Felix Salmon

Why ECB lending won’t solve the euro crisis

Felix Salmon
Dec 17, 2011 20:18 UTC

“By this time next week,” says Simone Foxman, “the euro crisis could be over”; she obviously doesn’t think much of Fitch’s analysis, which concludes that “a ‘comprehensive solution’ to the eurozone crisis is technically and politically beyond reach”.

I’m with Fitch on this one. But it’s worth looking at the bull case for the eurozone, as spelled out by the likes of Foxman and Tyler Cowen. At heart, it’s pretty simple:

  1. The way to solve the euro crisis, at least for the next couple of years, is for the ECB to act as a lender of last resort.
  2. The ECB is, quietly, doing just that — specifically by lending money for as long as three years against a much wider range of collateral than it accepted in the past.
  3. Even though that money is going to banks rather than sovereigns, the banks will borrow as much as they can, at interest rates of about 1%, and invest the proceeds in Spanish and Italian debt yielding more like 6%, in a massive carry trade.
  4. Which means that the ECB is, effectively, printing hundreds of billions of euros and lending it to distressed European sovereigns after all.

This, at least, is how Nicolas Sarkozy has been spinning things:

“Italian banks will be able to borrow [from the ECB] at 1 per cent, while the Italian state is borrowing at 6-7 per cent. It doesn’t take a finance specialist to see that the Italian state will be able to ask Italian banks to finance part of the government debt at a much lower rate.”

But look at the headline of the article that quote appears in: “EU banks slash sovereign holdings”. Here’s a taster:

Europe’s banks have slashed their holdings of sovereign debt issued by the peripheral nations of the eurozone, selling €65bn of it in just nine months…

BNP Paribas cut its holdings by the most, shedding nearly €7bn of the sovereign debt of Greece, Italy, Ireland, Portugal and Spain and leaving it with €28.7bn as at end-September. Deutsche Bank’s €6bn reduction was by far the biggest in percentage terms (66 per cent) and left the bank with just €3.2bn of GIIPS exposure.

My feeling is that, at the margin, banks are going to continue to reduce their holdings of PIIGS debt, rather than decide to follow in the footsteps of MF Global. But don’t take my word for it:

Senior bankers say they will cut further, despite pressure to use newly available, longer-term ECB loans to buy government debt as part of an officially-sanctioned carry trade.

“When investors are constantly asking what you have on your books and the board is asking you to reduce your exposure, it doesn’t really matter about the economics of the trade,” said the treasurer of one of Europe’s biggest banks. “Am I going to buy Italian bonds? No.”

That view echoes comments from UniCredit chief executive Federico Ghizzoni, who this week told reporters at a banking conference that using ECB money to buy government debt “wouldn’t be logical”. The bank had traditionally been one of the biggest buyers of Italian government bonds, with almost €50bn on its books.

Cowen says that “public choice mechanisms will operate so that desperate governments commandeer their banks to make this move, whether the banks ideally would wish to or not” — and normally I’d be inclined to agree with him. Sovereign borrowing always crowds out other forms of bank lending, when a national government decides it really needs the money.

But in this case, it’s not going to happen. Why? For one thing, the main tool that governments can use has already been deployed: if banks load up on sovereign debt, it carries a lower risk weighting under Basel rules and therefore makes their risk-adjusted capital ratios look more attractive. But that’s been the case for decades now, and it can’t be beefed up at all. Meanwhile, bank regulators and investors are looking at a lot of other ratios too, like total leverage. And as we saw with MF Global, they’re hyper-aware of European sovereign exposures these days. Any bank wanting to be considered healthy will stay well away from Spanish and Italian debt.

On top of that, the financing needs of Spain and Italy are much bigger than their respective national banks can fill — especially in the context of those banks trying to deleverage, and seeing their deposit bases move steadily to safer European countries. While national governments are reasonably good at twisting the arms of their own domestic banks and forcing those banks to lend to their sovereigns, they’re much less good at twisting the arms of foreign banks and getting them to do the same thing. Is there any way at all for the Italian government to persuade French banks to lend to it? No.

And more generally, the national debt of big European sovereigns like Italy and Spain is so enormous that it has to be held broadly, in bonded form, by individuals and institutions. Banks alone won’t suffice. Greece is small enough that most of its debt can be held by banks. Italy, not so much.

There’s an argument that it doesn’t really matter whether the banks buy Italian and Spanish debt or not: the main thing that matters is that the ECB is printing money, which is entering the system via the banking system, and which will ultimately find its way into sovereign coffers one way or another, especially since there’s precious little demand for commercial bank loans these days. But I don’t buy it: there’s a virtually infinite number of potential investment opportunities around the world, and there’s no good reason to believe that the ECB’s cash is going to wind up funding Italy’s deficit rather than, say, getting invested in Facebook stock.

If Europe’s banks use ECB cash to deleverage and buy back their own high-yielding debt securities, the investors getting that money are not going to automatically buy sovereign bonds with the proceeds. Especially since those investors don’t care at all about Basel risk weightings.

So much as I’d love Sarko’s dream to come true, I don’t think it’s going to happen. The eurozone’s sovereign crisis is here to stay.



There are many who view the wonton printing of money as heresy. They call for the gold standard which by its very nature limits the money supply. There is a major fault with this argument: There is not enough gold to go around.

Think about what a central bank does. It creates (prints) money that facilitates transactions. As the economy grows, more money is needed. What is a sovereign bank to do? Tax the populace to get money to buy more gold so they can print more money? Not very efficient. And what is other countries have a gold standard? The accommodate everyone, the price of gold will go through the roof. This causes banks to impose more taxes to get the money to buy the gold…..

You get the idea. The gold standard is not the answer.

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Nick Rizzo
Dec 17, 2011 01:09 UTC

“‘Comprehensive solution’ to the eurozone crisis is technically and politically beyond reach” — Fitch

Europe today is a bit like the America of 221 years ago — The Economist

Here are some charts arguing the stock market is going to rally — Narrow Tranche

The CEO of LLoyds apparently no longer has insomnia — WSJ (paywall)

While Allen Stanford is allegedly faking amnesia — Bloomberg

Credit Suisse’s new method for catching rogue traders: require vacations — Marketplace

The SEC has charged the guy who inspired “Rudy” with a pump-and-dump scheme — SEC

And Britons are drunk in 76% of the photos tagged of them on Facebook — Telegraph


“Two weeks is a standard that brings Credit Suisse into line with its rivals, including Deutsche Bank, Morgan Stanley and Barclays Capital. The U.K.’s Financial Services Authority recommended the two-week block leave several years ago”

and it has been standard practice on Wall Street for many years

congratulations to Credit Suisse and Felix for noticing

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Why payments won’t ever be anonymous

Felix Salmon
Dec 16, 2011 16:15 UTC

I spent Wednesday night in Silicon Valley, at a very geeky discussion of Bitcoin, the unregulated digital currency which managed to get a lot of anarcho-utopians very excited. But Bitcoin fever seems to be on the wane right now, and the number of real-world places where Bitcoins can be spent is still, to a first approximation, zero.

One of the subjects we spent a fair amount of time discussing was the question of chargebacks and reversibility of transactions. Bitcoin was designed to be as cashlike as possible: once it’s spent, it’s gone. As one user discovered in spectacular fashion.

There are good reasons for setting payments systems up in a non-reversible way: it makes things much simpler and easier, for starters, and there is real demand out there for a digital equivalent of cash. On top of that, many Americans are unaware of the rights they have when money is spent on their credit or debit card, by themselves or others.

But consumer-advocacy organizations like Consumers Union are very aware of those rights. And as we move, very slowly, into a world of mobile payments, Consumers Union is trying its hardest to ensure that such payments are as reversible as possible.

Most cell phone and tablet users can purchase digital goods and charge them to their monthly bill or prepaid phone account. But they may not get the protections they need to limit their financial liability if something goes wrong with the transaction…

“Consumers using mobile payments should get the same strong protections they currently enjoy when they make purchases with a credit card or debit card,” said Michelle Jun, senior attorney for Consumers Union, the nonprofit advocacy arm of Consumer Reports. “But we found that consumer rights can vary widely between wireless carriers and the protections carriers claim to provide are often nowhere to be found in customer contracts.”

Jeremy Quittner wrote up the Consumers Union findings under the headline “Banks More Consumer Friendly than Carriers for Mobile Payment”:

Banks have been much maligned for nickel-and-diming their customers, but in another area — cardholder fraud protections — they are being praised as consumer champions.

A Consumers Union report released Wednesday shows that protections for purchases that consumers make using their mobile phone numbers are much weaker than those consumers get from standard cardholder agreements regulating their credit or debit card purchases.

I suspect that as the world moves increasingly towards digital and mobile forms of payment, these issues are going to be key in determining how popular those forms of payment become. People are naturally resistant to change, and they still worry much more about spending money online than they do about spending money in much less secure real-world transactions. So long as headlines about digital and mobile payments continue to frame the issue as one of “consumer protection,” the payments industry is going to have to take such things very seriously, even if they run counter to the anarcho-utopian leanings of the geeks developing the underlying technologies.

The tension, of course, comes with regard to anonymity: while cash is perfectly anonymous, other forms of payment are not. And it’s pretty much impossible to create a reversible payments system if the users are completely anonymous.

But that’s OK: if I’m making a payment by swiping my phone, I don’t really feel the need to be anonymous at all. In fact, if the payments system knows not only my identity but also my location when the payment is made, there are lots of ways that it can use that information in ways I could find extremely valuable. We’re seeing this already: various payments companies are putting together systems whereby every time I walk into my local coffee shop, say, I can just pick up my regular order and walk out, and the payment will happen automatically. As will the free coffee I get after paying for ten at a regular price. All I need to do is have my phone in my pocket.

The future of payments, then, is likely to be highly personalized and reversible — exactly the opposite of the anonymous and irreversible protocols built into Bitcoin. And that’s one big reason Bitcoin is not going to be a long-term success.


I understand this article was written a while back, but it just goes to show how close minded people can be.

In terms of real-world places accepting Bitcoin, well I am sure we can all list a bunch of well known retailers who accept it now.

Heck, you can even buy a car: http://bitcoinchaser.com/new-yellow-lamb orghini-gallardo-bought-bitcoins/

When there’s a will, there’s a way…

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Emerging-market debt and Pimco risk

Felix Salmon
Dec 16, 2011 05:05 UTC

Jenn Ablan and Matthew Goldstein’s article about the slow implosion of Pimco’s Total Return Fund is of interest to more than just Bill Gross watchers. Specifically, anybody in the large and growing universe of emerging-market debt has good reason to be very worried about this development.

The Total Return Fund has seen $17 billion of outflows over the past 12 months — a period during which the DoubleLine Total Return Bond Fund has trebled in value from $7 billion to $21 billion, and bond funds more generally have seen inflows of more than $100 billion.

Now $17 billion is entirely manageable for the Total Return Fund, which is still a monster $241 billion in size, and which I’m comfortable in saying has extremely good liquidity management. But this kind of performance is very hard to recover from:

The Total Return portfolio is up 3.48 percent so far this year, lagging his peer category which is up an average of 5.87 percent. Put another way, his fund ranks in the 90th percentile, or 163rd out of 181 funds in his category, said Jeff Tjornehoj, head of Lipper Americas Research.

Bill Gross, here, is in a very tough position — his underperformance over the past 12 months has cost his clients some $6 billion, give or take, even as they’ve been paying him hefty management fees. He’s also human, which means he’s going to be sorely tempted to make big bets in an attempt to get his clients their money back. But Gross’s clients don’t pay him to gamble. And big bets have a habit of going wrong:

Gross’s latest move is another bold one.

In September, he ramped up buying of mortgage-backed securities, albeit by using leverage…

Last week, PIMCO said mortgage-backed securities now account for about 43 percent of the holdings of the PIMCO Total Return Fund, as of the end of November.

By loading up on mortgage bonds, Gross is making a bet on higher-yielding securities. But in doing so, he is effectively extending the average duration of his fund’s investments, making them potentially more exposed to a rise in interest rates.

For now, the performance of housing debt is still trailing Treasuries. Since June 30, the total return of mortgage-backed securities is roughly 3.15 percent — more than 200 basis points less than U.S. government bonds.

Gross is a living legend, and you’d have to be a complete idiot to write him off. But it’s pretty clear which way the wind is blowing here. And the base case scenario has to be one in which Total Return — which was getting pretty unwieldy in any case — continues to shrink rather than grow.

And that, in turn, is going to have an important effect on the world of emerging-market debt.

As Pimco in general and the Total Return Fund in general have grown over the past 20 years or so, one of their defining characteristics has been a remarkably consistent long-term bullishness with respect to emerging-market debt. Gross’s co-CIO, Mohamed El-Erian, started at Pimco running the emerging-market portfolio, and made his name with a huge bet on Brazil ten years ago which paid off spectacularly well.

As Pimco has grown into a trillion-dollar behemoth, it has been responsible for a steady multi-billion-dollar flow of funds into the emerging-market debt asset class. That flow has helped to ratify emerging market debt as a smart place to invest, and has also helped to support prices.

Now, however, that mechanism risks being thrust into reverse, with Pimco shedding its EM assets as clients withdraw money from the Total Return Fund in particular and even from Pimco in general. It’s a unique and idiosyncratic risk, which other EM fund managers are highly aware of — and can’t really do anything about.

The world of emerging markets is much bigger than any one fund manager, of course. But today’s twitchy markets have sold off sharply for much less reason than this. Long-only funds tend not to pose much in the way of systemic risk. But when they get this big, risks do emerge. And this is one of them.



Even if TR has lost $17 billion PIMCO has been taking in money in other funds and institutional money hand over fist.

Gross reduced the EM exposure in TR by 3% from 9/30 to 11/30, so $7 billion. This is less than a drop in the hat of the EM bond market, which is something in excess of $5 trillion. And that $7 billion is at least partially offset by money they are taking in in dedicated EM strategies, which are some of their fastest growing at this point.

And if there is a sudden stop in EM land, every EM manager is in trouble, not just PIMCO. TR fund would be insulated as EM is a small amount of the fund, and they could easily sell the high quality MBS and UST to meet redemptions.

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Nick Rizzo
Dec 15, 2011 23:51 UTC

Nouriel Roubini is (surprise!) not optimistic about the economy next year — Project Syndicate

The obscure program by which Germany lent the ECB half a trillion euro — BusinessWeek

MF Global reportedly stripped “critical powers” from its chief risk officer — Dealbook

The accounting clue that revealed just how bad things were at MF Global — Bloomberg

Morgan Stanley to cut 1600 jobs — Reuters

We’ve heard this before, but Congress might be close to a spending deal — Politico


CDN_Rebel, I rarely agree with Dan Hess, but you have overreacted. Please take a walk around the block and calm down.

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Greece’s proposed 75% haircut

Felix Salmon
Dec 15, 2011 17:14 UTC

One of the most important parts of Greece’s restructuring deal — the agreement with its private creditors over what’s going to happen to its bonds — is still very much up in the air. The idea was originally that there would be an agreement by the middle of next week, but no one’s holding their breath, and it now seems as though it won’t be until the end of January at the earliest before any deal is done.

The banks, unsurprisingly, aren’t in any rush to do a deal: they only just hired representation. But the official sector, too, Greece itself included, seems more interested in playing hardball than in getting agreement.

The banks have agreed, pretty much, that they’re going to be OK with a deal where they get 50 cents on the dollar. But that’s just the beginning, not the end, of the negotiations. Because the 50-cent number applies only to the nominal principal amount on the bonds — the amount that Greece will eventually repay, many years down the line, assuming it doesn’t default again. What’s equally important is the size of the coupon that the new bonds carry. And Greece has reportedly decided that if it’s going to restructure, it’s going to restructure right — by slashing the income associated with the bonds to such a low level that when they start trading, each $1 in old bonds is going to be worth just 25 cents on the open market.

This is called the “NPV haircut” — and if you’re a holder of Greek bonds, it’s the main number that you care about, since it determines how much your new bonds are worth. The nominal haircut is important, too: since banks hold most Greek debt, and can keep that debt on their books at par, they might well be able to say that the new bonds are worth 50 cents, for regulatory purposes, rather than the 25 cents they’d get if they sold them. But you can be quite sure that they will be fighting very hard to minimize the size of the NPV haircut in negotiations this week.

From Greece’s point of view, if you’re going to default then it makes all the sense in the world to maximize the haircut involved: the cost of default is constant, while the benefit increases steadily the lower your total future debt burden.

On the other hand, Greece also needs to get the banks to agree to an exchange, because a “voluntary” agreement, where the banks tender their old bonds in exchange for new ones, is much less painful and disruptive than a simple repudiation, where Greece just stops making its interest payments on the old bonds until the banks cry uncle and accept anything that Greece wants to give them.

So the negotiations are likely to be very tough indeed. And I’m glad that the professionals are taking over to represent the buy-side here: up until now, the banks have been represented by a trade organization, the IIF, which couldn’t really commit them to anything and which always wants to appear statesmanlike. When negotiations get tough, you want someone fighting your side hard, rather than someone grandly proposing compromises all the time.

At the same time, it’s in no one’s interest for these negotiations to drag on too long. The longer that Greece waits, the less faith the international community — and the markets — will have in its ability to extract itself from its current fiscal crisis. And the higher the discount rate that the market will apply to Greece’s new bonds.

What that means in practice is that Greece’s NPV haircut is growing by the day, even — especially — if the negotiations go nowhere, just because the discount rate used to determine it has been steadily rising. 75% seems like a big number now. But if and when it finally gets formalized in 2012 some time, it might seem much more reasonable.


Hm, didn’t Felix say that there is 0% chance of banks accepting 50% voluntary haircut? No “mea culpa”?

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Do any real people support SOPA?

Felix Salmon
Dec 15, 2011 15:45 UTC

Very few of us live in a world remotely representative of the nation as a whole; I certainly don’t. How many of my friends and acquaintances have a college degree? How many live in dense urban centers? How many have smartphones? How many have ever voted Republican? In all these respects and many more, the world I see is incredibly skewed. But what about the Stop Online Piracy Act?

I spent last night with a fascinating group of Silicon Valley geeks, talking Bitcoin; among them was Dan Kaminsky, who’s spending most of his time these days lobbying hard against SOPA. And it occurred to me, as we talked very briefly about how the lobbying effort was going, how very lopsided my view of SOPA is.

Everybody I know, and everything I’ve come across on the internet, falls into one of two categories: either they’re vehemently opposed to SOPA, or else they simply don’t know about it. Racking my brain for any counterexamples, the only one I can come up with is a pre-roll ad which I’ve seen before a couple of my videos here on Reuters.com, which complains about pharmaceutical counterfeiting.

In one sense, this is entirely natural: I’m a journalist, and journalists by their nature hate anything which smacks of censorship. On the other hand, I’m also a media professional, and the pro-SOPA lobby is led by media companies of various descriptions. I just don’t know anybody who’s part of it.

Yet the bill is very much alive, and it seems that if a bill makes it to Barack Obama’s desk, he’ll sign it.

Today, in his big NYT piece about the war being fought in Washington, Edward Wyatt is careful to be symmetrical in his descriptions, and talks about how “the howls of protest” against SOPA “have been loud and lavishly financed” by Silicon Valley — it’s one of those articles based on the idea of explaining that there’s a disagreement, without bothering to try to adjudicate whether one side makes vastly more sense than the other.

You don’t need me to tell you that SOPA is an incredibly bad idea — others can do so much, much better than I can. But here’s where I have a genuine question. I know that the MPAA and the RIAA are lobbying hard for SOPA. (As well as, oddly, the AFL-CIO.) They seem to have a lot of politicians on their side. I can also point to an almost unlimited list of people and organizations who are lobbying equally hard against it — although it’s harder to find die-hard opponents of the bill in Congress.

But does SOPA actually have any popular support? Are there any real outside-the-beltway people who think it’s a good idea? If so, where are they? And if not, how did Congress become so bad at reflecting popular opinion?

I guess what I’m asking here is whether the strength of support for SOPA in Washington is an example of the failure of democracy, or whether it’s just another case of a bitterly divided country. I suspect it’s the former, but I really would be interested in finding out about anybody who doesn’t share my views on this subject.

Update: I’m told that Creative America is a grassroots organization of real people who support SOPA. I’m not entirely sure I believe it, though.


Just for a repost if anyone hasnt gotten it already :D
EC 17, 2011
10:33 PM EST
The media industry is acting like the internet is the problem. BWAHAHAHA. Seriously, what happened with vhs? Cassette? CD? DVD? Don’t need the internet to pirate.
VHS, record right off the tv or borrow a movie from a friend.
Cassette meets radio.
CD meet computer with burning software. (borrow musician’s hard work)
DVD meet computer with burning software. (borrow movie)
No internets or tubes needed to do the above.
See what I did there? Piracy doesn’t end with censoring the internet. It ends when the archaic format for distribution evolves to meet the consumer(The people you are trying to screw over.)
Sure, censor the net and you have all your profits back…(sarcasm) Good job big media!
Posted by Jimnay | Report as abusive

Jimnay whoever you are,
your a brilliant person. as he states clearly, its not about what the internet does or doesnt do,.. people will still find ways to pirate stuff. as for me i find means of finding ways either getting it for free or finding a alternative, for example… microsoft office, its pricy…. comparison? Openoffice.. same exact thing. just not so glamourous.. expensive high detailed 3d image maker…. close to $1000 right? comparison… blender3d…. warcraft 3…. comparison.. = glest!!!

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Nick Rizzo
Dec 15, 2011 01:31 UTC

A new way the Euro crisis could become an American one — Business Insider

The EU reaches agreement… that prunes are not laxatives — Telegraph

James Murdoch’s entire defense is now he “did not read the full e-mail chain.” — NYT

Inside the Chinese village in open revolt against the government — Telegraph

One of Jon Corzine’s regulators throws him completely under the bus — Dealbook

I’m sure US CEOs completely deserved their 36.47% raises last year — Guardian

Surveymonkey, of all things, is now valued at a billion dollars — Fortune

And here are great photos of Las Vegas’s absurd real estate landscapes — Atlantic Cities

The value of finding content to link to

Felix Salmon
Dec 14, 2011 21:16 UTC

I’m convinced there’s real value in driving readers to great content — and clearly I’m not alone: Outbrain has just raised another $35 million.

What’s Outbrain? Well, if you look at the All Things D story announcing the new round, you’ll see something which looks a bit like this at the bottom:


These links are weakly personalized for me — they change according to what stories I’ve read recently on All Things D, but not according to what stories I’ve read recently on other Outbrain partner sites.

The links on the left are designed to maximize my engagement on the All Things D site — rather than reading this one story and then going elsewhere, I’m going to see some other story I want to read, and stay on their site, building up my loyalty to the site and the number of pageviews they get.

The links on the right are news stories from a range of media outlets, including very respectable ones like Wired alongside a slightly crappy listicle at a blog you’ve never heard of. Those sites are paying for traffic; when I click on one of those links, the site in question pays Outbrain some money, which Outbrain then shares with All Things D.

In both cases, the stories are chosen by a set of proprietary Outbrain algorithms which attempts to maximize engagement rather than traffic. In other words, they’re not clickbait: they’re not the headlines you’re most likely to click on, but rather the stories you’re most likely to read and engage with.

Or that’s the theory, in any case. The reality is that while I’m far more likely to click on an Outbrain link than I am to click on an ad, the links the company serves me — especially the external links — tend to be underwhelming. I’m sure that Outbrain’s algorithms are extremely sophisticated, but give me a human-powered curation site any day (ahem) over a list of stories from places like Top Stock Analysts.

I had lunch with Outbrain CEO Yaron Galai recently, and I told him that I would love to see what happened if Outbrain started putting a bunch of unpaid links in its list of external links. Still chosen by algorithm, of course — but not confined to the links which generate dollars for the company.

This happens already, to some extent: Outbrain employees, when they find stories they like, can throw them into the external-links bucket, and those links do sometimes appear in the wild. And on top of that, Outbrain is getting a certain amount of money from brands who want to drive traffic to certain third-party sites: technology companies, say, who want people to read glowing reviews of their products.

But I’d love to see how effective Outbrain’s algorithms would be if they weren’t constrained by the universe of Outbrain clients and instead had the whole internet to choose from.

Essentially, the question is this: can algorithms really compete with humans when it comes to finding great links? Outbrain’s links aren’t that great, but Outbrain is hobbled. For one thing, even when Outbrain does have highly-respected news organizations buying traffic, those organizations often severely restrict the stories that can be linked to, perhaps because they want to send traffic to a certain part of their site. And of course Outbrain is always constrained by any given organization’s budget: once it’s exhausted, Outbrain won’t link there any more.

Outbrain isn’t the only company in this space, either: NetShelter just announced something vaguely similar called InPowered. But it’s a very long way from what I had in mind when I talked about ad units linking to third-party sites. Go to SlashGear to see one of these ad units in the wild: on the right hand side you’ll see something which looks like this.


Click on that, and a huge Samsung ad pops up, saying “Experience the Wonder of Samsung Smart TV”; if you scroll down that pop-up ad, you’ll eventually find some third-party links, mostly to reviews of Samsung TVs. You click on them twice (for some bizarre reason), and eventually you get to see the third-party site — in a frame with a netshelter.net URL, and with the original Samsung pop-up ad still cluttering your workspace.

So no one is really getting this right, yet — presenting simple links to unrelated great third-party content, just for reflected glory of providing that service. But with another $35 million in the bank, Outbrain might at some point start thinking about that option — selling branding around its links, rather than the links themselves.

In a way, that’s what Reuters is doing with Counterparties: it’s polishing its own brand by sending people to great sites all over the web. My hope is that we’ll be able to feature Counterparties on sites all over the web, as well, rather than forcing people to find our links only on Counterparties.com. And if we can do it, anybody can do it. In principle, at least.



Just to clarify, Outbrain does not store cookies on 3rd party/paid links – only on the internal/recirc links. Also, our cookies do not follow you across the web. They stay within the publisher site you are on.

We do this for two reasons:

1) to help make the recommendations you see more personalized to you
2) so we do not show you an article you have already read

Lisa L.
Outbrain Marketing

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