Eurobusiness Media (EBM): Criteo, the commerce marketing technology company, has just announced its fourth quarter and fiscal year 2017 results. Joining me today is Eric Eichmann, Criteo’s CEO. Eric, thank you very much for joining us.
Eric Eichmann: Thank you for having me.
EBM: So another strong quarter for the company and a great year. Tell us about it.
Eric Eichmann: Indeed, Q4 was another record quarter and results were better than expected. We delivered high profitable growth while expanding our product portfolio. We had strong holiday sales momentum, particularly in the U.S. In Q4, we grew Revenue ex-TAC 20% and Adjusted EBITDA 36%
And for all of 2017, we grew Revenue ex-TAC 29%, Adjusted EBITDA 35% and Free cash flow 80%
EBM: So when we look at Q4, what do you think were the main drivers behind this success?
Eric Eichmann: There were 3 main drivers for Q4. One, we drove innovation across our technology and our product portfolio. Two, we had better access to inventory. And by the way, those two things contribute to same-client Revenue ex-TAC growth which for the quarter, year over year, was 6%, and if you exclude the impact of ITP was 17% which is very, very strong compared to what we’ve done in the previous quarters.
And the third driver obviously is adding new clients across all regions and sizes.
Let’s start talking about the first driver, innovation, I want to highlight three areas there: one is the Criteo Engine, second one is the Criteo Shopper Graph, and the third one is Enhanced client reporting.
First, in the Criteo Engine,we added new variables for improved Predictive Bidding within our in-App inventory, which increased the Revenue ex-TAC in our A/B testing environments by about 3%. And improving performance for in-app inventory is very critical since most of the consumer activity is moving towards in-app.
Second, the Criteo Shopper Graph, which is comprised of our three data collectives, grew further in scale and efficiency.
Our Identity Graph, which is the first of those three collectives, continued to have good traction with close to 80% client participation. We now have one of the largest user graphs in the market with over 3.7 billion user identifiers matched. And more than 90% of our Revenue ex-TAC is now generated from users matched in the graph.
And our Interest Map, which is the second collective, which organizes anonymized shopping intent and purchasing data across retailers in our ecosystem, is seeing great momentum, too. Eligible clients, who give us permission to share shopping data on an aggregated basis, represented already 43% of Revenue ex-TAC.
The Shopper Graph is the foundational and differentiated asset of these three collectives, to develop new products and we are pleased with our good progress on it.
Third, the Enhanced client reporting. This is an important part of providing transparency to our clients, clients can now download standard reports showing detailed impression-level information through the Criteo API, like where ads are shown, time stamps of the ads and the value of each impression. More transparency increases our clients’ confidence in our platform, which ultimately strengthens our relationship with them.
EBM: So that’s the innovation side of things. What about the other two drivers?
Eric Eichmann: With respect to inventory, which is the second one of these drivers, we continued to deploy the Criteo Direct Bidder, which is our proprietary header-bidding technology. We made good progress in Q4, we added new 500 premium publishers worldwide who are using this technology, to get to about a total of 1,500. Criteo Direct Bidder as we’ve said in the past drives additional monetization of publishers of 20% to 40%. And we continue to improve – and have improved – this technology including enabling usage on mobile sites leveraging the Accelerated Mobile Pages technology.
And the third driver was new clients. This quarter we added 800 net new clients across all regions, products and categories, while maintaining – and this is very important – a 90% retention rate for the core product. The net adds this quarter were lower than in prior quarters mostly due to our focus on larger midmarket clients at the expense of smaller midmarket clients. As a result, we saw Revenue ex-TAC per new client grow 14% versus Q3. We expect this trend to continue in 2018, until we implement our fully scalable self-service platform to manage smaller midmarket clients more efficiently.
And when we think about new clients we closed 2017 with more than 18,000 commerce and brand clients, an increase of over 3,600 net clients, or 25% for the year.
EBM: What about your new products?
Eric Eichmann: New products is an important part of our strategy, and building and deploying these new products, that rely on these data collectives that we’ve talked about just earlier, is core to our vision of creating the Commerce Marketing Ecosystem for our partners and we are very pleased with the progress in this area.
So, 3 new products. Criteo Sponsored Products had a very good quarter in the US, as 6 of our Top 20 brands clients grew their spend with us by more than 5X on a year-to-year basis. We also had good traction on that product in Europe, thanks to the addition of five large retailers and the good growth of existing ones. Overall, Criteo Sponsored Products represented slightly over 5% of our Revenue ex-TAC in 2017. And we are confident that the strong momentum in Q4 will position Criteo well for growth in this area in 2018.
And in addition to that product – Criteo Sponsored Products –we also introduced 2 new products in a beta basis in the US in Q4: Criteo Customer Acquisition and Criteo Audience Match. And they have already generated for Q4 $3 million of Revenue ex-TAC. Together with Dynamic Retargeting, these new products help our commerce clients or our retailers cover the entire shopping journey, from new customer acquisition to re-engagement.
So all in all we are very encouraged by the potential of both of these products based on the initial results. A couple of things to think about in terms of statistics for these products. About 6% of clients have adopted the Criteo Audience Match product to re-engage their existing customers, generating on average 15% more Revenue ex-TAC compared to what they were spending with us before on retargeting only. And Criteo Customer Acquisition was adopted by 26% of Fashion Retail clients in the U.S., France, Germany and the U.K., which are the only countries we are deploying these products in in Q4. And those clients drove on average 10% more spend or Revenue ex-TAC compared to retargeting. In Q1, we are introducing the product to all Retail clients, so instead of just Fashion, all retail clients, and we plan to launch it in six additional markets.
In mid-November, we also introduced another product, a beta version of the Criteo Reseller Program to enable online marketplaces to offer Criteo Dynamic Retargeting to their own sellers. This offer was already deployed with several large clients, including Yahoo! Japan. For marketplaces, this program brings additional sales, new services to partners and increases the Gross Merchandising Value that goes through their marketplace. For us, this means more ways to drive sales from users we would otherwise not reach inside a marketplace.
Overall, we are excited about the momentum and reception of our new products and will continue to improve them as time goes by in the next year or so.
EBM: And looking ahead to this year, what are the main priorities for 2018?
Eric Eichmann: We are focused on three key priorities.
First, of course, is to grow our core business. And there we have a couple of areas that will always be important: continued innovation on our world-class Engine, but we also are transforming the way we go to market with our sales organization. And the intent there is to maximize our commercial opportunity but also do that while becoming more strategic to our large clients. And then to allow us to scale the midmarket more profitably.
This means a couple of things. One, streamlining our multi-product sales approach, so we’re selling several products to the same client, that’s a big difference from the single product that we used to do. And then providing different levels of services to clients depending on their potential and their size. And finally, building a self-service platform with capabilities that will allow us to serve the smaller part of the midmarket.
And second, as a second big priority, is growing our Criteo Shopper Graph, which is the foundational element that allows us to develop new products and present and bring the benefits of scale to our retailers and technology.
And third, and finally, we intend to develop – or continue to develop - and scale our new products for commerce and brand clients.
EBM: So all in all another strong quarter for the company…
Eric Eichmann: Terrific quarter, terrific year, and a great potential for 2018.
EBM: Eric Eichmann, Criteo’s CEO, thank you so much for joining us today.
Eric Eichmann: Thank you!
