Criteo IPO Watch: Why The Retargeting King Will Have To Build The Ecommerce Stack Pre-IPO

The role of online retail is ever changing and facing constant disruption by the socially connected web. Despite this, ecommerce remains a major part of internet’s ecosystem, with continued growth on the horizon.

One company that is emerging as the major ad solution within ecommerce is Criteo. Its go-to-market strategy from day one has been to partner with ecommerce vendors, directly, mostly bypassing the agency. And it seems to be working, given that company is due to have revenues of around 300 million this year – and has been profitable since 2008. How many ad tech players can say that?

Criteo is thought to be mulling over a possible IPO early next year – with it likely to be another New York listing. But can a retargeting network really have a big IPO? Probably not. Retargeting can only scale so far as a business model. So the pivot is imminent. But this won’t be some desperate attempt to justify the retargeting solution – it will more an evolution of Criteo’s emerging e-commerce proposition.

Just as we will see an all-singing all-dancing stack in Display, Criteo will justify its value – and it’s likely to be well over 1.5 billion if it goes to market – by assembling the e-commerce stack.

Why become an ecommerce business?

As mentioned, offering a retargeting solution, regardless if it is perceived as best in class, will only create a certain valuation. Criteo needs to pivot and there are smarter ways of doing this beyond simply looking at the ‘upper funnel’, and delivering more intelligent ‘prospecting’.

The retargeting business will be capped at several 100 million, and this market share will eventually be chipped away by the solutions being built by Google and other buy-side solutions. Dynamic creative will be built into ad server, as the big platforms make it easier for its agency clients.

How could Criteo achieve its e-commerce pivot?

Criteo might need to do a little M&A to build out a comprehensive ecommerce stack. And why not? There is so much VC and Private Equity money around at the minute, and having a defined proposition would definitely attract the late stage investors. Building an ecommerce stack would not only diversify Criteo’s offering but also consolidate its position as being the go-to buyer and optimiser for ecommerce brands directly.

What could they build/acquire?

Tag Management

Criteo has in the past created smart relationships, like partnering with Tag Management vendors. This has been become really important in positioning with clients. By enabling its code to be deployed with the click of one button removed any potential IT-related barriers to entry. A question that needs to be asked is this: if they already partner with tag management providers, why bother acquiring or building? As tag management companies get cosier with the agency community, the agencies (as a whole) will continue to keep Criteo at arms length, if possible.

If tag management responsibilities lie more with the agencies, expect this ‘one click away from deployment’ position that Criteo currently enjoys to be eroded. Major agencies do not like Criteo because of two fundamental reasons: firstly, it has a dual agency/client direct business development strategy; secondly, Criteo is incredibly good at what it does, which ultimately threatens the burgeoning agency trading desk business (a retargeting-led business fundamentally).

Criteo need to maintain the ability to manage its data distribution directly with the advertiser. Let’s not forget that tag management has grown to become a “must have” service for e-commerce. Build or buy? That is the question. The US solutions are too expensive, but there are some decent European and even Asian solutions it could pick up for song.

Site Personalisation

The next obvious move for Criteo is to personalise ecommerce sites’ content. This space is pretty crowded, but then Criteo has a vast client base to leverage. It seems a natural product evolution: to move from personalising ad content to personalising the retail experience. At the very least landing page designs that are able to ingest the same user level insight that Criteo’s ads utilise.

Criteo certainly have the man power in their R&D lab in Paris – oh, yes the European can build ad tech – to start this project from scratch. There are likely to be a handful of companies looking for an exit in what could become a FNAC dead-end OR Criteo could simply do a ‘make-an-offer-you-can’t-refuse’ type deal with some young startup (some cash, some equity). Sub2Tech, based in London, would be a great acquisition, and represent great value.

What about mobile?

When it comes to the mobile opportunity, Criteo might have to go off piste. MCommerce is a booming part of the wider industry ecommerce industry. But the role mobile advertising plays within this is still somewhat unknown (mobile display is still stuck in a rut). Nevertheless, Criteo will need a bigger story in mobile come IPO time. If this isn’t an ad solution play, why not get into mobile payments?

EBay just recently reported about how their mcommerce business had exploded over the last 12 months. Is there a way for Criteo to cement themselves in ecommerce, and get in on the mobile game? There are a lot of companies trying to stake a claim. Could Criteo build out a solution, and bake it into its ecommerce stack solution?

The retargeting business is still growing with more global growth expected, but the public markets are looking for more than just “bottom-of-the funnel” targeting capability. Vertical expansion would certainly make an IPO interesting for investors, and would undoubtedly help solidify the position of Criteo’s main business model – unlocking even more revenue for the European company in the ecommerce space.


  • Incredble Bulk

    Nice post with some excellent thoughts.

    I agree with the overall sentiment of the post, that Criteo were in the right place at the right time. They will certainly be squeezed off the agency plans, now that agencies are building out their offerings, even with the direct ‘relationships’ they have bullied their way into. The only saving grace for Criteo will be if they can prove their high frequency cookie bombing actually adds any value to the marketers, and doesn’t just cannabilise all other efforts.

    Criteo were clever in going for retail clients initially, high volume of transactions, easy to drop a cookie on them and not get duped out by other channels (ie retail has very little generic search volumes, it’s mainly behind brand lead campaigns from TV/Print/Other Display) and Criteo have been able to piggyback off that success.

    Marketers are already questioning retargeting (even with the added dynamic creative frills), if Criteo really want to make some smart moves, they should look at ‘attribution’ and what their business can actually offer beyond last click (and not to be as biased as their recent study).

    Smart guys, smart timing, but smart future? Time will tell.

  • Really?

    Criteo may be squeezed out of agency plans, but marketers will just go direct to Criteo as they realize agencies don’t have any real talent at retargeting beyond the most basic approach.  And I don’t know what market you play in, but retargeting is not only not being questioned, it’s being treated as a must-have part of the plan.  But then again I assume you work for an agency, so your sour apples post makes sense.

  • Have to agree a good post with some great insight into the future for Criteo.

    Criteo have a great product and a great position. But that position is a short term opportunity and as the post states they cannot rely solely on retargeting. They are going to have to do something else. Perhaps this ecommerce stack is a solution for them but will they want to move to new and not proven area of development?

    They knew retargeting worked before they began making it work so well for themselves. Tweaking a few positioning “knobs”, developing some proprietary tech and masking a fantastic bidder and buying strategy behind DCO is all good when they knew retargeting “just works”.

    The ecommerce stack angle doesn’t seem like the “just works” angle of retargeting. There going to need to do some work and that doesn’t mean just tagging the homepage, search results page and creating feeds and I don’t IT dept’s will be the least of their worries. They are entering someone else’s domain. That being said they did the same with retargeting.

    I’m sure they can do it but then marketers are not all the same.

    I agree marketers will go to Criteo directly, but speak to some others and they will admit they don’t want to. It’s more “ignorance is bliss” type of relationship for some. It works though and it’s a fruitful relationship. But it’s not a perfect relationship.

    I liked the point on ATD’s being a retargeting-led business fundamentally, but they know this and I wouldn’t count on them remaining like that.

    Thanks for the insight Exchangewire.


  • Guest

    FYI Criteo is misspelled in the title

  • Incredble Bulk

    What are Criteo offering beyond retargeting (which is the point of the post)? Dynamic creative? That plays a part, but is much of a muchness, the ‘performance’ success comes from the high frequency cookie bombing on relevant clients where they get duped out less.

    ‘Real talent at retargeting’ is funny, it’s not exactly rocket science.

  • Incredble Bulk

    Criteo have been going to marketers direct since they began, but that will start to begin being heavily reigned in. Have already seen it across particularly clients. Local market activity which Criteo get on to, will start to be controlled by far greater group global deals. If the marketer is unhappy, they will have to move group. Criteo in the grand scheme of media is tiny.

  • Really?

    I think you’re confused on a number of items.  

  • more positive

    “the ‘performance’ success comes from the high frequency cookie bombing on relevant clients where they get duped out less”Could you explain what you mean by this? Criteo is measured on Post Click sales (people click on an Ad, and then buy)…so I’m not sure how “cookie bombing”  is relevant?

  • I think we (industry) all know that. But I don’t think marketers do.
    Yes they are tiny. The £5k retargeting budgets they target from clients with less than 10 products, as well as being annoying to an agency shows a certain amount of dare I say it desperation?

  • Incredble Bulk

    Not many clients are using them just on a last-click basis (and the ones who are just implementing click trackers into the tracking, aren’t measuring their media correctly).

    Yes Criteo highlight their post-click performance ahead of other display partners (see recent infectious study that higher frequency = higher CTR, an easy way to get clicks). By dropping their cookies they dupe out other partners, so even if they record post-impression conversions, but they tell the client to ignore them, this is taking away the merit of other activity. Bombing other partners out of the plans.

    Remember once a cookie is on a machine it can be attributed for more than one sale, particularly as retail users tend to be female 25+ and not the type to regularly clear cookies.

    I don’t see how a 40+ frequency strategy is even linked to a succesful marketing strategy. It’s just capitalising on the inherent flaws of online measurement … which is why I suggested they should get into the measurement game.

    What if you were walking down the street and someone was showing you the pair of shoes you just looked at in a shop on a poster, but didn’t buy, times at every possible opportunity up to 40 times in a day? That would just be annoying, but say you happened to go into the shop again because you saw a better ad on TV, but because they kept putting that poster infront of you they would win.

    I would love to see Criteo with frequency caps and visibility metrics in place versus other more premium offerings. This would dramatically cut the revenue they make though, and would hinder the IPO valuation.

    Hope the above is clear, this isn’t meant to be a rant. It’s just meant to highlight what their strategy is donig and how it is far from a marketing oasis.

  • Incredble Bulk

    Couldn’t agree more. I think they must see it coming, but they can show their past 2 years graphs highlighting revenues, show the growth they have had, and that will be enough to get a high valuation.

    I just don’t see the business model in the future, but I REALLY hope Criteo improve as a company and offering, and reinvest the ridiculous amount of money they have made by capitalising on an immature market into something more future proof. Hats off to them for being as successful as they have been though.

    On a side note, agencies do need to reign them in. They’ve been getting away with bullying clients into it for far too long. The ‘direct relationship’ won’t last much longer for any large client who has an agency deal. The smaller clients who bring it in-house might be their only hope otherwise.

  • Surfer676767

    Adding frequency caps to retargeting when charged on a CPM basis which occurs through various partners makes sense absolutely, and when certain partners such as trading desks implement post view to prove their worth within the channel – shouldn’t this be questioned? Also even if an advertiser is looking at attribution on a last click basis, this does not necessarily mean Criteo will benefit, when many Ecommerce clients engage in channels such as affiliate which reap benefits at being measured on last click.

  • Incredble Bulk

    The post click vs post impression argument is a good one, and agree trading desks are probably keen to mop up on post impression conversions at the moment, however, econometric modelling is becoming more prevalent at larger agency groups, and how a trading desk (or affiliate program, paid search program etc.) fits into them models is interesting. 

    This will give ATDs an edge versus 3rd party partners such as Criteo, as they’ll be first to the econometric party, and can tailor strategies accordingly.

  • more positive

    Maybe there is something that needs to be cleared up here. 
    Criteo is measured post click by its clients. So everything about Frequency, post view cookie dropping etc is sort of irrelevant to the attribution debate.

    For sure, traditional Post View display campaigns tend to lose out when Criteo is added to the mix. But that’s just because it’s fairly obvious that an ad that gets clicked on is more sucessful than an ad that wasn’t clicked on… isn’t it?

  • Incredble Bulk

    I know Criteo campaigns that have ran with both post-click tracking and post-impression tracking, irregardless of this, Frequency is still a massive issue. Setting your cap to 40 a day, and then it resets when you click is crazy. How is that anything close to good marketing practice?

    Have a read of this impartial study regarding click vs non click debate (remember the Crriteo study is heavily weighted in their favour, and the testing is highly flawed)-

  • Really?

    How is the testing heavily flawed?   How do you know what Criteo’s freq cap is?  It would make absolutely no sense to cookie bomb given their business model.  

    Seems like you make lots of accusations without any support.  Sour apples, my friend.

  • cpokane

    fixed… apologies

  • Incredble Bulk

    a) The ‘study’ was off cookie data and had an incentive to highlight Criteo as a great company, whereas the Comscore study they ripped to shreds (incorrectly) was from a research company, with panel based users and Comscore had no incentive to wither the click.

    b) You can just ask them for clarity on frequency caps.

  • be nice

    I think you’re confusing “Whither” and “Wither”

    But really, if you’ve got a problem with the study (rather than the companies), then you should explain your objection!

  • grouver

    you obviously have an axe to grind with Criteo but your arguments are mostly pathetic and, if you were to read your own writing, you would see a lot of contradictions in it. 

    As to the Comscore “study” what you call a “research company” is in fact a market research one (quite a big difference) and no offence but anyone using market research to obtain deffinitive answers on any question is either inexperienced or an idiot …

    How’s life after Criteo been btw?

  • Incredble Bulk

    Please explain which points are contradictory, as I would like to know … genuinely.

    If you don’t see the difference between an impartial bit of research (or market research) and some research which is from a company geared towards proving the value of that company then you are either incredibly naieve, or as you say, an idiot.

    I haven’t even mentioned the difference in buy and sell models that they apply, which is unbelievable. You wouldn’t see someone buy in pounds but sell in packets of sweets.

  • Incredble Bulk

    Good spot on the error (smiley face).

    I’ll write a new post on the problems with the studies in a couple of days Would honestly welcome any feedback from it 🙂

  • Really?

    Well, we’re still waiting for your post.

  • Mrs Hulk

    Interesting to see so much faith on here in the agencies’ ability to kick Criteo off plans, while in the US the conversation is very much about the agencies being cut out of the picture when it comes to retargeting and media buying.

    I wonder if the people commenting on here think the agencies will also put more pressure on brands who have direct relationships with DSPs?

  • Paul, ExchangeWire

    Are you referring to the post or the comments? We at ExchangeWire were merely commenting that if Criteo want a successful public offering, they’d probably need to offer more than a retargeting network. Either way, Criteo clearly divides opinion amongst the industry. 

  • Mrs Hulk

    Apologies, should have made that more clear. The comment was aimed at the people making comments and was a genuine question. I think the article was excellent and it was perfectly fair to ask the questions it did.

    But I’m genuinely interested to know if agencies really think they’re in a position to wield so much power over their clients in 2012, particularly when it comes to something so performance driven like retargeting where the ROI is so clearly visible?  

    And if agencies do wield this power, how come so many of the new ad tech companies have been happily working directly with clients for years?

  • Olymbid Games

    Congratulations Criteo for beating the record of # of comments on ExchangeWire.
    Number of Haters is a KPI !

  • Criteo deserves a lot of credit, not so much for technical prowess, but for flat out-selling the rest of the industry. Criteo is above all else a story of strong sales execution that dozens and dozens and dozens of online marketing startups would do well to learn from. 

    So many startups take the easy road of doing biz dev deals or relying on agencies for revenues, and the lack of traction and control you have renders whatever technology you’ve built unimportant. Moreover, most U.S. VC-funded startups are scared to go overseas for revenue until they raise the type of money that creates impossible expectations. 

    Criteo has lots of problems to contend with, chief among them:

    1. Having grown so big so fast, lots of their better salespeople have left for lack of selling opportunities;
    2. The margins on the direct publisher deals they live on are so fat that they will be paralyzed when massive, lower-cost, better performing inventory pools come along. Will Criteo tell its customers that every incremental dollar should go to inventory on which Criteo’s margins are relatively low? We’ll see.
    3. They’re based in France, a country that doesn’t make it easy for the entrepreneur. I know several hundred French people in Silicon Valley / SF, and this very bright & accomplished group all say today’s French govt and French mentality works against startup success.

    But needing to grow beyond retargeting immediately is not one of them. A good online marketer spends 20-25% as much on retargeting as he/she does on search, and search is a $30B+ business. Criteo can grow to several billion dollars in revenue before they run out of retargeting industry growth.

  • Olymbid Games

    I don’t understand point 2/ – can you please elaborate?
    It’s true Criteo has good margins, but still pay the best CPM’s to publishers… 
    Who are the massive, lower-cost, better-performing, magic(?), inventory pools, you are thinking of ?

  • IT Architect

    The problem I see with this approach is if you advertise on your own site. Let’s say that you are a weather site and have a hotel affiliate site. Criteo would advertise weather and hotel sites on their list that belong to their companies and steal your business.

  • Matt

    Now, after the IPO, what do you think about your past thoughts ?