Criteo Sees Ad Revenue Rebound, And Reshapes Its Pitch As A DSP And SSP Hybrid

Criteo reported revenues of $551 million in Q2 2021, up 26% from the same period last year, while its profitability increased from $6 million to $15 million.

The year-over-year metric is inflated this quarter for practically all advertising companies, because Q2 last year held the worst of the pullback on marketing during the pandemic. And Criteo did still have a razor-thin profit margin in the quarter.

Criteo does have some potential revenue hits built into its new forecast for the year. Losses due to privacy policies and regulations totaled $56 million in the first half of 2021, about evenly split between Apple’s App Tracking Transparency framework and other costs, Clarken said. That’s slightly less than the $60 million it forecast last year, but it now expects those costs to weigh heavily in the second half of the year, because Apple delayed the implementation of its new privacy rules.

Privacy issues aside, Criteo is finally enjoying some tailwinds, as ecommerce advertising accelerates across the board.

Its retail media business, a self-serve marketplace for online and brick-and-mortar retailers to sell ads for products they carry, grew by 13% year-over-year. Criteo added the blue-chip client Best Buy to its retail media platform, it announced Wednesday. And growth was also driven by “execution on Prime Day,” said CEO Megan Clarken. In other words, Criteo’s retailers took advantage of higher shopping interest during Amazon Prime Day to convert on their own sites (not Amazon).

More apps, web publishers and merchants want to plug into sponsored product ads, and Criteo is the biggest source of that demand outside of the major walled gardens. But as Criteo tries to shake its ‘retargeter’ label, its roster of more than 21,000 advertisers, mostly for retargeting, has helped the company expand elsewhere.

CEO Megan Clarken said that Criteo’s deeper pockets helped secure direct relationships on the sell side, for instance.

Sixty percent of Criteo’s audiences now come from direct supply-side integrations, up from 50% a year ago. Clarken said the company now views itself as a hybrid DSP-SSP for just that reason.

Product chief Todd Parsons said that Criteo’s direct relationships on the supply and demand sides help it reduce the advertiser “tech tax” – in this case, the cut of the overall media budget that would be parceled out to the SSP.

Google Chrome’s delay in phasing out the third-party cookie “granted a reprieve” to Criteo and others in the space that are testing and building first-party data solutions, Parsons said. But the desire to connect the buy and sell sides still exists.

“We’re racing ahead so media owners can activate first-party data from their domain,” he said. “A direct connection is the only way to achieve that, not through an SSP.”

But there are also whole new potential growth areas.

Parsons pointed to outstream video and shoppable video units as a lucrative new market. Criteo also has “the makings of an incredible affiliate network,” and is evaluating and testing affiliate partners, though expanding into affiliate is more of an aspiration more than a true product at this point.

“There are a lot of things we wanted to do within our media owner network that we haven’t done in the past as our business was focused on retargeting,” he said.

Now the focus is on the self-serve platform, where publishers and advertisers can bring their own data, as opposed to the managed service retargeting Criteo is known for.

“Our commerce media platform is the platform on which we can provide (first-party data) capabilities across the open internet,” Clarken said. “That’s what we’re laser-focused on.”

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