishing tools and social media to offer effective online campaigns for as low as $20 a pop.

In Gorman’s case, he laid down $1000 on two such companies, Outbrain and Virurl, and was delighted with the results. While he pays as much as $10 for a customer to click on one of this Google ads, he found he paid 8 cents and 5 cents at the other sites and also earned a surge of traffic.

This may sound too good to be true but, for the growing number of businesses priced out of Google Adwords,  it could be the real deal.

A new type of advertising: how it works

Instead of buying a search keyword like they do with Google Adwords, advertisers like Lawyer.com can pay Outbrain and Virurl to act as distributors for their messages. They supply the message in the form of a link to a piece of content — a picture, a story or a video. Outbrain and Virurl then spray the link across the web via third party publishers and on social media sites like Tumblr and Twitter.

Compared to Google Adwords, the upstart services are remarkable for their simplicity: Outbrain and Virurl provide a website for the advertiser to upload a content link, and to set a budget and duration for the ad campaign. While Outbrain has traditionally worked with publishers to augment and monetize their traffic, it recently added an advertising tool called Amplify for small and medium businesses.  Here are screenshots of how the purchase process looks:

Here’s Outbrain: 

Here’s Virurl: 

The advertiser can use a credit card to get the campaign up and running almost immediately compared to the 5 days that Gorman says it takes for Google to approve content (the delay is important for brands that want to jump on time-sensitive ad opportunities like Big Bird). As for the money, the advertiser’s allocated budget is depleted every time someone clicks on the link; some of the money goes to the publisher who hosts the ad and the rest goes to the distributors — in Gorman’s case, to Outbrain or Virurl. The distributors also share real-time analytics that let the advertiser monitor the campaign.

To be clear, the two would-be Adwords-competitors have different business models. Outbrain is bigger and works primarily with major publishers, including premium ones like CNN and Time, to find augment traffic or to find spots for ad-driven content. Virurl, on the other hand, is aimed at getting ad content to go viral on social networks like Twitter where “influencers” retweet the links and are paid for clicks. But, from a small business perspective, the underlying strategy is the same: find ad content that people want to see and pay to distribute it.

Gorman notes that the young ad companies’ geographic targeting isn’t as good as Google (“you can target down to the lamp post with Google AdWords”) but that they do permit users to choose between US and oversees viewers. He also says they have been forthcoming about fraudulent clicks and will refund money for suspicious traffic.

What it means for businesses: a scramble for quality content

The advent of cheap, easily managed ad campaigns is good news for companies like Lawyer.com. But there is, of course, a catch.To sign up for these distribution networks, a company can’t just show up with 20 bucks — it also needs to have a piece of content that people want to see.

“We spend a lot on screening. We’re pretty fanatical about taking on only quality,” said Outbrain CEO Yaron Galai by phone, explaining that the company rejects half of all would-be clients. He added that advertisers like GE are producing “wonderful content” such as a video interview with the inventor of the LED. Media companies looking to acquire more traffic to meet ad needs are also logical customers for Outbrain.

In the case of Lawyer.com, Gorman said the site produces quality original content that suits Outbrain. But what about other small companies? Galai said small, non-media companies are unlikely to have the capacity to produce quality content and their best bet is to use “earned media” like reviews or press mentions. If they are ambitious, they could of course still try to make Outbrain’s quality cut; a bakery might, for instance, start a cupcake or recipe blog.

Virurl, which was featured at a Paley Media Center’s “Next Big Thing” event, is less finicky about the content it sends out. But the social advertising start-up likewise uses a quality control process to weed out junky ads.

“A human in our Santa Monica office, views the content and either approves or rejects it. We will never drive anyone to a product page or anything that is spammy or a clear ad … The underlying philosophy is that – If the advertiser put enough thought into tapping into human emotion it will likely be approved,” wrote CEO Francisco Diaz-Mitoma in an email message.

The bottom line is that the new ad distributors offer small businesses a low-cost way to get their brands before huge numbers of potential customers — provided they have the ingenuity to make or earn quality content. The people who see the ad content may not have the same “intent-level” as those who click on Google search ads but, for now, the price advantage mean companies like Outbrain and Virurl could one day emerge as viable competitors to Google.

(Image by Monkey Business Images via Shutterstock)