Dive Brief:

• Content recommendation company Outbrain is eliminating 4% of its 600 global employees as it pivots strategy, according to a report in The Wall Street Journal. The Journal said Outbrain will focus on programmatic ad sales while moving away from helping publishers use chatbots on platforms like Facebook Messenger and Kik after the initiative failed to see the expected traction with users. Outbrain is also pulling back editorial tools it offered to help manage homepages.
• Outbrain's key competitor is Taboola and, according to comScore, Outbrain had a 23.5% share of the global desktop market compared to Taboola's 40.4% in May. The two companies were in advanced merger discussions earlier this year, according to reports from the Israeli publisher Calcalist cited by the Journal.
• Outbrain's business model is serving ads in the "recommended" reading format, and it works with media companies including ESPN, CNN and People.

Dive Insight:

Outbrain's struggles underscore how chatbots — one of the hot emerging technology items not too long ago — have largely failed to gain significant traction in the mainstream, often proving more frustrating than helpful for users. It's a problem that major platforms including Facebook Messenger have tacitly acknowledged, with Facebook recently launching Messenger Platform 2.0 to try and improve the chatbot ecosystem in terms of utility and also discoverability. 

Content recommendation, for its part, can be an effective format for publishers, but Outbrain's downsizing is a sign that the space might not quite be big enough for two major players. Taboola owns the lion’s share of the market at the moment and looks to be poised to acquire Outbrain, with the latter's pivot to programmatic services potentially making it a more appealing target.

Last July, Taboola bought the outstream media company ConvertMedia for less than $100 million, giving it a larger footprint in the video and TV space and inroads into social media video. At the time, Taboola founder and CEO Adam Singolda pointed to Facebook, Snapchat and YouTube as platforms for Taboola video streams.