Criteo trumpets Microsoft tie-up and further retail media opportunities as Q3 revenues slide
By Ronan Shields • October 30, 2024 •
Ivy Liu
Today (Oct. 30), Criteo posted mixed results for the three months ending Sept. 30. Revenues were $459 million, representing a 2% annual decline, although gross profit increased 13% to $232 million during the period.
These results — announced a day after Google posted further declines in its display ad business — indicate the challenges facing the broader digital landscape as it attempts to wrestle with the transition to ad targeting without third-party cookies.
Criteo’s leadership quickly pointed to some of its operational highlights during the period, such as “disciplined cost management” — traffic acquisition costs (TAC) were $193 million, compared to $224 million 12 months earlier.
A further breakdown of the results also indicates Criteo’s strategic priorities. The earnings report noted that retail media revenue increased by 22% and that its legacy “performance media” revenue, i.e., its ad retargeting business that’s reliant mainly on third-party cookies, decreased (by 5%).
In a prepared statement, company leadership forecasted Q4 revenue ex-TAC between $327 million and $333 million, equating to a 3% to 5% increase, equating to EBITDA between $114 million and $120 million.
“We enter the holiday season with confidence to deliver double-digit growth and margin expansion for the year while continuing to invest in our transformation,” added Criteo’s CFO Sarah Glickman in the company’s release.
Analysts noted that Criteo had slightly lowered its full-year guidance, with management reducing “contribution ex-TAC to grow 10%-11%, compared to its earlier Q2 earnings disclosure when the upper end was 12%.
On the company’s subsequent earnings call, Criteo executives pointed out how factors such as the ongoing general election — likely leading to a “short holiday season” — would negatively impact its revenue forecast. “We’re seeing some retailers waiting until the political cycle is over,” noted Criteo CEO Megan Clarken.
Meanwhile, leadership also pointed to the company’s recently announced tie-up with Microsoft, a development that involves the Big Tech outfit closing its PromoteIQ offering, as revealed exclusively by Digiday.
Answering questions from analysts, Criteo’s management attempted to offer some insights on what the development would offer, including how it could lead to up to half a million advertisers coming to their platform.
“There are different considerations in the design that we’re going through to make sure that’s as seamless as possible,” said Criteo’s chief product officer Todd Parsons, noting the migration represents potentially “about ten billion [dollars] of demand.”
Earlier this year, Digiday cited multiple sources familiar with the developments, noting that Criteo was in negotiations with retail media specialist Skai over a potential acquisition. Those sources noted that such talks have slowed if not outright ended. Meanwhile, the company has announced a plan to find a new CEO in the year to come.
However, despite Crtiteo executives highlighting the opportunities ahead, analysts still emphasized how its ad retargeting business (the function upon which Criteo first built its name) hadn’t grown for three consecutive quarters, a query that inevitably led to the question of how it will function without third-party cookies.
“We’ve moved on,” replied Clarken. “That’s not to say we don’t continue to work with Google as they navigate the Privacy Sandbox.”
“We have been working towards influencing Google as a partner and the CMA on the upcoming user choice implementation that is anticipated this next year,” Parsons added, “but our strategy doesn’t tie directly to it anymore… it’s part of our bigger picture of addressability.”
Criteo’s results came within a day of Google-parent Alphabet posting its earnings results for the same period, a development that comes as it faces unparalleled regulatory scrutiny in the guise of multiple antitrust investigations, including the ongoing ad tech case that is expected to be ruled upon next month.
Despite Alphabet posting an overall increase of 11% ($76.7 billion), its “Google Network” business, which is chiefly under fire in the ongoing ad tech antitrust case, continues to stumble.
Revenues there dropped to $7.5 billion in Q3, down from $7.7 billion 12 months prior, a sign to some industry observers that Google may offer to divest this section of its empire. This potential has piqued the interest of analysts, some wondering if it will prove a boon for independent entities such as Criteo.
Answering such a question from analysts on the October 30 call, Criteo’s Clarken answered, “It’s just incredibly hard to speculate as to what could happen here; the options are endless… if there are changes to some of the ad tech properties that are owned by Google, then it will be interesting to see.”
https://digiday.com/?p=559290
