Criteo CEO Eric Eichmann's 2 big predictions for ad tech in 2017

Eric eichmannCriteoCriteo CEO Eric Eichmann.

Criteo once again proved it is ad tech’s star performer on Wednesday, reporting fourth-quarter earnings that beat on both the top and bottom line.

The company posted a 33% lift in revenue ex-TAC (traffic acquisition costs) to $US213 million in the three months to December 31, beating analysts’ expectations of $US210 million. EPS (earnings per share) came in at $US0.84, ahead of the analyst estimate of $US0.68.

Criteo’s only blip was its guidance for first quarter revenue (ex-TAC), which it estimates to be between $US200 million and $US205 million, with $US213 million expected by analysts.

However, Criteo CEO Eric Eichmann told Business Insider on Wednesday that analysts’ modelling did not account for an $US8 million foreign exchange headwind — if that didn’t exist, Criteo would be forecasting at the range expected by analysts. He added that Criteo also faces unfavorable comparisons with last year: Easter — a key period for its travel clients — takes place in Q2 this year rather than Q1, and Q1 this year has one extra day.

Nevertheless, Criteo — which works with retailers and other businesses to target ads at users who are most likely to be in the market for buying products — is predicting big things for its business in 2017: projecting full year revenue growth of between 27% and 31%.

We asked Eichmann to share his predictions for 2017 beyond Criteo to the entire ad tech market. Here’s what he thinks the big themes will be:

Header bidding will continue to rise — putting strain on traditional ad exchanges

Header bidding — a piece of code publishers can deploy to their websites to yield more revenue from the ads on their sites by offering their inventory out to multiple ad exchanges before the site makes a call to the ad server (usually Google DoubleClick, which usually got a first look at all the bids in the auction) — has become the breakaway ad tech trend of the past 18 months.

Eichmann says it shows no sign of letting up. That presents a problem for ad exchanges because it makes each individual exchange “less relevant” than before, according to Eichmann. But for Criteo, header bidding is great because it offers the company more access to inventory — and more access gives the company a better chance of making intelligent forecasting bets.

Criteo also has its header bidding solution live with 10 publishers at the moment. If all goes well, Eichmann said it will deploy the service more widely in the second quarter of this year.

Header bidding is most advanced in the US at the moment, but Eichmann predicts Europe and the APAC region will catch up as the year progresses.

Eichmann said: “I think buyers are smarter now than they were. They were caught off-guard buying second-price environments and now they are buying first-price and adjusting their bids. But whatever premium publishers got when they first implemented header bidding is not as significant now. But for publishers it is in their interest to provide certain players a first look.”

Linking online ads to offline sales

Criteo has made its business on proving people that saw the online ads it served clicked through to buy the product in a brand’s online store.

Eichmann believes companies’ CRM (customer relationship management) systems are the best way make the connection between an online ad and a sale in a bricks and mortar store and he predicts announcements around CRM-matching will become more prevalent this year.

He said: “We have been talking a lot over the last three years about the ubiquity of mobile devices and what that does to our ability to serve ads or deliver services in the offline world. I think it continues to to be the case as activities online become more digitised. The new variable is the idea of using the CRM database as the key mechanism to drive that and get real-time reporting.”

Criteo has its own system to do this but other platforms like Google and Facebook also offer this kinds of service — offering the ability to connect online ads with offline sales via their own technology and through partnerships with data companies.

Again, Eichmann explained, scale is an advantage when it comes to this type of service: the more data ad tech companies have about users as they switch from device to device, the more they can prove their ads actually led to people buying products.

He added: “A lot of people [in the marketing and advertising industry] talk about zero-based budgeting. But zero-based budgeting really is all just about how you can justify spending on something. If you have performance metrics, you can justify it. The pressure on campaigns will continue to increase, which puts us at a really important [vantage point].”

Criteo Q4 2016 earnings, the key numbers:

Revenue ex-TAC: $US213 million, up 33%

Net income: $US41 million, up 5%

Adjusted net income per diluted share: $US0.84, up 16%

Adjusted EBITDA: $US83 million, up 55%

Operating expenses: $US131 million, up 33%

Cash flow from operating activities: $US77 million, up 15%

Free cash flow: $US55 million, up 15%

Total cash and cash equivalents: $US270 million

Total clients: 14,468, up 42%

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