Criteo in Talks To Acquire Skai – But Is A $500M Price Tag Justified?

According to Digiday, Criteo is in talks to acquire Skai. The acquisition of Skai could be a key move to accelerate Criteo’s #retailmedia sales — a crucial strategy for the company’s future success. (See my article on Criteo’s recent 2Q24 earnings report.)

This potential acquisition follows Criteo’s strategic emphasis on Retail Media, which was highlighted as the only stand-alone product segment in its earnings report, underscoring its importance. Moreover, Criteo has appointed Brian Gleason, Chief Revenue Officer, to the additional role of President of Retail Media, and secured a significant distribution deal for their Retail Media products with @MSAdvertising.

On balance, the deal seems unlikely, mainly due to Skai’s price tag and the uncertainty over whether Skai can genuinely enhance Criteo’s Retail Media offerings.

Skai, formerly known as Kenshoo, has evolved from an SEM specialist to an #ecommerce advertising expert and is privately held. However, I’d estimate its 2023 revenue to be around $146 million, making a purchase price of $500 million reasonable.

However, with Criteo holding only $675 million in cash, would Skai be worth depleting nearly all of Criteo’s strategic cash reserves?

While retail media significantly contributes to Skai’s top line, it doesn’t appear to be its primary revenue driver — that honor belongs to its omnichannel DSP. My best guess is that retail media accounts for only 15% to 25% of Skai’s total sales.

But Skai could bring other qualities to the table:

• Could there be retail media talent and technology at Skai that justify the acquisition?
• Beyond that, Criteo would also acquire the omnichannel DSP, which seems specialized in ecommerce campaigns, adding to its commerce capabilities.
• Skai’s Search, Social, and App Marketing products could also be valuable additions, especially the latter two.
• Moreover, Criteo would see a roughly 15% boost in net revenues.

The crucial question remains: If the primary goal of this potential acquisition is to strengthen Criteo’s Retail Media business, does Skai’s Retail Media product bring enough value to justify a half-billion-dollar price tag?