- Criteo’s new business are 21% of revenue, and it expects to hit the 30% mark by the end of 2021.
- The company is positioning itself in areas removed from Google’s and Apple’s ad tracking changes.
- But in fielding these new businesses, Criteo faces new challenges.
- See more stories on Insider’s business page.
For years, the public adtech company Criteo was best known for retargeting ads to people, even as browsers began clamping down on the practice.
At a Thursday investor event announcing its new direction, Criteo said it’s making progress in shedding its label as a retargeter as it gains traction from newer businesses like its retail media platform and contextual targeting — and expects those businesses to represent a third of its revenue by the end of the year. Along those lines, it’s now calling itself a “commerce media platform.”
Retargeting is when you can’t escape the ads for a product you shopped for or just bought online. It’s often annoying to consumers, but it tends to work at scale, which is why advertisers use it. But recent crackdowns on tracking consumers online — in the form of policies from Google and Apple, as well as legislation like the EU’s GDPR — have threatened Criteo’s business.
As recently as early 2019, Criteo tried to expand with new offerings like in-app advertising and data onboarding, but those areas didn’t grow fast enough to offset the potential losses if regulation or platform policies suddenly killed its retargeting business.
Criteo is honing in on areas that won’t be impacted by tracking restrictions imposed by Google and Apple
Criteo still gets the bulk of its revenue from retargeting. But its “new solutions business” accounted for 21% of total revenue in Q2, and CEO Megan Clarken said she expects that area to grow 50% year over year to account for a third of its business by the end of 2021.
“We want to make sure that any decline that we see in the retargeting businesses is made up by the increase in size of the new solutions business,” Clarken told Insider. (Ironically, Criteo said that retargeting rebounded in Q2 after a downturn in Q1, though the uncertainty around the future of tracking users online make retargeting a volatile business.)
Criteo says its new solutions are immune to Google and Apple’s consumer tracking restrictions and include a retail media platform and contextual targeting.
With the retail media platform, Criteo is selling software for advertisers to buy online ads and software to help retailers sell ads on their platforms. Criteo’s idea is to use that retailer data to make the ads they sell perform better.
Criteo’s other new solution, contextual targeting, involves figuring out why people bought certain products and using that data to match ads to them. This solution does not rely on cookies, so it won’t be impacted by Google’s or Apple’s tracking restrictions. It also shows how Criteo is expanding beyond retargeting to prospecting — an advertising tactic for finding new customers.
Criteo has tried to expand before, but this time might be different
Despite Criteo’s ambitions to diversify its business, watchful observers might recall how in 2019, previous CEO JB Rudelle wanted Criteo’s new business, 9% of overall revenue at the time, to account for 30% by the end of 2020.
But industry analysts are optimistic. “The growth rate with the non-retargeting businesses speaks for themselves, and you can see a pathway out a few years,” said Dan Salmon, managing director of equity research at BMO Capital Markets. “It’s our top small cap pick these days.”
Criteo also faces competition in the retail media arena. True, retailers are climbing over each other to sell ads on their ecommerce sites to compete with Amazon, and Criteo has a head start with its rich retailer relationships. But other adtech companies are getting into the space. For instance, in January, Walmart’s media-selling business tapped The Trade Desk to build its ad buying platform.
And Criteo’s contextual targeting business requires purchase data from online retailers. If these retrailers restrict that data, worried that it might help competitors prospect, it could undermine Criteo.
Finally, by making money from ad buyers as well as ad sellers, Criteo’s model could lead to potential conflict where each side might question who it’s really serving. Maximizing ad revenue for ad sellers, for instance, could make ad buyers question whether they’re getting optimal rates. This tension has plagued adtech companies before, notably with Tremor Video, which sold off its buy-side business in 2017, in part because of such tension.
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