The Criteo bounce back is in full effect after the company reported strong profit growth and continues to hit benchmarks distancing it from the old days of retargeting.
Criteo made a miniscule Q4 revenue jump – from $564 million in 2022 to $566 million last year – but earned $62 million in profit during the quarter, up from $16 million the year before, according to its earnings report on Tuesday.
Shares of the stock jumped by 20% following the report.
Back from the brink
Criteo is, suddenly, it seems, on a much more stable growth trajectory.
This time last year, Criteo’s years of diminishing profitability dipped into the red, as Criteo reported a net loss of $12 million in Q1 2023. The company fought to remain profitable, and was nearly flat as of three months ago.
In Q4, though, profitability rocketed back up. For the full year, Criteo earned $1 billion in cash flow (not profit, mind, but money that stays with Criteo after its paid off traffic partners) for the first time.
“That’s an important benchmark,” Criteo CEO Megan Clarken told AdExchanger prior to the earnings report.
Aside from the satisfaction of clearing a round number, there are scale benefits that start to happen as companies reach higher levels of revenue on their platform.
Criteo’s scale and leadership as a buyer in retail media, for instance, makes it a default partner for many retailers, especially the largest players out there. Criteo’s latest client win, for instance, is grocery chain Albertson’s.
Criteo also signed new deals with social platforms like Meta’s Facebook and Instagram, Clarken added, which open up whole oceans of new inventory that are increasingly amenable to shopping.
These partnerships help Criteo win “a supply-demand scale game,” she told an investor on the call.
Criteo also saw a 5% jump in its gross profit margin – a stand-in for its take rate. That’s a small increase but a large step up because take rates tend to be fairly stable. Also, the retargeting business, which is still declining, has a larger take rate than the high-growth retail media business.
Two investors asked for clarity regarding the take rate improvement, but there was no precise explanation.
Criteo’s traffic acquisition costs did drop by more than $30 million year over year, so part of the improved margin could also be that Criteo is more efficiently reaching audiences.
A rough year for addressability
There is bad news, despite the overall positive results.
Criteo confirmed its expected losses due to Chrome’s impending third-party deprecation. If Google does move forward with its Privacy Sandbox plans on its current timeline, Clarken said Criteo expects a revenue loss of about $30 million to $40 million in the back half of 2024, according to an internal analysis of the value of cookieless Chrome inventory.
That would be a relatively small part of the overall revenue hit, though, which would fall primarily in 2025.
Clarken told AdExchanger the company is well prepared for a cookieless future, despite the tough revenue headwinds in the first year without cookies. The company just reached another benchmark, she added, by having a 50-50 split between inventory it bids on that has or does not have a third-party cookie attached. Five years ago, more than 95% of Criteo’s bids were on third-party cookie-based impressions.
“The trick is how you maintain addressability when the oldest mechanism for one-to-one targeting is taken away,” she said.
Without naming names, Clarken called out other ad tech players (*cough* The Trade Desk *cough*) that have distanced themselves from the Chrome Privacy Sandbox. Ad tech players need to be engaging in the Privacy Sandbox, she said, or they’re forgoing the chance to run personalized ads to one of the biggest pools of online audiences.
Clarken also told investors there’s more of a “spectrum of addressability” now.
The Privacy Sandbox, for instance, doesn’t enable user-level targeting just like cookies did, but does allow batches of users or very precise profiles of a type of user to be targeted using first-party data.
Social platforms and other partners like Shopify have other forms of addressability. They allow customer list targeting and personalized messaging to customers, for instance, though they don’t export user-level data back out to advertiser CRMs, like how advertisers used to be able to track individual users with third-party cookies across sites and online checkout pages.
With third-party cookies and other identity signals clearing out of programmatic, “the race now is to maintain continuity of addressability,” Clarken told AdExchanger.
“Some players are focusing on one method,” she said. “We’re focusing on as many [methods] as we can support and develop.”
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