• Wall Street has fallen in love with the mobile adtech and gaming company AppLovin.
• AppLovin's recent push into e-commerce sent its market valuation over the $100 billion milestone.
• Some ad industry insiders question the sustainability of its run, however.

Shares in the mobile ads and gaming company AppLovin have been running wild — and advertising industry insiders have a lot of questions.

AppLovin entered the Nasdaq 100 in November, with its market value surpassing the $100 billion milestone and shares up more than 780% so far this year. It's a remarkable ascent for any company, but especially for one that had flown fairly under the radar until recently, even within the ad industry itself.

At its current valuation, AppLovin dwarfs even The Trade Desk, long considered adtech's star performer, which has a market capitalization of around $65 billion.

AppLovin — which helps app developers make money through advertising and find new users through ads — has grown its share to 42% of the mobile gaming market, per analysts at Piper Sandler.

But there's one key new development that's driving its stunning stock run: e-commerce.

Bullish analysts say AppLovin has room to grow further and do for e-commerce marketers what it has for gaming companies, taking on Meta in the process.

"In all my years, it's the best product I've ever seen released by us, fastest growing, but it's still in pilot," AppLovin CEO Adam Foroughi said of the company's new e-commerce product on an earnings call last month.

With its stock riding high, some industry insiders also think AppLovin could make a transformative acquisition that would make it a household name.

Still, others in the ad industry say AppLovin's business model deserves some skepticism amid its meteoric rise.

22V Research analyst John Roque wrote in a recent note that AppLovin was the most overbought stock in the Russell 3000.

AppLovin declined to comment on a list of detailed questions about its business.

Investor enthusiasm goes stratospheric

Wall Street's interest in AppLovin soared this year as the company unveiled a plan to go after a new target customer outside the mobile gaming community: e-commerce advertisers.

The move opened up a total addressable ad revenue opportunity of around $120 billion, two to three times the size of the $40 to $50 billion mobile games user acquisition market, according to Macquarie Equity senior analyst Tim Nollen.

Nollen recently raised the firm's target share price for AppLovin to $450 from $270, citing its e-commerce push.

Cody Pfloker, chief marketing and revenue officer for Jones Road Beauty, which is testing AppLovin, said direct-to-consumer advertisers are excited by the prospect of a new player in the market.

"Meta has been the dominant customer acquisition channel for brands and while other platforms have come up like TikTok a few years ago, none are either as efficient or scalable," Pfloker said. "Nothing has been able to dethrone Meta."

AppLovin says it can reach a potential audience of 1.4 billion daily active users across mobile apps and connected-TV devices — an audience comparable to Meta or Google's apps.

Pfloker said part of the appeal is that e-commerce advertisers can easily repurpose their Meta ads into ads for AppLovin's mobile games and other apps.

AppLovin is only inviting e-commerce advertisers that spend upward of $20,000 a day on Meta ads to try its product, and it's incentivizing some of those buyers with $10,000 ad credits, multiple industry insiders told BI. They, like some others in this story, requested anonymity to preserve business relationships; their identities are known to BI.

Prescient AI, a marketing measurement company, ran an analysis in October that found AppLovin delivered a 1.5 times higher return on ad spend for its customers than Meta and Google Adwords, on average.

"A pretty startling thing is happening," said Will Holtz, VP of strategy and operations at Prescient AI. The top spenders are spending 25% to 30% of their budgets on AppLovin, he said, something Prescient hasn't seen before on a new channel, except for something like TV where people bulk up spending over the holidays.

What's more, Holtz added: "They're spending incremental dollars; they're not just shifting budget away from channels like Meta."

It's worth noting that the ads are full-screen and can't be skipped, which also likely boosts some performance metrics compared to other platforms. The results are also early and could fluctuate as more advertisers come on board.

Out-Googling Google

Despite the enthusiasm from some customers, others in the digital ad community have raised concerns about AppLovin.

Some industry insiders attribute AppLovin's performance to its cornering of every part of the mobile app ad transaction.

AppLovin operates AppDiscovery, the technology that advertisers use to buy the ads; the MAX mediation technology developers use to sell their ads; and the ALX exchange that connects the two. It also has Adjust, its ad measurement platform, and AXON, an AI engine designed to improve the performance of its ads.

This could give AppLovin a unique view of the market and allow it to see what different advertisers and buying platforms are bidding. Theoretically, AppLovin could use this intelligence to refine its own ad bidding strategies.

"It's one company for monetizing your app, growing your userbase, and then grading its own homework," a mobile ad veteran told BI. "They say there's a firewall and 'we don't talk,' but it's hard to prove otherwise."

If that sounds familiar, it's because it's similar to how people often describe the approach that helped Google dominate advertising on the web. A judge in Google's adtech antitrust trial is currently weighing whether that strategy, as well as its use of other auction tactics, amounted to Google operating an illegal monopoly. Google denies this and has said the adtech market is fiercely competitive and that its innovations have brought benefits to consumers, publishers, and advertisers.

Jeromy Sonne, the founder of marketing AI technology company Simbiant, has been monitoring the early AppLovin e-commerce results.

He said he'd seen an "extremely high correlation" between when AppLovin sees a spike in conversions and when Meta sees an increase in ad spend. He said he hadn't seen a similar trend when comparing Meta and Google or AppLovin and Google.

He said that made him wonder if AppLovin was driving real incremental value or whether its campaigns were just reaching the exact same audience as Meta in some way.

He said he'd also seen a "concerning overlap" where Shopify sales purportedly driven by AppLovin have a very high geographic overlap with where Meta ad website traffic was coming from.

Separately, Prescient AI's analysis found that brands spending between 25% to 30% of their digital ad budgets on AppLovin acquired fewer incremental new customers than brands in the 5% to 10% range. While reacquiring some old customers isn't necessarily a bad thing, the finding raises questions about the appropriate level of spending advertisers should devote to AppLovin, Prescient AI's Holtz said.

Other advertisers have questioned why AppLovin doesn't share granular data about exactly where their ads ran.

"It's a little bit of a black box — we have no idea where our ads are appearing," Pfloker said of AppLovin. "There's a lot to be excited about, but there's a lot to be skeptical about."

Could AppLovin become SnapLovin?

AppLovin recently paid more than $150 million to add developer Zynga's portfolio of games to its MAX ad exchange as part of Zynga's divestment of its adtech platform Chartboost, three people familiar with the matter told BI. This boosted AppLovin's already huge audience of gamers.

A spokesperson for Zynga owner Take-Two declined to comment.

Some in the industry think AppLovin could make an even bigger move. The company recently sold $3.5 billion in bonds, which Bloomberg reported were to pay down debt "and for general corporate purposes."

Could that include an acquisition?

Alex Merutka, an early AppLovin employee who now runs his own digital marketing company, Craftsman+, thinks AppLovin should make a bid for a social network — a particularly valuable sector of apps because users tend to be logged in, visit often, and share useful data.

People who use mobile games don't usually hand over data like phone numbers or email addresses, vital pieces of information for marketers to help connect their ads to outcomes, and to retarget users with ads.

AppLovin is already trading at a larger market capitalization than Snap, Pinterest, and Reddit combined.

Years ago, Snap held informal, early-stage talks about potentially acquiring AppLovin, a person familiar with the matter told BI.

Perhaps the roles could be reversed this time around. While Snap posted a revenue growth bounceback in its latest quarter, it's struggled to keep momentum amid fierce competition from the likes of TikTok. AppLovin could theoretically help optimize Snap's ad platform for performance advertisers to better compete with Google and Meta.

"If Adam was in control, Snap could be a $100 billion business — a $200 billion, $300 billion company — and AppLovin would be stronger too," Merutka said, referring to AppLovin CEO Adam Foroughi. "There's a lot of opportunity there."

However, AppLovin execs said onstage at the Nasdaq Investor Conference earlier this month that M&A wasn't a near-term priority and that the company was keeping a close eye on its head count and margins.

"It's much harder than people realize, and it's exceptionally hard for a company that's structured like us," Foroughi said of M&A and the difficulty of absorbing different company cultures, according to a transcript provided by the market intelligence platform AlphaSense.

• Ad industry insiders say the Omnicom takeover of Interpublic Group could kick off more M&A.
• Insiders laid out who could be involved, from WPP to smaller holding companies.
• Private equity and global solutions providers like Accenture also could be consolidators.

The planned $13.25 billion takeover by ad holding company Omnicom of Interpublic Group by merger has industry insiders speculating: Who's next?

Other agency giants face similar conditions that led two of the six big ad-holding companies to seek a merger. There's the concentration of ad dollars with tech giants Google, Meta, and Amazon; the need for media-buying scale to maintain an edge with global advertisers; and the growing use of AI that threatens to wipe out certain agency tasks. The US ad industry has barely grown over the past few years. By combining, Omnicom and IPG are looking to ensure their continued survival.

Some industry insiders think the Omnicom-IPG tie-up is just the start of a massive reordering of the $70 billion ad agency industry and that it's only a matter of time before other holding companies are forced to acquire or be acquired as they look to bulk up.

"From an M&A perspective, it's only going to add fuel to the fire," said William Ritchie, founding and managing director of the media and technology advisory firm WY Partners. "As others vie for competitive advantage over the newly crowned world's largest holding company, I'd expect there is going to be more competition for the best assets and more focus on building a streamlined data and tech-first offering which can compete — notably with companies like WPP, which remains behind the curve on competitive advantage here."

Ritchie said he sees continuing interest in assets that specialize in using data, tech, and AI to inform advertising, as well as PR and communications companies. He noted KKR's recent move to increase its stake in FGS Global, a comms and public affairs firm.

The IPG-Omnicom combo will spark more consolidation for other reasons, said Andreas Roell, CEO of Evros Group, which advises on media, marketing, entertainment, and tech deals. Once the new group decides what it wants to be known for, it may discard the units that don't fit that new identity and also divest some agencies that have competing clients or culture clashes.

Other networks will have to look in the mirror and decide if they're strong enough to acquire weaker networks or acknowledge they're falling behind due to tech disruption, Roell added.

"My prediction is that 2025 will serve as a reckoning year for networks," he said.

Other holding companies could partner up

Starting at the top of the food chain, some industry insiders think the upheaval could force two other longtime rivals to come together: French ad-holding company Publicis Groupe, which has been outperforming its competitors lately, and London-based WPP.

"Mark Read has not done the job that he probably expected he would be able to do; [Arthur] Sadoun is doing a great job," Tom Triscari, CEO and founder of Lemonade Projects, a programmatic ad agency, said of WPP's and Publicis' leaders, respectively.

Such a combo might be tricky to align culturally, though. A proposed merger between Publicis Groupe and Omnicom famously broke down in 2014 after they failed to agree on multiple fronts, including which agency would be seen as the acquirer and who would be appointed chief financial officer. It would also need to pass regulatory muster. That could be harder to do if the IPG and Omnicom deal succeeds, reducing the number of big agency groups in the sector. And there would be so much complexity that Publicis might not see the upside.

Another top holding company that could be active is Havas. Its parent, France's Vivendi, just approved its split into four companies. This is set to lead to Havas being publicly traded as its own company. Havas has indicated that it has M&A in its sights.

A number of other smaller, independent ad-holding companies could help bigger players scale up, like Mark Penn's Stagwell, the Bill Koenigsberg-led Horizon Media, or the Martin Sorrell-founded S4 Capital.

David Morgan, executive chairman of TV ad-buying company Simulmedia, said Horizon Media could be in play since Temasek, the investment firm that bought a minority share in 2021, needs an exit at some point.

Digital performance shops like PMG and Kepler also could be of interest.

Private equity has been circling

The big holding companies could also be a target for private-equity giants. Apollo, KKR, and Blackstone have shown interest in media and entertainment. Industry insiders have speculated for months that WPP, which once ranked as No. 1 among agency businesses, could be taken private — or at least some parts of it could be.

"They all see the same thing — these assets are bloated and mismanaged," said an industry player who's had conversations with PE firms. They asked for anonymity to preserve business relationships. Their identity is known to BI.

Another group of potential acquirers is companies like IBM and Capgemini, which provide a range of business solutions. Tata Consultancy Services and Accenture Song have eyed ad agencies as a way to offer end-to-end services to clients. Tata was in talks to buy R/GA this year and Accenture acquired creative agency Droga5 in 2019.

When it comes to deals that are just about getting bigger, though, there's plenty of skepticism that bulking up will solve the problems agencies face.

"Agencies today are not losing to the tech giants because of a shift in power," said Jay Friedman, CEO of the Goodway Group, a brand consulting firm. "They're losing because the capabilities they have aren't fit for how brands need to buy advertising today. They need a better cost model overall, which is global and AI-driven."

• The Omnicom-IPG mega-merger will create waves across the ad industry.
• Mergers are highly disruptive in the short term, and opportunistic rivals could pounce.
• Ad industry workers should expect concerned clients and bruised egos as the two companies combine.

A coming mega-merger is set to make waves across the advertising world, especially among the millions of people employed by ad agencies globally.

On Monday, Omnicom announced a $13 billion agreement to acquire fellow US advertising agency business Interpublic Group. The deal would create the world's largest advertising agency holding company.

Industry insiders shared their thoughts with Business Insider on how the merger could impact individual workers at Omnicom and IPG, as well as in the industry at large. They said ad industry workers should expect disruption like job cuts and opportunistic rivals swooping in for concerned clients as the new Omnicom takes shape.

Prepare for job cuts

As with many horizontal mergers, job cuts seem inevitable.

Omnicom said Monday the transaction would "generate $750 million in annual cost synergies" as it consolidates its operations with IPG.

Steve Boehler, the founder of marketing and management consulting company Mercer Island Group, predicted in a LinkedIn post that "thousands" of people would lose their jobs.

Job security in the ad agency world has been increasingly hard to come by. Agencies often lay off entire teams when they lose a major client. US advertising, PR, and related services employment fell by 300 jobs to 522,900 in November, despite overall US employment rebounding, according to the Bureau of Labor Statistics.

AI could also negatively impact the advertising job market. The research firm Forrester said last year that the rise of automation could lead to the loss of 32,000 jobs within ad agencies by 2030, about 7.5% of the total worldwide agency workforce.

Expect short-term merger turbulence and questions from clients

Merging two companies with 100,000 people, dozens of different agency brands, and hundreds of offices across the globe will not be a simple task.

"It's a massive integration risk," said Martin Sorrell, the executive chair of rival agency S4 Capital, who led WPP for more than 30 years. Sorrell has been an active acquirer of businesses throughout his career.

The companies could also dispose of assets. IPG announced recently that it would sell its digital ad agency Huge to a private equity firm and had said earlier this year it was also looking to offload R/GA, the agency famed for its work for Nike. IPG said the companies would continue to act independently until the deal closes and that during that time they would continue advancing strategic plans that had previously been announced.

Some clients will also have questions, particularly if the combination means their agency is working for one of their direct rivals.

On a call with analysts on Monday, Omnicom CEO John Wren downplayed the threat of client conflicts.

"Are there clients that we have to sit in the coming weeks and months and assure them that we still love them quite as much as we did prior to this morning? Yes." Wren said. "But clients are what drive us every morning when we wake up."

Egos will be bruised

A proposed merger between Omnicom and Publicis Groupe memorably failed in 2014 after the two companies couldn't agree on which executives should hold key positions, such as the CEO role.

While the Omnicom-IPG deal appears more straightforward, there will be some humbling as the company looks to reduce duplicative roles and some execs are looked over for the top roles.

On Monday's call, Wren said he wasn't worried about senior people looking to change their careers as a result of the merger.

If you're in one of these roles, you are in demand

Omnicom and IPG executives on Monday talked up the potential for combining their technology platforms, the use of data and analytics, and disciplines like media trading and customer-relationship management.

"Superstar creators and creatives will also be in demand, as well as good strategists, in all disciplines," said Simon Francis, CEO of marketing consultancy Flock Associates. "But, lots of other roles will become diminished."

Jay Wilson, VP and analyst for the research company Gartner, said job candidates looking to strengthen their résumés should consider that high-performing brands are looking for strong performers in areas like business strategy, strategic thinking, and data analysis.

"Advertising and marketing workers certainly need to upskill on Gen-AI skills as well," Wilson said.

Smaller independent agencies could benefit

As Omnicom and IPG work through the merger, there will be opportunities for rival agencies to pounce.

"Competitors will decide to target you and go through all your clients and your best staff, it's inevitable," a former Publicis Groupe exec said Monday. They spoke on the condition of anonymity to protect career prospects. Their identity is known to BI.

Nimble independent agencies that aren't encumbered with legacy businesses could offer good career opportunities for people who don't want to deal with the complexity of a giant network.

"Certain people will make life or business-style decisions to say, 'God, I don't want to be in this oil tanker and I'd rather jump into a speed boat,'" said a former WPP veteran, who asked not to be named in order to protect their business relationships. Their identity is known to BI.

With fewer big holding companies to choose between, consolidation could drive up prices for clients, which could also present more opportunities for smaller rivals to undercut the incumbents on fees, the WPP veteran added.

• A $13.25 billion merger of Omnicom and Interpublic Group would create the largest ad-agency company.
• Industry insiders say the deal reflects an ad sector under threat from Big Tech and AI.
• A bigger company could have more leverage to make deals, but job cuts seem inevitable.

For ad-industry insiders, the US ad giant Omnicom's proposed takeover of its rival Interpublic Group represents the consolidation of a challenged sector and shows that the future of advertising will be rooted in data and AI.

Being big matters as the industry wrestles with disruption from the might of Big Tech players and the advent of artificial intelligence. While AI could make offerings more efficient, it also threatens to displace many ad-agency services and affect the prices they can charge for them.

First reported on Sunday by The Wall Street Journal and confirmed by the companies on Monday, the agreement would create a company with combined revenue of more than $25 billion, based on last year's figures. The $13.25 billion all-stock deal would merge Omnicom's creative and media-buying agencies, such as BBDO and Omnicom Media Group, with IPG's McCann Worldgroup and Mediabrands.

The combination would create an entity bigger than Publicis Groupe, which has the largest market capitalization in the sector. Analysts expect Publicis will end the year with the most revenue, too.

The French advertising company, the sector's star performer, has outpaced rivals thanks to its simple messaging about an integrated set of services and as multibillion-dollar acquisitions in areas like data, IT systems, and commerce began to bear fruit. It also came out of the gate on AI, launching its internal Marcel platform in 2018, before generative-AI hype.

The combined company seeks to get an edge in AI, data, and media buying

Omnicom-IPG will be hoping to knock Publicis off the top spot — and not just on paper. By creating a larger company, Omnicom-IPG would have a bigger base to deploy data or technology like AI, which could give it leverage to secure beneficial and exclusive deals with partners such as cloud providers.

"Technology and data and thereby data-driven marketing has been arguably the largest driver of differentiation and growth for agencies for some time now, and one of the benefits of additional scale is being able to leverage major technology investments over a larger base of operations," said Simon Nicholls, a partner at the advisory firm GP Bullhound, which works on mergers and acquisitions within the ad industry.

Some industry insiders say both Omnicom's and IPG's investments have lagged behind those of their competitors.

One rival minced no words.

"It's a merger of two drunkards leaning against the lamppost as far as AI is concerned," said Martin Sorrell, a former CEO of WPP who now leads the digital-marketing company S4 Capital.

The so-called IPG engine is powered by a nonexclusive partnership with Adobe GenStudio. Omnicom — whose Omni AI platform doesn't lock clients into the Omnicom ecosystem — hasn't offered as many specifics as its key rivals have about how much it's investing in proprietary AI.

Still, the merger could benefit the pair in the future.

"This ushers in not just a new era of scale — it ushers in the opportunity to invest in where the marketplace is going, which is creative and tech powered by AI," said Laura Desmond, an ad-industry veteran who now leads the martech company Smartly.

Scale is also crucial in media planning and buying, the profit centers of many agency businesses. Generally, the more client ad budgets you control, the more leverage you have as an agency when it comes to negotiating deals with media owners.

Being bigger is also particularly important in the lucrative but often controversial practice of principal-based media buying, where agencies buy ad inventory in advance and sell it back in packages to clients. It's controversial because the agency doesn't disclose the price at which it originally bought the media to the advertiser. Agencies have defended the practice, saying that it still drives performance for brands — and that brands themselves are often pushing agencies for lower ad prices. A larger advertising agency would have a bigger market of clients to resell its ad inventory back to.

An opportunistic deal in a turbulent market

Some of the rationale behind the deal is opportunistic.

IPG has been trailing behind its rivals recently, having lost key client accounts like Amazon's media-buying business, General Motors, Pfizer, Microsoft, and Coca-Cola. Meanwhile, Omnicom's stock is at an all-time high.

"Wren is a wily old fox; he's no fool," Sorrell said, referring to Omnicom CEO John Wren's move to agree to the deal while Omnicom was on the upswing and IPG was floundering.

Omnicom said Wren would remain the company's CEO after the deal closes. The acquisition, subject to regulatory and shareholder approvals, is expected to close in the second half of 2025.

What the deal means for ad-agency jobs

The consolidation of the two companies is likely to lead to large synergies — including job cuts. Omnicom said on Monday that the transaction was expected to generate $750 million in annual cost savings. The research firm Forrester said last year that the rise of automation could lead to the loss of more than 30,000 jobs within ad agencies by 2030.

Simon Francis, an ad-agency veteran who now leads Flock Associates, a marketing consultancy and recruitment firm, predicted that in the ad-agency sector, "there will be even fewer big roles and lots and lots of junior roles."

"It will be harder to climb the career ladder," Francis added. "Superstar creators and creatives will also be in demand, as well as good strategists, in all disciplines. But lots of other roles will become diminished."

That could create opportunities for smaller agencies, especially as the merged company works its way through the disruption caused by integration, egos being knocked out of joint as roles combine, and client conflicts in which the new entity suddenly works with two or more fierce rivals in the same sector.

A proposed deal to merge Omnicom with Publicis Groupe a decade ago memorably fell apart after the pair couldn't agree on which executives would hold key positions, including chief financial officer.

"The lessons learned a decade ago are not going to be repeated," Wren said on a call with analysts on Monday morning.

Nimble independent agencies that aren't encumbered by legacy businesses could offer good career opportunities for people who don't want to deal with the complexity of a giant network. But industry insiders said it's probably not a good idea to bet on companies in the middle of the pack, especially for those working in in-demand specialties like data, tech integration, and commerce media.

"For the average worker, it's going to be all about scale," said Greg Paull, a principal of the R3 marketing consultancy. "Unless you are in a creative boutique like Wieden+Kennedy or Mother, the world's largest clients are going to seek out the world's largest holding companies."

• Omnicom is taking over the Interpublic Group to create the world's largest ad-agency business.
• The deal is expected to generate annual cost savings of $750 million.
• John Wren will remain CEO of Omnicom, while his counterpart Philippe Krakowsky will be co-COO.

Omnicom is taking over Interpublic Group in a deal expected to create the world's biggest advertising and marketing agency business, the US advertising company said on Monday.

The two had been in third and fourth place in the highly competitive ad-agency sector, but a combined entity would eclipse both London-based WPP and France's Publicis in terms of expected revenue and market capitalization.

Advertising industry insiders said the deal underscores the disruption faced by agency holding companies. Agencies face the dilemma of helping clients leverage tech while at the same time risking being displaced by AI and automation.

Industry insiders said the new company's added scale could bring benefits like the leverage to strike better deals with tech and media companies. It could also allow them to combine some offerings and eliminate duplicative roles. However, some industry insiders warned that merging the two companies could be highly disruptive in the short term, which could prompt their rivals to try to poach clients and key staffers.

Investors will receive 0.344 Omnicom shares for each IPG share they own. Omnicom shareholders will own 60.6% of the combined group. The deal is expected to generate annual cost savings of $750 million.

Omnicom was valued at about $20 billion at Friday's close. Its shares fell around 4% in early morning trading after the deal was officially confirmed. IPG was worth $10.9 billion at Friday's close, and its stock jumped by around 12% on Monday morning. The shares of competitor ad companies WPP and Publicis Groupe were also up following the Omnicom-IPG news.

The new Omnicom will have more than 100,000 staffers and offer services across media, precision marketing, customer relationship management, data, digital commerce, advertising, healthcare, public relations, and branding.

"Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes," John Wren, Omnicom CEO said in a statement on Monday.

Philippe Krakowsky, IPG's CEO, said the two companies had "highly complementary offerings, geographic presence, and cultures."

Wren will remain CEO of Omnicom, while Krakowsky and current Omnicom COO Daryl Simm will be copresidents and co-COOs of Omnicom. Three members of the IPG board, including Krakowsky, will join the Omnicom board.

• OpenWeb's board ousted the company's founder and CEO, Nadav Shoval, earlier this year.
• In his first interview since his removal, he said his situation is a cautionary tale for other founders.
• A legal battle between Shoval and OpenWeb is ongoing in an Israeli court.

Nadav Shoval says the conflict that culminated in his dramatic ouster from OpenWeb, the company he cofounded, started with a disagreement over a prospective BlackRock investment.

In his first interview since his removal as CEO, which is still playing out in court, Shoval told Business Insider that tensions with OpenWeb's board bubbled up when the company received "several term sheets" for further investment in mid-2024, including an offer from BlackRock.

OpenWeb, which provides tech to publishers to help manage the comment sections of their sites, create newsletters, and sell advertising, had previously raised $392 million and was last valued at $1.5 billion.

BlackRock's capital infusion, Shoval said, would have been a "game changer," allowing the company to make its fourth acquisition and advance toward an initial public offering. But it hit a roadblock.

"We brought in some of the best bankers in the world to support the process, and everybody was very excited until we started to see that one of the board members, specifically, one of the funds, was really pushing against taking this money," Shoval said, without naming the fund.

Two people familiar with the discussions said some board members had concerns about the conditions tied to BlackRock's proposed investment. They asked for anonymity to discuss private conversations. Their identities are known to BI.

BlackRock declined to comment.

OpenWeb's big-name investors include Insight Partners and Georgian Partners. It has also attracted investments from Samsung's Next investment group, The New York Times, and the famed NYU Stern professor and podcaster Scott Galloway, who sits on the company's board.

Shoval's relationship with his board of directors went rapidly downhill from there — and was thrust into public view.

Shoval's messy battle with the board goes public

Tensions boiled over in mid-2024 when OpenWeb's board changed Shoval's reporting line, a move he felt breached his contract. He sent an ultimatum to reverse the change to the board, which responded by firing him.

Then the company announced to staffers that Shoval would be replaced with an interim CEO, OpenWeb's former chair Tim Harvey.

Shoval went on a rampage.

Cut off from his business accounts, he used his personal Gmail to send a companywide email saying that he refused to step down.

He also took to LinkedIn, writing: "I do not accept these actions. I will continue to fight for OpenWeb's mission and purpose alongside our team."

Two former colleagues of Shoval and four people who have worked closely with him described him as a force of nature who's extremely passionate about the publishing industry. They said he could also be hotheaded and sometimes lacked the willingness to listen to others, including the board. They declined to be named to protect business relationships. Their identities are known to BI.

In October, Shoval sued OpenWeb and many of its board members in a Tel Aviv, Israel, court, alleging he had been the victim of an illegal boardroom coup enacted so investors could seize control of the company. His complaint argued that he should be reinstated as CEO and able to appoint two new board directors of his choosing.

The litigation is ongoing, and OpenWeb is seeking to have the case dismissed. BI has reviewed copies of some of the related court filings, translated from Hebrew to English.

In denying Shoval's claim for a temporary injunction against his firing, Ariel Zimmerman, the Tel Aviv judge presiding over that case, said the chances of Shoval succeeding in his claim for reinstatement as CEO "do not appear promising, to say the least."

In response to Shoval's suit, OpenWeb said in court filings that the case was a classic situation in which the board of directors had lost confidence in its CEO. OpenWeb said Shoval was trying to extract money that was not owed to him and that he had chosen to give up control of the company when he brought in investors.

In a statement to BI, a spokesperson for OpenWeb said the company was excited about the steps it had taken to set it up for long-term success.

"The company is moving forward without distractions, fully committed to the success of our employees, partners, and the broader community we serve," the statement said.

Shoval told BI he's optimistic that "justice will come" as he continues his legal fight. He said he hoped his story would serve as a lesson to other founders to vet the funds and directors they work with closely.

"No one wants to see the behind the scenes of restaurants," Shoval said. "This is what I feel like I've seen about the VC industry."

Shoval's path to the New York startup scene

Shoval said he's used to defying the odds.

He often describes how he came close to death when he was 2 years old from Kawasaki disease, a rare condition that causes swelling of the blood vessels and can lead to heart problems.

The disease, Shoval said, affected his motor skills, making it difficult to write. He later struggled with dyslexia and didn't finish high school.

After serving in the Israel Defense Forces' elite Maglan commando unit — famed for going behind enemy lines — he moved to New York City in 2012 at the age of 21. There he cofounded OpenWeb, then known as Spot.IM, alongside two other cofounders who have since left the company.

Shoval said he had noticed that publishers and content creators were "under massive threat" from Big Tech companies that wouldn't compensate them for their content.

The startup sought to build tech to keep people more engaged on publishers' websites. It began with the comment section, providing community-management tools and analytics to help make online conversations less toxic. It later acquired three other companies to help publishers in other areas, like advertising and newsletter building.

OpenWeb grew to more than 370 employees and says it reaches more than 150 million active monthly users across sites such as Fox News, CNN, and Yahoo.

Through secondary transactions, as OpenWeb raised more capital, Shoval diluted his stake in the company, leaving him with less than 2% of issued shares and a remaining 5% in unvested options, per OpenWeb's legal filings.

The sales, which OpenWeb calculated earned Shoval tens of millions of dollars, resulted in him ceding his control of the company to its investors.

The board calls Shoval's bluff

Shoval said in legal filings that OpenWeb's sudden decision in mid-2024 to change his reporting line was an illegal move that hindered his management capabilities and diminished his role. The board had decided he would start reporting to a newly appointed temporary executive chair, Omer Cygler, the managing partner of its investor Lion Investment. Shoval had previously reported to the entire board.

Furious, he sent a letter in September to the board demanding it reverse the decision.

OpenWeb's legal filing said Shoval's letter had also set out "excessive and baseless financial demands" amounting to tens of millions of dollars in exchange for his continued appointment as its chief executive. In an attachment to his letter, Shoval mapped out a scenario where he would resign as CEO and help with the search for a replacement until summer 2025, on the condition that the investors bought his shares and accelerated the vesting of his options.

The board called his bluff.

Board members convened an urgent telephone meeting in which the directors who attended, including those appointed by Shoval himself — Galloway and Cygler — unanimously voted for his dismissal.

In the statement to BI, OpenWeb said: "OpenWeb is laser-focused on continued growth and advancing our mission to foster healthier online discourse — creating a web that is safe for users, profitable for publishers, and fair for advertisers."

Shoval says his ousting is a cautionary tale for other startup founders

Looking forward, Shoval told BI he remained committed to fixing toxicity in online discourse and promoting independent journalism.

Shoval didn't start the company "for a small secondary," he said, referring to money he might have taken off the table were the company to raise a further investment round. "It's not a nonprofit. I'm here also for everybody to make money, but it's not the only reason why I started the business. I'm an extremely mission-driven person. I love what we do."

Shoval maintains that OpenWeb board meetings and decisions were conducted improperly and that he still has the right to appoint two new board directors of his choosing.

He said that he wanted to impart a lesson to other founders: There can be some occasions in startups when "there is inherent conflict between the fund and the founder."

After the huge investment boom of 2021 amid a stock-market rally and low interest rates, many startup valuations plunged in the following years, and IPO and M&A activity dramatically slowed.

"When those funds are successful, they act like a cheerleader," Shoval said. "They agree with you. They follow your strategy. As soon as market conditions change — and it really, really changed — some of those people change."

• Agility Robotics CEO Peggy Johnson says humanoid robots are filling some labor gaps.
• The company's Digit robots began "working" inside factories this year.
• Agility Robotics is hoping to deploy them across industries like grocery, automotive, and pharma.

Robots are coming for our jobs — at least the repetitive, back-breaking jobs humans increasingly don't want to do.

Peggy Johnson, the Silicon Valley veteran who became the chief executive of Agility Robotics earlier this year, told Business Insider that it'd soon be "very normal" for humanoid robots to become coworkers with humans across a variety of workplaces.

Many factories in the US are struggling to recruit workers amid a labor shortage that Deloitte predicted could cost the economy as much as $1 trillion by 2030. In January, there were 622,000 manufacturing jobs that hadn't been filled, according to data from the Bureau of Labor Statistics.

Enter the robots.

"First in the business-enterprise space because that's where the need is highest. And then, as Digit learns new skills, it'll start to be able to go beyond logistics and manufacturing facilities and eventually, somewhere way down the line, is consumer robots," Johnson said in an interview at the Web Summit tech event in Lisbon earlier this month.

Digit is Agility Robotics' mobile manipulation humanoid robot. It stands at 5-foot-9 and has hands designed to grip and carry objects. Its backward-folding legs allow it to maneuver around a workspace. Digit also has animated LED eyes that act as indicators to its human coworkers to let them know which function it's about to perform next.

This year, Digit became the first humanoid robot to be "paid" for performing a job. Agility Robotics signed a multiyear deal with GXO Logistics for Digit to be deployed in its Spanx womenswear factories, with it moving boxes known as totes and placing them onto conveyor belts.

Agility Robotics charges a monthly fee, similar to a software-as-a-service model, which includes the Digit robot, its work cell, and the robot's operating software.

While Agility Robotics hasn't disclosed the exact amount its Digit robots are paid, the company has previously said that GXO is estimated to see a return on its investment within two years, based on the equivalent of a human working an hourly rate of $30.

Johnson said that any company that requires material handling — be it pharmaceutical or grocery — could make use of a workforce of Digits.

"Mobile phones started first in the enterprise space because there was an ROI for a salesperson not to stop and find a phone," Johnson said. "That will happen with robots."

Amazon began testing Digit in its warehouse operations last year. Ford is looking at how it can deploy Digit with its autonomous-vehicle technology to create a "last-mile" delivery service. Most recently, Agility Robotics struck a deal with the German automotive and industrial supplier Schaeffler, which also made a minority investment in the company.

Agility Robotics has raised about $178 million in investment to date, a spokesperson said. It competes with the likes of Apptronik, which is working with NASA on humanoid robots, and Boston Dynamics, which has created humanoid robots called Atlas that it says can run and jump over obstacles, as well as perform factory-worker tasks.

Agility Robotics' humanoid robots are permitted to work only inside a specific, cordoned-off space separate from human workers. But Johnson said that by mid-2025, the next-generation version of Digit would be able to safely operate around humans. The company is aiming for the new model to be commercially available within 18 to 24 months.

A 2023 Gallup poll found that about one-fifth of US workers surveyed were worried that their jobs would become obsolete because of technology, up from 15% of workers polled in 2021. Johnson said Agility Robotics hadn't had pushback from the likes of workers' unions despite advancements in the number of humanlike tasks Digit can perform. Widespread deployment of humanoid robots is still some way off, however.

"I think they also recognize that these are jobs that they haven't been able to fill," Johnson said. "We tend to think of it as augmenting humans and not replacing humans — it's just taking some of the tasks off their plate."

Hype and misleading marketing videos are 'not great' for the robotics industry

While Digit robots are starting to be tested in some workplaces, Johnson said getting them to perform tasks around the home, like folding laundry, would take awhile longer.

"A household is a very chaotic environment: At any given moment, a child's ball runs across the room, and dogs run by. There's things that are in the way," Johnson said. "Warehouses are much more disciplined."

Johnson said the data gathered by robots working in warehouses would eventually be used to train consumer robots. But she added that she wanted Agility Robotics to focus on demonstrating what its technology can perform today — rather than the concept videos used by some of its competitors.

Robotics videos and demos at trade shows and events are often highly choreographed, she said. For instance, Tesla's humanoid Optimus bots at last month's robotaxi event were remotely operated by humans behind the scenes.

"The hype, in general, is not great for the industry because people think it's somehow not here and now," Johnson said. "My job is to say, no, it is here and now. Humanoids are deployed right now and are getting paid to do work."

Agility Robotics takes a similarly cautious approach to its application of artificial intelligence, which is deep in the hype stage. Johnson described the company as "AI-agnostic," as it uses various models in reinforcement learning to help fine-tune Digit's leg movements and help it recognize and carry out various tasks.

"Many companies in the robotics space think, well, now that AI is here, I can just build a complete AI stack. We think that is very dangerous right now," Johnson said. "The problem is, just asking ChatGPT a question — it doesn't always answer exactly right. Can you imagine if what it's telling it to do is move an arm around and these things are human forms, 5-foot-9, 160 pounds? They have a lot of force."

• The DOJ asked the judge in its antitrust case against Google to force the company to sell Chrome.
• Chrome is a key distribution method for Search, which provides crucial data for Google's ads.
• A breakup would be a blow to Google and likely create opportunities for competitors.

A possible breakup of Google just became slightly more likely.

The Justice Department on Wednesday asked the judge in its antitrust case against Google to force the company to sell its Chrome browser.

That follows Judge Mehta's ruling in August that Google maintains an illegal monopoly in search and advertising markets. Google will get to suggest its own remedies, likely in December, and the judge is expected to rule next year.

If Google ends up having to sell or spin off Chrome, it would be a blow to the company. Meanwhile, advertisers and search rivals would likely cheer the news, according to industry experts.

Separating Chrome from Google and preventing default search placement deals "would put Google Search into competition with other paths for advertisers to reach potential customers," said John Kwoka, a professor of economics at Northeastern University. "Advertisers would find competitors for their business, rather than needing to pay a dominant search engine."

Chrome is a hugely popular Google product that the company leans on to grow and maintain its search advertising empire. Chrome holds 61% of the US browser market share, according to StatCounter, while 20% of general search queries come through user-downloaded Chrome browsers, according to the August ruling from Judge Mehta.

Distribution and self-reinforcing data

Chrome is a valuable distribution mechanism for Google Search, and a portal into the searching habits of billions of users.

When you open Chrome and type something into the search bar at the top, these words are automatically transformed into a Google Search. On other browsers and non-Google devices, that's not necessarily the case. With Windows devices, for instance, the main browser defaults to Microsoft's Bing search engine. And when there's an option for users, Google pays partners billions of dollars to set its search engine as the default.

Chrome avoids all these complications and costs because Google controls it and sets its own search engine as the default for free.

Once this important distribution tool is in place, Google collects mountains of user data from the browser, and from searches within the browser. This information goes into creating higher-value targeted advertising.

There's an equally powerful benefit of Chrome: When people use it to search on the web, Google monitors what results they click on. It feeds these responses back into its Search engine and the product gets constantly better. For instance, if most people click on the third result, Google's Search engine will likely adjust and rank that result higher in the future.

This self-reinforcing system — supported by Chrome — is very hard to compete against. One of the few ways to compete is to get more distribution than Google. If Chrome were an independent product, rival search engines might be able to get a piece of this distribution magic.

In 2011, venture capitalist Bill Gurley called Chrome and Android "very expensive and very aggressive 'moats,' funded by the height and magnitude of Google's castle."

Google has also tapped Chrome as a way to reach users with new AI products, including Lens, its image-recognition search feature, as it tries to fend off emerging rivals such as OpenAI.

The lesson of Neeva

Many have tried to take on Google in the browser market, and many have failed. Take Neeva, a privacy-focused search engine launched by Google's former ads boss Sridhar Ramaswamy and other ex-Googlers.

Not only did the startup have to develop a search engine from the ground up, it also had to build its own web browser to compete with Chrome because this is such a major source of distribution in the search business.

Neeva lasted four years before closing its doors.

"People forget that Google's success was not a result of only having a better product," Ramaswamy once told The Verge. "There were an incredible number of shrewd distribution decisions made to make that happen."

A 'manageable inconvenience'

Teiffyon Parry, chief strategy officer of the adtech company Equativ, said that losing 3 billion monthly Chrome users would be "no small blow" to Google.

However, Google has many other ways of reaching users and scooping up data, including Gmail, YouTube, a host of physical devices, and the Play Store. The company also has a standalone app that functions as a web browser and has the potential to effectively replace Chrome.

"Chrome has served Google exceptionally well, but its loss would be a manageable inconvenience," said Parry.

Implications for the web

Lukasz Olejnik, an independent cybersecurity and privacy consultant, is concerned about what might happen to the broader web if Chrome is sold off.

"Chrome is adopting web innovations really fast," he said, giving Chrome's security features as an example of how Google has innovated.

Without Google's financial support, Chrome might struggle on its own, and it's possible that progress on the web slows, weakening the ecosystem, he explained.

"The worst case scenario is deterioration of security and privacy of billions of users, and the rise of cybercrime on unimaginable levels," he warned.

Would Chrome even survive on its own?

One of the biggest questions is how a Chrome spinoff might work. A Bloomberg analysis valued Chrome at $15 billion to $20 billion if it were to be sold or spun off. Would antitrust regulators allow a major rival to buy it?

It's "unlikely" that Meta would be allowed to acquire it, tech blogger Ben Thompson wrote on Wednesday. That would leave someone like OpenAI as a potential buyer, he said, adding that the "distribution Chrome brings would certainly be welcome, and perhaps Chrome could help bootstrap OpenAI's inevitable advertising business."

And if Google has to sell Chrome, will it also be banned from making distribution deals with whoever buys the browser?

"The only way [a spun-off Chrome] could make money is through an integrated search deal," said tech commentator John Gruber on a recent podcast.

There may be ways around it. Earlier this year, a group of researchers published a paper analyzing Google Chrome's role in the search market and within Google's business (it should be noted one of the authors works at rival DuckDuckGo).

"The precedent set by Mozilla's financial dependence on Google highlights potential challenges for Chrome in maintaining its operations without similar support," the researchers said, nodding to the fact Google pays Firefox a lot of money to be its default search engine, despite Firefox's dwindling user numbers.

The researchers proposed one way to divest Chrome without letting it die is to let Google still financially support it if necessary but block Google from exclusive contracts that make Google Search the default. They also suggested web browsers could be reclassified as public utilities.

"Under such a classification, Chrome's agreements and decisions would be subject to heightened scrutiny, particularly to safeguard consumer welfare and prevent exclusionary practices," they wrote.

Google's response

Google plans to appeal any ruling, potentially delaying any final decision by several years. In a statement earlier this week, Lee-Anne Mulholland, Google's vice president of regulatory affairs, said the DOJ was pushing "a radical agenda that goes far behind the legal issues in this case."

"The government putting its thumb on the scale in these ways would harm consumers, developers and American technological leadership at precisely the moment it is most needed," she added.

Are you a current or former Google employee? Got more insight to share? You can reach the reporter Hugh Langley via the encrypted messaging app Signal (+1 628-228-1836) or email ([email protected]).