Criteo Heralds 'Transformation,' But Primes Itself for the Privacy Pinch

Criteo posted flat revenues of $661 million for Q4 2020 as the company pursues its ambition of becoming the largest independent retail media network on the market. But it's also preparing for a $60 million hit in revenue from upcoming privacy changes from key industry stakeholders. Company leadership noted the numbers, posted today, exceeded earlier guidance and acknowledged it is still in the key phases of its transformation given privacy changes in Apple's iOS 14 and major browser providers, in addition to ongoing global economic conditions. In a synopsis of the financial impact of the Covid-19 pandemic on Criteo's overall 2020 performance, its leaders estimated the resulting economic downturn meant that its Q4 revenue was down $26 million, primarily due to the reduction in spend from travel advertisers. Although the company leadership heralded its continued transformation away from ad retargeting, which is heavily reliant on third-party cookies, and toward retail media—typically a more holistic marketing proposition—Criteo's annual revenue dipped 8% year over year to $2.1 billion. Meanwhile, in a prepared statement to financial analysts, Megan Clarken, CEO of Criteo, said the company's continued transformation throughout the year—her first year at its helm—helped it deliver 97% of its 2020 revenue guidance issued before the pandemic. Currently, Criteo's retail media network has over 21,000 ecommerce partners, including Best Buy, Costco, Macy's and Target, enabling it to ingest first-party data on over $2.5 billion worth of daily interactions, according to Clarken. "Through direct integrations with our retail clients, enabling cookie-less targeting and retargeting ... only Criteo has this scale [among independents]," she said. Elsewhere, company leadership also reported that it anticipates the headwinds from privacy changes implemented by key industry stakeholders like Apple. The ongoing negative impact of Covid-19 on the travel sector will also result in a notable negative impact on revenue in 2021. Sara Glickman, Criteo CFO, explained how this includes a potential 4% annual dip in Q1 revenues, resulting in forecasted Q1 revenues of $200 million, excluding traffic acquisition costs. "This includes $6 million of incremental identity and privacy impacts relative to the 2020 run rates," she said, adding these could amount to $60 million overall in 2021. Todd Parsons, Criteo, chief product officer, noted the company's ongoing preparations given the pending decline of third-party cookies in Google Chrome. This includes efforts to integrate with Unified ID 2.0—a search for a "cookie replacement" by independent ad tech players—and its participation in Google's Privacy Sandbox experiments. "We continue to be laser-focused on preserving addressable advertising at scale without a third-party cookie whether retargeting or other outcome-based use cases," Parsons said. Also included in these efforts is a Criteo API program that Parsons said the company hopes will "pave the way for brands, retailers, agencies and partners to...build customized solutions that produce more value using our core assets." Additionally, Criteo is also working on a "rights management layer" with the goal to convince clients and partners that Criteo's platform can safely manage their key audience insights end to end. "We believe that this capability will encourage first-party data to flow freely into our ecosystem and speed the success of our future-proofing initiatives," Parsons said.