Criteo Reduces 2019 Forecast But Brushes Off Potential Chrome Changes

Criteo posted overall revenues Tuesday of $588 million for the opening quarter of the year, representing a 3% year-over-year increase, although “identified execution issues” led the company to downgrade its earlier predicted 2019 outlook and investors have been spooked. This, plus continued concerns over the potential negative impact widely-anticipated changes from Google will have on third parties to target ads within its Chrome browser, saw a double-digit stock price drop later over the course of the day. Speaking on the company’s subsequent earnings call, Criteo's C-suite attempted to provide assurances that the anticipated privacy-centric policy implementations from Google would not adversely affect the wider ad-tech ecosystem and that Criteo was working “hand-in-hand” with the online ad giant. Criteo reported that revenues excluding traffic acquisition costs increased 2% to hit $236 million, or 42% of overall revenue, during the period, with CEO JB Rudelle stating that the company is making good progress with “several key priorities” such as new solutions including the rollout of self-service tools. Although Rudelle later went on to tell those listening in that Criteo expected 2019 revenue excluding TAC to be either flat or come in at 2% above last year, this is compared to the 3%-to-6% growth figure it had earlier forecast. This “more modest approach to its 2019 outlook” is based on the back of Criteo’s leadership recognizing that it requires more time to successfully sell its expanded product suite, which includes products beyond its core ad retargeting services including more “upper funnel” products such as its in-app advertising plus app install offerings. Rudelle told investors, “I realized that some of the new capabilities we are building to achieve our transformation are going to take more time before yielding the acceleration we're working very hard for." Criteo now intends to adapt its existing sales operations to better meet the needs of advertisers in the market for such upper funnel offerings. Rudelle pointed out the length of time between an initial sales pitch and eventual onboarding of such clients is a much longer process compared to the rollout of ad retargeting solutions. “Despite encouraging client performance for new solutions, we are not ready yet to sell them in a truly scalable way … we believe it's going to take a bit longer than expected to get the full benefit of it,” he added. Criteo’s leadership faced repeated questions from analysts on how anticipated updates to the Google Chrome browser could affect its core business of online ad retargeting which has historically been reliant on cookies. The earlier implementation of such software by Apple with the rollout of intelligent tracking prevention in its Safari web browser had negatively impacted Criteo’s earning capability and subsequent stock performance. When Adweek broke the news of similar debates happening within Google in late March, Criteo’s stock price took a similar sharp dive–it has since recovered to a large extent–but Rudelle is confident his company can adjust accordingly. He went on to cite comments made earlier in the week by Google CEO Sundar Pichai in reaction to a similar inquiry on Alphabet’s earnings call where Pichai hinted heavily that privacy-centric changes are on the way, including how the Chrome browser operates, but reiterated this would include “making sure privacy works for everyone.” Per Rudelle, Pichai's remarks “confirms what we heard from our side” adding that any changes “would not be adverse to the ecosystem” and that “we are working hand-in-hand with Google to implement this.” “They're going to make some changes in the future about how Chrome manages identity ... those changes will be done in a way to minimize any impact on the ecosystem,” said Rudelle. “He [Pichai] was very clear on that and insisted that for them it's extremely important to maintain a healthy advertising ecosystem that is the key revenue source for most publishers.” Criteo’s stock price dropped by as much as 13% during the day and closed at $19.78 per share on April 30. Adweek attempted to contact Criteo for further clarification on the remarks made on its April 30 earnings call but it was unable to do so by the time of publication.