Criteo is tightening its belt for the dust bowl days of retargeting.
Revenue decreased 3% year over year to $653 million in Q4 2019, according to Criteo’s earnings report Tuesday. And the company expects revenue to drop 10% in 2020.
But CEO Megan Clarken, the former Nielsen chief commercial officer who took over in November 2019, said Criteo has the pieces to be a major player as a full-stack DSP business.
There are optimistic metrics for Criteo. Its non-retargeting businesses, such as in-app ads, retail shopper marketing and data onboarding, grew 44% last year and account for 16% of total revenue. That’s up from 9% in Q2 2019, when then-CEO JB Rudelle set a goal of 30% non-retargeting revenue by the end of 2020.
Clarken told AdExchanger she doesn’t have a specific target in mind for the non-retargeting products.
“It’s more important to be known for a portfolio that doesn’t tie us to a single product,” she said.
For the past two years, Criteo has juggled retargeting declines, new revenue and profitability. Investors are still spooked from when Apple launched Intelligent Tracking Prevention in 2017, Clarken told AdExchanger. “But the fundamentals are sound.”
The company had $419 million on hand at the end of 2019, up $54 million in the year. Profitability ticked down by 2%, but it still earned $41 million in net income in Q4.
She argued that Criteo’s industry scale and long-standing ties to European data protection authorities give it more influence in trade groups and industry bodies that increasingly write the rules for ad tech.
But if Criteo wants to sustain profitability while its business declines by 10%, it will need new sources of revenue.
The company has stemmed revenue losses in large part by spending less. Criteo got rid of its Palo Alto office in Q4, for example, saving an annual $6 million in head count and $9 million on the real estate.
But after two years of careful cost cutting, there isn’t much fat left and cuts go to the bone.
There are also challenges ahead. Criteo still has a large managed service business – and its shift from retargeting to non-retargeting means moving clients from managed retargeting campaigns to an SaaS platform, where fees are more transparent.
Criteo is trying to get into OTT and CTV supply, Clarken said. And her background as a leader at Nielsen Watch, the TV ratings and measurement group, indicates that Criteo plans to be a more active player in digital video and CTV.
However, other DSPs without TV and video legacies have been making that pivot for years, including The Trade Desk, AT&T’s Xandr and Roku’s dataxu.
Criteo is also focused on its ID graph and identity partnerships.
Only 5% of the total profiles in Criteo’s audience graph are entirely reliant on cookies, Clarken told investors. And identity partnerships such as the one Criteo has with LiveRamp are also strengthening the graph by filling out profiles with off-line and non-cookie data.
LiveRamp is the only identity partner Clarken would name, but she said adding other providers is a priority this year.
“If you think of the identity graph as the way we make connections across our network of 20,000 advertiser clients and 4,500 publishers,” she said. “Then we have an ID product that covers a large chunk of the open internet.”
And Criteo has other areas where it can pick up incremental revenue. Agencies, for instance, haven’t been a major budget source, since brands tend to handle their own retargeting or use a point solution. Clarken said Criteo will work more closely with agencies moving forward, as part of its repositioning as a full-stack DSP.
A turnaround effort is painful, Clarken said. But after 15 years at Nielsen, Criteo’s assets and balance sheet are stronger than the market credits.
“AdExchanger called this ‘one of the toughest jobs in ad tech’ when I started last year,” she said. “And I do enjoy a challenge.”