Criteo reported its 2Q24 earnings last week on Thursday. Things look good, net revenue (i.e., revenue net TAC), grew by 11% year-on-year, meaning the company can sustain low double-digit percentage growth rates and hold its own even as programmatic advertising is seeing a slowdown (see first chart).
However, Criteo’s story in recent years has been more about staying afloat rather than growing significantly (see second chart). This contrasts with, for instance, The Trade Desk, which first grew with the programmatic segment, and then outgrew it.
Now let’s look at the performance of Criteo’s products. Unfortunately, the company reduced the number of reported segments from four to just two, beginning with the 1Q24 earnings report. They retained Retail Media as one segment and combined Retargeting, Commerce Audiences and Iponweb into one segment called “Performance”.
However, this consolidation itself allows us some insight into how Criteo’s products are doing. For one, they are probably putting everything except Retail Media into one segment to make the decline of Retargeting less obvious, their original bread-and-butter business. They perhaps also want to prepare for the deprecation of third-party cookies on Google’s Chrome browser, which will depress Retargeting sales even more. Criteo has maintained that the impact on Retargeting sales from Chrome cookie deprecation will be less severe than when Apple deprecated its ID for Advertisers (IDFA) on iOS, but I would still expect a noticeable effect.
In the new Performance segment that decline is offset by increased sales in Commerce Audiences. That product contributed less to additional sales than Retail Media did in 2023, but enough to make up for some of the losses in Retargeting. Iponweb hasn’t yet proven to drive significant revenue growth, which is now also less visible due to the segment consolidation.
Criteo sees Retail Media as having the greatest potential for future growth. This is evident as it is the only product featured as its own business segment, and by the fact that Brian Gleason, Chief Revenue Officer, has taken on the additional role of President, Retail Media.
Criteo’s Retail Media sales have shown growth rates in the 20s and 30s for several quarters. However, this success is qualified – Retail Media hasn’t significantly increased its share of Criteo’s product portfolio, oscillating around the 20% mark for the past seven quarters (see third chart). For Criteo to succeed, Retail Media must grow faster, and Brian’s promotion is a key part of this strategy. The recent partnership with Microsoft is a major step in this effort, offering more distribution and revenue for Criteo’s Retail Media product.
The company is in good shape to make things happen: It has $675M in cash for acquisitions and is on track to buy back $150M worth of stock.
Criteo is well-positioned to capitalize on its strengths and navigate the complexities of the current market landscape. The company’s steady revenue growth, strategic focus on Retail Media, and significant cash reserves for acquisitions underscore its resilience and potential for success. With the recent partnership with Microsoft and the promotion of Brian Gleason, Criteo is poised to accelerate growth in its most promising segment, Retail Media.
The market agreed. Criteo’s stock price went up by 6.3% after earnings – only to be caught in the big stock sell-off, especially in tech, the Monday after, to end down 2.5% from where it was pre-earnings.
Criteo provides online display advertisements, data and digital marketing services, focusing on personalized retargeting and commerce media solutions. Criteo has developed what it calls the world’s leading Commerce Media Platform, which connects marketers and media owners to drive commerce outcomes.
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