Within the face of a possible world recession on prime of a horrendous 12 months for advert tech shares, firms have to seek out consolation within the small victories.
Wednesday was one such victory for Criteo, regardless of a number of troubling developments.
The corporate reported income of $495 million for the second quarter, which was down year-over-year from $551 million. However Criteo’s internet revenue did tick up from $15 million to $18 million.
“July was barely worse than June and June was barely worse than Could,” Criteo CFO Sarah Glickman advised traders, referencing the affect of some advertisers pulling again spend – not due to diminishing gross sales, however as a result of they’re taking a extra conservative strategy in anticipation of an financial downturn.
On prime of that, platform privateness adjustments, primarily Apple’s ATT and different iOS-related alterations, decreased income by an estimated $16 million – with increased losses forecast for Q3 and This autumn of this 12 months.
The great things
Wait … didn’t this text begin out by say Q2 was a win for Criteo?
It was. As in, the wins outshone the unhealthy information.
For instance, Criteo received an anticompetition case towards Meta final quarter and is within the technique of being reinstated to the Fb and Instagram companion program and advert platform. It’s been greater than 4 years since Criteo final had entry to Fb stock, and opening up such a big addressable pool of provide may deliver a fast floodtide of development.
Criteo additionally accomplished its acquisition of IPONWEB. The deal, introduced in December, is a key a part of Criteo’s revamped pitch as a full-funnel advert tech platform that features each a DSP and SSP.
The acquisition was anticipated to shut in Q1, however the struggle in Ukraine sophisticated issues and prompted a delay. IPONWEB was based in Russia and has a big contingent of product individuals based mostly within the nation.
Criteo restructured the deal to excise IPONWEB’s Russian subsidiary from the acquisition, and introduced the deal worth all the way down to $250 million from $380 million, with one other $100 million in doable incentive-based payouts over the following 18 months.
“We consider that our strategic acquisition of IPONWEB will speed up our technique of making the world’s main commerce media platform,” stated Glickman, who additionally pointed to the worth in bringing collectively an SSP (which Criteo will get from IPONWEB) with DSP capabilities. (Each Criteo and IPONWEB every have their very own demand-side platform).
“The SSP was central to our funding thesis in getting along with IPONWEB,” stated Criteo’s Chief Product Officer Todd Parsons.
Criteo has plans to cross-sell the IPONWEB MediaGrid SSP by way of its personal DSP.
Retail margin features
To know why Criteo locations such significance on cross-selling IPONWEB to spice up its commerce media enterprise, think about Criteo’s retail media section. That enterprise earned $54.67 million in Q2 2022, down 14% from final 12 months. Criteo’s advertising and marketing options section, which incorporates legacy retargeting, was down 10% and totaled $440.42 million.
Not very spectacular at first blush.
However Criteo makes use of a metric it calls ex-TAC contribution – the web revenue (or loss) generated by income after accounting for visitors acquisition prices. (It is sensible to do that, as a result of Criteo’s retargeting enterprise buys adverts and prices by value per conversion. Baked into the associated fee is the understanding that some adverts it buys shall be a waste.)
And for those who have a look at Criteo’s income by way of the lens of contribution ex-TAC, though the Advertising and marketing Options group was nonetheless down 8%, retail media was up 36% year-over-year.
The purpose right here being that retail media is a really high-margin enterprise. By including provide and demand through IPONWEB and doubtlessly consolidating one other SSP out of the pipeline, Criteo can proceed driving worth from that margin if the full development slows and even ticks down once more.
Uncrumbling the cookie
Criteo can be getting ready for post-cookie promoting, in fact. Its plan is to be a pacesetter amongst impartial firms utilizing the APIs in Google’s Chrome and Android Privateness Sandboxes, in response to CEO Megan Clarken.
However who’re we kidding. The delay and delay once more of the demise of the third-party cookie is a present to Criteo particularly, which may proceed to retarget successfully on Chrome.
Even so, Criteo is testing non-cookie IDs and focusing on methods, Clarken stated, albeit in environments that don’t have knowledge indicators the place advertisers are alrrady “flying blind,” together with Safari, Firefox and Apple iOS.
However past testing post-cookie options on the margins – and utilizing third-party cookies for so long as they do exist – Criteo shouldn’t be making any main adjustments.
Though that’s not utterly by Criteo’s alternative.
“Using cookies is type of saturated by way of our consumer base, and so it’s very troublesome for us to have them cease doing it, except we will present them both a drop-dead date after they can’t use it anymore or a cause to maneuver,” Clarken stated. “And whereas Google continues to maneuver the date that first half, the drop-dead date, is out of our attain.”
That stated, some advertisers have validated that post-cookie merchandise can work higher than, properly, flying blind.
And as patrons get extra expertise and a style for the way these techniques work, Clarken stated, they will get a way of “precisely what we will do as soon as Google does truly flick the change.”
