Criteo S.A. (CRTO) Earnings Call Transcript & Summary

All right. We'll get started. People rolling in post lunch, but we'll get started as people come in. So Ygal Arounian from the Citi Internet team. Really pleased to have Criteo CEO, Michael Komasinski, with us today. And as we kind of kick off the afternoon, thanks so much for being here.

Thanks, Ygal. Good to be here.

So Mike, you've been CEO at Criteo for a little over 6 months, right? Stepping back, just as we kind of get it kicked off here, like what excited you about the opportunity takeover at CEO, Criteo? Looking ahead, what are some of the strategic goals and outlook for Criteo that you've got? And just give us kind of your overall strategic overview.

Yes, sure. Yes. So I think in terms of like looking at the opportunity, definitely a big believer that -- I love this ecosystem, in general, right? But I do believe that platforms will continue to take share within the ecosystem for a long time, right? That's probably not a new insight, but for someone that had been in the agency, part of the ecosystem, sort of got to that crossroads and decided that while I love the overall ecosystem, the platform, no question is going to be a faster growth rate and taking share for some time to come, still debated point, but happy to take that side of that debate. And in terms of evaluating which platform to go to, I wanted something that had performance engine at its core value proposition and a platform that had significant data assets from which to drive AI opportunities because you can't do AI unless you have great data assets. And I think when I started evaluating the Criteo opportunity, the fact that it's the industry leader in the fastest-growing secular space in the landscape in Retail Media was like the icing on the cake, so to speak. So it had performance, had data to drive AI, whatever manifestation that ends up being and then the industry leader in the fastest-growing space. So this is a dream opportunity for me. In terms of the vision of where to take it, the commerce media platform vision that we've had that Megan started, I actually think it's quite sound. And I've said that since I took over at the beginning, our strategy really needs expansion and extension. We got to continue to look for adjacent white spaces to make sure that we don't miss opportunities that are really synergistic or complementary for our core capabilities. And then we got to continue to drive. So what's the next generation or the next items on the road map in Retail Media in performance and continue to look out over 2 or 3 years. And if there's anything that's sort of new and additive to that strategy and vision, it really would be the agentic opportunity. And that's just kind of come on to all of us very rapidly this year. And I'm sure we've got some questions to get into that later.

Yes. We've got plenty of questions on all those things, and we'll dig into each of those topics, actually. Let's start with kind of your points about the kind of building around Retail Media and Commerce Media. You've moved more into being a full funnel cross-channel solution, particularly around agencies. And so we saw that in the Performance Media segment in 2Q, which outperformed that kind of drove the beat in the guidance raise. So let's start here with Performance Media and kind of what's driving the strength? How do you think about the segment's longer-term profile?

Yes. So one of the tailwinds that's happened this year was the sort of resolution of cookie deprecation and in this what I'd call stability of the addressability landscape. And in fact, that I think even went a step further just this week, with the DOJ decision around Google and Chrome.

Good timing to have this conversation.

It is, right? And so what that means, while I would say, and I think Criteo has been on record for many years saying this, like we were ready for whatever new addressability landscape came at us. If it was privacy sandbox or something like that, we were ready to operate in that paradigm. But -- it's nice to not have to go through a transition. And so that's good. And that allows us to put a lot of mental energy and resource investment into developing new product as opposed to trying to protect the foundation of the existing product, right? So a lot of that mental energy and some resource investment that was going towards addressability can now go into product development to move up funnel, which is the full funnel part of the strategy and to open up new supply sources, which is the cross-channel part of the strategy, and to continue to evolve the interface to make it more self-service. I usually talk about full-funnel, cross-channel self-service. And there's a lot of energy going into all three facets of that, which makes that sort of core performance offering sort of taller, wider and more easy to use, which opens up a larger advertiser base and makes it more scalable for them, but also in partnership situations as well.

Okay. So with the addressability understood the Google's decision to not move away from cookie deprecation was positive for you guys in the way you're talking about reallocating those efforts into other places. Does the ruling yesterday impact you the same way? And then any comments to make on the ad tech trial that's upcoming and how all of that might impact you guys?

Sure. Like I said, the ruling this week really just, I think, reinforces stability. So no change there. On the ad tech trial, I've always said that a sort of fairer, more competitive landscape in the ad tech ecosystem is good for most of us in the sector, and it would be good for Criteo. That's not necessarily predisposing which way those decisions will go, but a fair landscape is good for us. If the ad serving and exchange parts of the business are sold off or divested, it probably does create some kind of an opportunity on the supply side. And just to put some numbers to it, if we had a 1% share gain would be a double-digit million opportunity for Commerce Grid, our Commerce SSP. So I don't know if that will happen, but there would be some market opportunity if those more extreme remedies were to come to pass.

Okay. Well, we'll keep a close eye on that, of course. Let's elaborate on the agency opportunity. You guys have before -- even before you joined, you guys have kind of already been moving in that direction, building strong relationships with agencies that are becoming a bigger part of the overall spend. You obviously come from an agency background, and you're pushing a little bit more on this effort. You recently announced a couple of broader agency relationships. Can you talk about those how you're fitting into the agency world and kind of the newer role that you're playing there? And what that opportunity is for you guys?

Yes, sure. I mean, as you alluded to, it's been a multiyear effort that preceded my arrival. And I think it probably started with just the simple realization that Criteo was underpenetrated with that segment. Agencies either control or influence a large amount of media investment decision-making. Not unilaterally, clients are quite involved in what ad tech tools are used on their behalf and often have strong preferences. So you always have to have relationships with both brands, advertisers and agencies. But we're not competitive with agencies. There's a very complementary nature to our product set. And I think maybe the emergence of retail media was what helped maybe sort of tip that forward. Because our Commerce Max solution really gets good feedback from agencies in terms of the efficiency of the platform, the ability to run cross-retailer campaigns. And as you know, buying retail media efficiently and at scale is one of the sort of challenges that's been needed to be overcome in that space. So we really now approach agencies holistically with at least 3 of our main 4 products, Growth, Max and Yield -- and Grid, sorry, the SSP. And we look for a holistic commercial agreement. We support them on training and adoption and make sure that we've got the right customer support in place so that the people that are hands on keyboard have a great experience when they're using our tools and that drives adoption and expansion.

Okay. How many of your agency relationships have 3 of those 4? I think it's early? Or are there still...

Almost all of them. Yes, that is sort of our -- our sort of standard approach now is to go into those with all 3 of those products in play.

Okay. Got it. Yes. But still a lot of opportunity to build and expand relationships with agencies?

Yes. I mean we're still underpenetrated in the segment. And so there's just a lot of upside for Criteo to gain share. In some cases, that's client preference, where they maybe worked with us in the past on like our Commerce Growth platform, and they want to see their agency using that as part of their -- the media mix and the tool set up or it's again driving adoption and sort of fandom inside the agency and taking share from other ad tech player.

That was going to be my next question. So when you are building these relationships, is it -- are they new and incremental? Or I mean it sounds like you're answering it, some of it's -- at least some of it's coming at the expense of competitors as well?

Yes, it can. And I mean it's funny. We don't have exactly a lot of like perfect head-to-head competitors. So I think a lot of times, you might be taking share from other players, but you're not necessarily competing against them like one-on-one. I mean there are sort of the more traditional programmatic DSPs. We don't compete head-to-head with them. But as we move up funnel, with, say, mid-funnel offerings like Commerce Audiences, that competes for dollars that potentially would flow through a programmatic DSP. When we create curated audiences in Grid, the Commerce SSP, that's competing for curated audiences with other SSPs. So -- yes. And like I said, we've got real advantages in the way that those products are built because they've got the commerce intelligence, the product catalog and so they are differentiated when we line those up.

Okay. Helpful. So one product that you haven't mentioned yet is Commerce GO! And part of -- I believe at least part of this agency push is around building more self-service tools, and that's what Commerce GO! is. So can you talk about GO!, the opportunity there? Maybe what it is and what you think it does for you guys?

Yes. Yes, Commerce GO! is a really exciting product that is in early stage rollout right now. We have about 15% to 20% of our long-tail clients migrated over and we will go into net new self-registration in early '26 for that product. But what Commerce GO! is, is really our performance engine with a really simple interface that basically takes a lot of the setup and the management of campaigns and automates it. So the selling tagline is 5 clicks to campaign. So you can set what audience you want to pursue, and we have an audience builder that will help do that for you. You upload some of the creative you want to use, set which marketing KPI you want to optimize to and the budget that you want to spend and you basically hit GO!, right? That's the name and it will essentially drive those outcomes with that creative to that budget, and give you great reporting on how you're tracking against that objective. So it really appeals to people that want to drive outcomes, understand how they're pacing against it and have confidence that those campaigns are running in high-quality parts of the open Internet. And Commerce GO! does a great job with that.

Okay. And this is met for agencies, can open up to SMB advertisers like -- as well?

Yes. It's a great question. The initial focus is SMB advertisers, but we do see opportunity with agencies. And I actually think some large clients as well. So I believe the segment -- the client segmentation part will become a little less relevant as it scales. But we're very focused on the SMB segment, at least, initially to prove the efficacy of the platform and to get scale behind it.

Okay. And then this strategy on the agency side and the kind of full funnel, how does this help you get back to total activated gross media spend growth?

Yes. I mean that's key, right? That is one of the #1 objectives inside the company is driving robust activated media spend increase. Yes, we just have to compete for dollars, right? So I mean getting greater share of wallet inside of agencies drives that. As we become more full funnel cross-channel, we become a more -- a bigger platform that has more scale to drive various types of campaigns, own a bigger part of the media plan. And that's -- that all sort of works as a flywheel as you try to gain share inside of those companies.

Okay. And then I think this one will help, too, is CTV. And so that's an area that has also been a little bit more incremental since you've joined, you've focused there a little bit more. Can you talk to us about your -- the CTV opportunity. I think it's a small part of your business right now, but how do you envision kind of taking it from where it is today to where you want it to go? And what does that look like? What does that product look like?

Yes. So the -- as you said, the focus on it is pretty basic, right? The fastest-growing parts of the media ecosystem are retail media, CTV and influencer, right? So it just makes sense that if we're chasing activated media spend that we need to be present in the fastest-growing parts of the market. And then happens to be that CTV from a technology standpoint is the sort of closest into how we operate today. And if I click into that, there's really two approaches for Criteo and CTV. One is to develop audience products where we might partner with somebody like Roku that we announced a couple of weeks ago to take their audience information, infuse that with our Commerce Graph information and to create really differentiated audiences that client like WPP media then might activate on behalf of their clients. And so that was the beauty of that announcement we made a few weeks ago. And so that's a great example of sort of infusing CTV audiences to create differentiation. The other opportunity is to include it as a biddable supply channel on the performance side. So when we are looking for ways to influence consumer behavior, even think about like a retargeting use case. There are certain types of CTV inventory that are going to be relevant to that bid stream. And so we're taking a look at how we develop relationships in the right type of supply that works well with our algorithm. And then broadening the opportunities that we have to bid and influence behavior for our performance clients.

I think that might be the first time I heard retargeting and CTV put together. Maybe I missed it, but so -- okay. So that's an interesting opportunity. Is there a time line you think about when that becomes like a more meaningful part of the business or when you kind of have that set up to go to market?

Yes. I mean, obviously, the first part is already in market, right? So the more audience-based part of that is starting to roll now. And we'll have to come back and I think set some expectations on the performance side of that. We've got a couple of different proof of concepts that are running right now. And so I don't want to get ahead of that just yet, but -- we need to make that work.

Yes. I mean the performance side feels like a big opportunity. I feel like in CTV that's been a big area of promise where we really haven't reached that potential. Everyone talks about it, but big opportunity.

Yes. It's like these things are a lot of times, right? It's a little bit of a chicken and egg where the supply base continues to grow and evolve. So you have more sort of free ad-supported channels, which means you have a longer tail. You've got sort of more breadth of opportunity. You've got more range of CPMs as well as more opportunity to target sort of niche audiences. And then that creates opportunity for demand to come into that. And that flywheel, I think, is starting to really spin on CTV, which -- you see that in some of the other peer set companies really focusing on it.

Got it. Okay. You mentioned influencers. And now you have a partnership with Meta that's become more important, maybe I'm not framing that the right way, but just talking about it. Can you talk about Meta partnership? And is this the influencer idea separate from that or aligned with that? Expand on that one.

Yes, it'd be separate from it. But I'm happy to come back to the partnership with Meta relates back to the cross-channel part of the strategy. We need to be able to drive performance where people spend time. And so the Open Web is still a really important part of that, but the other channels like CTV, like retail, like social, are a huge part of where people spend time. And so we have a great partnership with Meta. The campaign volume in that partnership has been growing at like a 30% clip. And so it's scaling really nicely. I think there are some other things that we could do with Meta. They're very partnership-friendly. So got a lot of expectations for what that could look like in the years to come.

Okay. And then you want to hit on the influencer thing also.

The influencer thing, I think, probably leads back to more affiliate or sort of opportunities of that nature. I don't have any sort of like announcements to make on that here. But it is an interesting space. And back to my point about the 3 fastest-growing spaces, you just have to follow the money and kind of look at what are the opportunities around that, that would be complementary to what we do. And so I think some of that -- some of the way that affiliate might interact with retail media and potentially with agentic make that interesting.

Okay. We're going to -- we're getting to the agentic. I had another follow-up. And now you mentioned agentic in my mind, just on blank except for thinking about GenAI. So let's shift to that. Okay. Before we get to that, other social partnerships, are you doing with any partnerships with anyone else? Is that part of the road map?

It's part of the road map. No new announcements to make yet, but definitely active discussions and hope to have other announcements in the future.

Okay. Got it. All right. GenAI, let's spend some time GenAI and agentic. I want to start with agentic commerce, in particular. You guys put out a block post a month or so ago, integrating with MCP and kind of how you're positioned there to help in this future world of where commerce might become more agentic, maybe live inside LLMs a little bit -- your commerce data kind of proprietary and really valuable in that. So maybe just kind of set the stage on what that is, what you're doing there and what the opportunity is for you guys?

Yes, sure. So -- as you set it up, right, you have to always come back to the monetization plan for agentic commerce is still in development, right? So you don't even know exactly what you're building towards. So you need to, as a product team, take a step back and think about what are the scenarios of how that might manifest. Is that going to be sponsored citations? Is that going to be affiliate? Is that going to be some kind of a rev share on product reco and work backwards from that. So what would we have to do to be ready for those opportunities when and if they come to pass. And that's how we get into some of the MCP build-out that we've done, which is the architecture basically of how agents talk to each other. So we've got that server up and running. We've got a team around that, dedicated to it. And then even working back below that to make sure that our data house is in good order, in terms of what would flow into that, what would power it, that all the permissions are appropriate and that we're thinking about attribution and measurement sort of post activity, whatever that ends up being. So really kind of getting ready and having dedicated teams in place. And starting to even think about what some of our own products could be, like how would that work? So if someone's hitting our API, is that a cost per call or some kind of a way that we monetize our IP flowing through that. And then how do we drive performance back to our clients as those recommendations are acted upon by us as consumers. So really, I think a lot of getting ready, putting teams in place, putting the architecture in place, making sure the data layer is sound. And then just driving conversations with those companies to try to see if our ideas line up with their monetization ambitions, which are kept pretty close to the vest as you'd expect still.

Okay. So on that point, you're having conversations with the LLMs, with retailers, both -- all this collaboratively?

Both, right? It take different forms, yes, and you have to. They're going to own that consumer interaction. And so really falls in their core for how they're going to act on that and when. For retailers, I think it's a very different set of discussions. It's really all about what part of the shopping experience do they want to continue to own, and what are they doing from a capability standpoint to act on that? It starts with what data are they making available, like what's being scraped or crawled? And what's the front end of their e-commerce experience, like what's the agentic support for that? And then how is sort of traffic coming into their site, where is it coming from? How is it showing up? But I mean, Criteo's got a great position in that because so much of the data that you would use in any kind of a retail agentic front end, would be the data that flows through our ad serving pipes today to serve ads, right? It's SKU product information, copy, imagery, price, availability, all the sort of scaled up to data that we manage in an ad-serving environment. So I think retailers are still kind of figuring out what their strategy is going to be. But we're starting to prototype different approaches for how we'd support them in a couple of different scenarios.

Yes. Okay. This is all, like you said early, super fast...

It's early.

But it sounds very kind of forward thinking and position in Criteo leveraging your data assets for when this starts to become more of a reality.

Yes. Look, we -- big believer that this is -- it's a big opportunity, right? If you sort of maybe just take a step back and look at it historically, there have been these 4, 5 major waves of innovation and ad spend around this like search advertising, programmatic, paid social, retail. And Criteo has participated in two of those in a big way, right? The sort of programmatic performance wave and certainly the retail wave. And agentic is either the fifth or sixth in that cycle, and we need to be on the front end of that. So again, yes, trying to be ready and be forward thinking about how we play.

Okay. Great. What about some of the GenAI stuff for AI, GenAI that's actually happening now...

In the product?

Yes, that's -- in the products that's making contribution today. Can you talk about how you're leveraging that within your products and what you're seeing? And then I'll follow-up.

Yes, sure. Yes, that's the other -- there's really, I think, for any product company, there's maybe an ad tech especially, there's kind of 3 pillars to your AI strategy, right? There's just enterprise enablement, which is just efficiency inside the company and how you work better, more efficiently. There's the agentic commerce opportunity that we just talked about. And then we're getting to the third one, which is AI in your products. And so we are definitely driving that full speed. It shows up in products like Commerce GO! where I talked about how we've taken probably 100 different sort of settings and assumptions or things you would need to do to run a campaign and gotten that down to a pretty automated process with 5 clicks. Audience building is another great example of that. Go back several years ago to build an audience to run campaigns against, you might need a data scientist, you'd take a couple of weeks to bring in some third-party data, you do some analysis and you develop an audience that you could activate against. And now we have prompt based interfaces inside of our tools where you just talk to the interface and generally describe the audience that you want to target and it will help you construct that real time. And so that's the kind of enhancement that drives efficiency for the users of our products, which drives adoption, maybe if we're talking about agencies and makes them big fans of using our products. So there's a few other examples like that, that go audience building, definitely, there's some AI automation and measurement reporting. We want to make the platform as efficient and as effective as it can be.

Okay. And you mentioned this as one of the pillars. But -- so internally, in terms of efficiencies, how are you leveraging that? What are you seeing for you guys internally on the cost side?

Yes. So it's like all facets. It happens in the development teams where they are generating code with AI tools, right? So our productivity per developer is starting to really pick up speed. We see it in the sales team where we're building extensions off of our sales force implementation with their tool agent force, where we get more automation and how we find connections inside of target accounts or the way that we manage opportunities, even happens inside of the HR and finance functions, just the ability to sort of get data, analyze things quickly, it makes everybody more efficient. So we have a pretty broad-based agenda that basically covers almost every department in the company, and they've all got expectations to drive productivity into what we do.

Okay. Great. Very interesting there. Let's shift to Retail Media. Maybe if you can give us, I don't know, call it, kind of a state of the union update where Retail Media product sits today. Obviously, seen a lot of growth there. You're rolling out a few new products, real-time bidding for display, on-site video, continuing to focus off-site. What are the big drivers from here for Retail Media products? And how much is left -- you talked about it as one of the biggest -- the fastest-growing verticals within digital advertising? Like how much is left here for you guys?

Yes. So you touched on some of it. There definitely is a lot of scaling still to be done with the supply base that we have, right? So the 200-plus retailers that we represent are rolling out the new formats that we've introduced like on-site video and auction-based display. And we're getting great uptake on that. I think I talked in the earnings call about the uptake on auction-based display, and it's actually exceeded the kind of expectations that I'd set on that call. And so that drives incremental revenue for those retailers. It helps to scale our business. And it just, again, reinforces our category leadership position as the monetization platform of choice across the industry. The types of things that we're rolling out new for next year tend to fall in a couple of different categories broadly. You want to continue to drive enhancements in relevancy. So product search and just raw efficiency of what that drives, but also how we help retailers optimize e-commerce objectives and advertising objectives on page. We call that holistic page optimization. Because you really want to optimize those 2 objectives, as an e-commerce retailer, you're trying to sell product and the gross merchandise value of those products represents the vast majority of the value of what shows up on a page. But you want to optimize advertising. Ideally, you'll actually want those things to be complementary to one another. You want to make money on your advertising and actually have it help drive product sales. And all that has to be done in a fairly complex set of calculations that need to happen in those milliseconds while that page is loading. And so HPO, as we call it, is a set of sort of algorithms and features that allow retailers to accomplish that. And so that's a big part of our road map over the next year. And then the other piece would be how to bring demand into the supply more efficiently. You touched on it earlier. It has been a little bit of a fragmented supply base and really some kind of a programmatic solution probably is the unlock there. So that's something that we are piloting and working on because there's still a supply-demand imbalance in that segment of the market. So similar to HPO, we need to help retailers protect what types of bids they're going to yield against, especially in sponsored ads, so that it maintains that complementary nature to the shopping experience. And so you kind of have to figure out all the different sort of content protections and the complementary nature of products and bake that into the bid stream calculations to make that work properly. But we're working on that. And I definitely think that we will be first to market on a real scaled solution. And I think that drives to your question, the next big growth leg in that -- in Retail Media overall.

Great. Fascinating. We'll get an eye out on that. I feel like we're stopping mid conversation here, but we are out of time. Thank you so much for joining us.

Thanks, Ygal. Thanks, everybody.

Thank you.