Criteo
Criteo CEO JB Rudelle
- Criteo is a rare example of a successful public ad-tech company, even with challenges around Europe's General Data Protection Regulation and Safari ad blocking.
- The French-owned firm's second-quarter overall revenue dropped 1% year-over-year but revenue excluding traffic acquisition costs increased 5% during the same time period.
- CEO JB Rudelle said that the firm "anticipated a bigger impact" from GDPR.
- After Apple's restrictions on targeting ads on websites cut into Criteo's revenue last year, the firm is trying to pivot to serving ads within apps and emails.
French ad-tech company Criteo has faced a fair number of challenges in the past year.
On top of already shaky public markets for ad-tech companies, the firm has had to weather Europe's General Data Protection Regulation. That law threatened to wipe out Criteo's most power digital ad tactic: retargeting consumers with ads after they look or buy at specific products on websites.
And after Apple revamped its Safari internet browser last fall with a feature called Intelligent Tracking Prevention (ITP) that significantly limits ad targeting by preventing third parties to track users for more than 24 hours, Criteo had to cut its 2018 forecast.
And while the company's revenue isn't skyrocketing, it's also not plummeting as some observers may have expected - at least according to its second-quarter earnings.
Criteo is pushing Wall Street on a unique revenue metric
Criteo's overall revenue hit $537 million during the second quarter, equivalent to a 1% drop from $542 million in the second quarter of 2017.
To compare, Criteo reported revenue of $564 million in the first quarter, representing a 9% year-over-year increase.
But according to CEO JB Rudelle, the company has been pushing the metric of revenue excluding traffic acquisition costs to investors in recent quarters. That metric generated $230 million in revenue during the quarter, which is up 5% from $220 million year-over-year.
"It's a mix of fairly modest revenue growth and very meaningful growth," Rudelle told Business Insider ahead of earnings. "I recognize that it's fairly modest growth compared to what we've shown in previous years - we had some headwinds at the end of last year with ITP and we had to readjust our financial forecast. 2018 is a transition year for us."
Specifically, Criteo now counts 19,000 advertisers on its platform, representing a 16% yearly increase. In addition to providing technology that helps retailers zero in on specific audiences and deliver targeted ads, Criteo also provides header-bidding software to help publishers manage their programmatic ad revenue.
Criteo works with 2,300 publishers to power their programmatic pipes, up from 2,000 in the first quarter of 2018.
Small publishers "went way above" the EU's recommendations for GDPR
According to Rudelle, the firm saw GDPR "coming for a long time - it creates much more trust and clarity."
But in terms of small publishers - think US-based newspapers and local sites - "a small fraction of them had an implementation of GDPR settings which went way above what is recommended … and that created some friction," he said.
Indeed, sites like Tronc-owned Chicago Tribune and New York Daily News blocked their websites from EU users on May 25, the day that GDPR rolled out.
Rudelle referred to such approaches as "rigid" compared to the more "mainstream" ways that involves publishers setting up pages that require consumers to read about how their data is collected and check a box confirming that a publisher can collect data on them.
"We anticipate this small friction is going to last until the end of the year as the outliers who have been implementing GDPR in a much more rigid way," he said. "Those outliers will hopefully switch back to mainstream implementation but obviously we don't control when that is going to happen."
However, he said that the company's guidance for Q2 included a buffer specific to GDPR and that the firm "had anticipated a bigger impact."
Criteo is trying to move away from Apple's grip on mobile web advertising
Criteo is most well known for its retargeting technology that helps advertisers stitch together audiences across multiple websites to serve targeted ads.
But after Apple clamped down on preventing firms like Criteo to do so with a change to its Safari browsing app, the company's shares tumbled in December.
"We are recovering from this right now," Rudelle said. "This year, we had to rebuild our business, which limits any growth that you can do with existing clients." The decision to readjusting the firm's direction "took us too long."
That said, Rudelle added that Criteo learned its lesson from relying on manufacturers too hard and is "making a major effort to redesign our platform architecture to be much more less dependent on those types of browser manufacturing settings."
So, Criteo is moving its business away from web advertising to two areas that it believes Apple and other manufacturers will not be able to interfere with: in-app and email advertising.
In-app advertising in particular is the company's "fastest-growing segment," because it does not rely on cookies that power web advertising, Rudelle said.
"This gives us a much more diversified way to identify users and mitigate any risk on the back of any technology," he said.