Q2 2021 Criteo SA Earnings Call
Good morning, everyone and why.
Welcome to curtail the second quarter 2021 earnings conference call.
All participants will be in a listen only mode. So the needed.
Assistance. Please press the star key followed by zero.
After the prepared remarks, there will be and opportunity to ask questions.
And I ask the question you May press the Star and then 1 to withdraw your question you May press Star and 2.
Also of note today's event is being recorded.
At this time I'd like to turn the conference call over to Edward Lasalle SVP of market Relations and capital markets. Please go ahead.
Thank you Daniel and good morning, everyone welcome to create a second quarter 2021 earnings call and we hope you're all doing well and keeping the stage Johnny.
Joining us on the coal to day, you Megan Clarken and she has so sorry, glickman and going to share of prepared remarks after that cut parts of it.
Product officer will join us for the Q&A session.
Usual, you'll find our investor deck, and our website now as 1 of the scripts and transcript after the call.
Before we get started I'd like to remind you that our remarks today will include forward looking statements, which are like Chris judgment and analysis only as of today.
Actual results may differ materially from current expectations based on the number of factors affecting kudos business the more.
More information please refer to the risk factors discussed in our earnings release as well as the most recent form 10-K, and 10-Q filed with the SEC we.
We do not undertake any obligation to update any forward looking statements discussed today.
As required by GAAP.
We will also discuss non-GAAP measures of the performance definitions and reconciliations to the most directly comparable GAAP metrics aren't.
Included in our earnings release published today.
And finally, unless otherwise stated all growth comparisons made during the school are against the same period in the prior year.
With that let me know hand, it over to Megan.
Thanks, Ed and good morning, everyone.
Thank you for thank you all for joining US Tonight, and I hope, everyone is doing well and some sites.
And that's not the 2021 and seeing strong and your growth and momentum of pretty young.
The developments around cookies remind the industry of the criticality of first party data and.
The highlight the importance of a leader in this area.
Thank you for attending our Investor day, where we showcased value brands.
The comments media platform strategy, and our strength and the comments media.
Our teams know family and place them and continue to deliver steadily and our 3 priorities of growth execution and first party data and again this quarter.
And increasingly pleased with the momentum we are building around the company's transformation and all comments media platform.
Together with Sara Buda Scott's 4 topics today.
Well the People's decision to delay the deprecation of third party cookies and crime means for the industry and the Caribbean.
Second half of our comments media platform strategy is gearing us up for long term success.
And how are steady delivery across the growth execution and first party data is driving our business momentum and.
And for what our Q2 performance means for our growth outlook and the second half.
Starting with the crime announcements.
Those decision to delay the deprecation of third party cookies and crime through 2020..3 is welcome news for people, who rely on the vibrant and healthy and internet that mean everybody.
While this creates more time for our industry to prepare.
This decision does not in anyway change of impact or impact of strategy and product roadmap pretty out of the goal is to become the strategic partner for global brands market as the media earnings per Se.
Navigate cookie line advertising on the Internet.
We are of heads and the race to connect first party data across our ecosystem and and creating valuable non cookie marketing and media monetization alternatives from the base.
We expect to advance our lead during this extended period of time and provide that much needed safety net for businesses and of World of first party data.
Well, we hear of collective release from the market right now the clock is still ticking and underpinned market as the media owners will still wait couple of the hangover when cookies finally site.
Subscribed and the post cookie world the <unk>.
Industry needs to accelerate making first party data fully interoperable across a complex ecosystem.
The market is and brands need and open garden of audience and media opportunities to advertise across the Hudson internet, including on retailers digital properties.
All connected by first party data.
This requires ensuring the collection aggregation and interoperability.
Of consented first party data across all market is and meatier on us to make digital marketing and seamless and.
And performance as possible on the open Internet.
And to the level, the playing field with walled gardens, but Theyre Commerce media platform operating at the core of the ecosystem <unk> is in a unique position to cultivate this Hudson got and this is our strategy to be the centerpiece of commerce media for the open Internet.
Talking about comments media platform strategy.
During our Investor day, I shared with you the abuse on the massive opportunity that comments media provides.
And the new approach to advertising Commerce media uses comments data and machine learning to target consumers through the shopping journey.
Essentially putting targeting on steroids.
Thank comments media items of the Tam for us of about $100 billion by 2024, representing annual growth of 22% compared to our current market.
Executing on this huge opportunity.
And that's due not only expands our addressable market, but also to continue to gain share across all of our existing markets.
Pretty good contribution to Commerce media is to provide the platform and suite of solutions that activate the world's largest set of comments data and capabilities.
To help marketers and media owners reach and monetize audiences to drive commerce outcomes.
Whether these are lead sales our AD revenue and.
In short our marketing comments media, we're making comments media work for everyone, meaning and.
The debt PNG, and Masada get new and repeat customers.
C N N and the way the channel get new audiences and attract advertisers.
Cash flow and target get brands to spend on their own media properties and all of us as consumers, we get more relevant trustworthy enjoyable experiences with more choices across the most diverse accessible space on line the open internet.
Comments media is the future of and technology and our position here is both strong and unique and the open Internet. We have of large 900 billion dollar plus comments datasets comparable only to walled gardens.
We have superior AI capabilities and the unified platform built for first party database marketing and monetization.
Next to that we have enormous consumer reach and cross sell media network and 15 years of experience and driving powerful marketing outcomes.
With a strong first mover advantage and defence book months, we think we're poised to win and Commerce media, it's primarily a matter it's merely a matter of delivery.
Speaking of delivery, we're making steady progress on each of the priorities starting with growth.
Our growth accelerated to 18% and Q2 full points about guidance.
<unk> was well balanced across our portfolio with the re targeting growing 10%.
And nice milestone for us.
And new solutions growing 50%.
We grew double digits across all regions as we leverage and continued growth and retail and comments and drove healthy trends without enterprise and core customers.
1. Good example of a large enterprise customer we grew with is it very well known global American sportswear giant.
This client has built the far reaching direct to consumer strategy around content community and customization can feed for consumer world where brand connections are embracing.
Over the past 2 years, we've consistently expanded our business with this client across several solutions and we're now building a long term partnership with them.
Putting the transition from a retail sales to <unk>.
Correct to consume of business across the U S South America, and Asia Pac markets.
And Q2, we help them support historical earnings growth by working in tandem to develop audience type of scenarios and drive incremental return for their E Commerce channel.
But the first party media network, we enabled the customer to activate the so it's probably the audience and reach new customers and key markets, but online and in store and in line with their objectives.
We have growth.
The retail and Cleveland sale of portions of the sides by <unk> 75 per cent compared to Q1 and.
And drew their onsite conditions to buy 200 per cent compared to Q2.2020 and.
10 of our business with them grew 130% year over year, and 180% compared to Q2.2019.
We believe this customer values of <unk> strong performance.
And the diversification, we have drive away from the digital and you hopefully.
Helping marketers like this American sports with Joy and capitalize on their own and audiences through various complementary channel position is pretty low.
As a strategic enterprise partner for the largest brands and retailers worldwide.
Execution is the second priority the team continues to execute steadily and thoughtfully across the build buy and part of the layers of it.
The execution playbook.
We keep investing in talent and are thrilled with the industry heavy hitters, who have recently joined <unk> as we focus on bringing more world class talent to the organization.
We saw solid momentum across the board and Q2.
And marketing solutions, and new solutions grew 52%, including solid bookings for our recently launched contextual product.
We're excited to carry this momentum into untapped agency awareness and consideration and spend.
When shipped this year and.
And U S. S. P will lead the way, enabling agency share each comments audiences and measure outcomes using the clients first party data.
The <unk> DSP or the DSP of choice.
And retail media, we continue to strengthen our number 1 position and signed 10 net new retailers and Q2.
We also signed or transition and 15 existing retailers to our retail media platform.
This includes and include the recently announced deal signed with bits right.
Signing about fifth retailer and Japan and.
And you multiyear and exclusive agreements.
With the large high and session.
Speciality retailer and the U S and at the.
Very large membership currently big box retailer also and the U S U S on.
And the demand side, we ended at the 200 net new brands.
On the product side, we continue to make good progress with our new solutions, including contextual online video and CTV.
To expand our first party media network on the supply side with standard building the <unk> the supply side platform or SSP can provide many more advertisers working with third party DSP with privileged access day by audiences and media across our.
Large network of direct media partners.
After a successful proof of concept.
We already work with over 450 publishers to activate the third party demand throughout direct connections driving significant momentum over the past few months.
This is just the start of a pretty good of deepening integrations and to market as the Meteor and <unk> first party data assets to sell data transparency the system and interoperability issues. The both sides of the ecosystem.
And then supply with connected directly with more publishers for example, adding of top global soccer site to a new director of the partners the hit of the 2020, you I'd say Europe.
Just 1 of them and in Q2.
Eric integrations allow us to reduce the tick tax and enhanced supply path optimization and.
In addition to increasing our business on media sources that do not rely on third party cookies. This leads to around 60% about daily active users on the web now addressable true publishers, we have of direct integration with <unk>.
On the M&A front.
Quite and fire and maybe expanding out comments media platform into the exciting area of online market places.
Beyond the buyer, we have an active M&A pipeline focused on building capabilities to strengthen further strength in our first party data assets and accelerate our CMP vision.
With regards to first party data around the mid priority.
<unk> continued to advance of amounts and differentiation.
As we said.
And our Investor Day, we think the Holy Grail Grail of building a sustainable first party data solution for the industry at the said, both marketers and media owners and essence, providing a combination of the DSP and SSP and this is 1 of our comments media platform is about.
We know that a bit of first party data solution for the supply side will be propelled by our control of the demand side nature and spend as it allows us to reduce multi hop date of loss.
The value chain.
We also know that once day, the no longer is transmitted via cookies.
The first party supply will become the only way to provide the opportunity for both marketers and media owners to effectively advertise and monetize consumer audiences on the open Internet and this is exactly where we're going.
We continue the partner actively with the demand and supply sides of the market, helping create the open got and I mentioned earlier.
Investing in the in the large scale infrastructure needed to drive the collection aggregation and interrupt the ability of consented first party data across all marketers and media and is on and I Couldnt gotten.
The <unk> of its P. I just talked about provides us with an even broader access to direct supply and data as we add third party demand to our already extensive demand base.
While small of the addition of my by Oh first party data supply side customer business not relying on third party cookies further strengthen our moat around the first party data.
And we're making further progress with our open source interoperable single sign on and solution.
Last as I said earlier, we feel good about what google's delay and its upcoming changes to chrome means for us.
As we continue to strengthen our first party data of assets in short of team has delivered steadily with discipline and conviction.
And the cross sell of strategic priorities and Q2 and H 1.
Looking ahead.
We remain laser focused on the same 3 priorities first on growth accelerating momentum focusing on the comments delighting clients and bringing more to them and attracting and retaining the best and brightest talent.
Chicken on execution, maintaining a high say do ratio and everything that we do and third and first party data focusing on leapfrogging the market post cookies and using our competitive moats of consented first party data across a marketer and media network and core.
And I feel good about the momentum with created.
Round Commerce media platform and leadership team and it's fully committed the steady execution against our growth plan.
Solid balance sheet provides the means to invest with conviction and our transformation and outgrowth.
And that's we're uniquely positioned to win and comments media. The future is wide open for chretien with this I will try and ive been Sarah and I'll be back for Q&A Sara.
Thanks, Meghan and yes, we are very pleased with our business the format and the momentum on all Commerce media platform strategy.
I will discuss the drivers of our operating and financial performance in Q2 and share our outlook for Q3 and 2021.
And Q2, we outperformed across our portfolio of we targeting of new solutions for revenue and revenue ex Tac and we had of 31% adjusted EBITDA margin.
So let's dive into our performance.
The media spend all commerce media platform activated what's like the $2.4 billion in the last 12 months and accelerated towards the $620 million and Q2 growing 31% at constant currency.
As we said the our Investor day activated media spend is the underlying spends about commerce media platform activates the marketers and media outlets.
Take rate on the spend reflects the value and our customers who rely on us for to ensure best in class returns on that at the tightened daughters.
Clearly, we benefited from digital marketing tailwind in Q2, and which revenue grew 26% or 22% of constant currency to $551 million.
Our revenue ex Tac growth of 18% accelerated over the 17 points compared to Q1.
This included 8 million pallets of incremental identity, and privacy impact slightly lower than anticipated.
Our revenue ex Tac margin was 40% of revenue in line with expectations and.
And on the 2 year comparable to Q2.2019 revenue ex Tac grew 11% excluding the impact.
Our retail business was particularly strong across all our solutions growing 19% year rise of year and 17% when compared to Q2.2019.
Travel remains challenging despite budgets, increasing 360%, yeah, right as of yet and it's still down 73% versus Q2.2019.
Our marketing solutions revenue ex Tac grew 15%, including all the targeting business growing 10% because of them by strong execution in all regions and continued healthy trends and commerce and retail.
Focusing solutions grew 52% driven by audience talks to and growth of 31% and omni channel accelerating to close to 200% I still continue to reopen.
Retail media grew 49% on the revenue ex Tac basis, driven by existing accounts and the onboarding of new customers.
Prime day was the highlight for law of large retailers and brands, especially in North America, and we are excited by the ramp up of activity with Carrefour.
Oh for row of new solutions, the cross Cristiana, including retail media growth, 50%. The 21, 25% of our total revenue ex Tac.
We now have over 21000 customers with close to 40% of life clients using our new solutions.
We added over 700, net new clients and Q2.
Same client revenue ex Tac growth of 16% improved 14 points relative to Q1, including of 17 point improvement and marketing solutions.
All other regions grew double digits and Q2 on the.
And revenue ex Tac basis, the Americas true grew 23% of constant currency, increasing 15 points of growth compared to Q1, driven by traction and our strategic customers and.
In EMEA revenue ex Tac from 13% at constant currency, improving 15 point from Q1 due to higher e-commerce sales during the extended lockdowns offset by travel.
If you ex Tac and Asia Pac grew 20% in constant currency, improving 25 points compared to Q1, largely driven by 1 large market place, we starting campaigns offset a weak travel and the muted macro and Japan still kept the still impacting classifieds.
Yeah.
We continue to invest and growth while maintaining a cost base of adjusted EBITDA of $67 million was up 61% and constant currency driving of 31% margin up 9 points year over year and up 6 points compared to Q2.2019.
Our growth investments are largely funded through productivity, enabling top line leverage as we ramp up of commercialization of new solutions.
The investments in Q2, and created contextual commerce insights and we the retail media with terrific new highs and solution selling.
And go to market as well as R&D day.
And Q2, non-GAAP expenses were $153 million up 8% at constant currency.
Non-GAAP, opex increased $11 million or 9%, including 14 per cent for R&D and clearly on the 5% before the impact of a higher stock price on social charges.
On the same basis, we increased employee costs by $14 million of 15% of constant currency.
We are also upgrading our back office processes and tools.
As you can see and non non-GAAP reconciliation, we incurred just shy of $10 million of pre tax restructuring and transformation costs in Q2, almost entirely related to the downsizing of global real estate office footprint.
Anticipate pre tax restructuring and transformation expenses of.
Around $30 million and 2021 largely driven by our real estate portfolio actions and to a much lesser extent.
Employee severance.
Moving down the P&L depreciation and amortization increased 11% and ship share based compensation expense increased 63% due to our stock price over the period.
Our business performance and solid cost management, and <unk> hundred and 2% increase and income from operations and 144% increase and net income reflecting lower financial expenses.
Keith was stronger revenue performance and regional mix of projected 'twenty 'twenty..1 tax rate is now expected to be 27% with the Q2 effective tax rate of 22%.
Our weighted average diluted share count was around $65 million up 5% as a result of our increased stock price.
Diluted EPS was <unk> 23 sets of sense.
156% and adjusted diluted EPS was <unk> 63 up 133%.
Our strong cash generation and cash position continues to provide ample execution flexibility of.
Free cash flow was $13 million and Q2, and we repurchased close to 800000, Chez asked and average cost of $37.6 per share.
Since the hundreds of millions of all the buyback program commenced in the early 2021 we have repurchased $35 million worth of corio shares, including $30 million and Q2.
We closed Q2 with the strong balance sheet and $553 million and cash and marketable securities offset the my buyer acquisition we.
We have total financial debt liquidity in excess of the billion dollars, providing strong flexibility for capital allocation.
We maintained a robust capsule of allocation process with a primary goal and of investing and I'll continue to organic growth and leveraging M&A to accelerate of commerce media platform, including capabilities to further strengthen of first party data assets.
I'll now provide our guidance and business outlook for Q3, and 2021, which reflects our expectations as of today August 4.
Our guidance reflects we tell the openings sustained secular trends and online called bus and coach Kate tougher comp figure of I forget growth and H 2.
The range too, we expect limited recovery sort of travel down to the 70% from 2019 levels and incremental identity impact of $43 million largely driven by apples a T T and I O S.
The fiscal 2021 we are increasing our guidance for revenue ex Tac growth of 6% to 8% at constant currency.
We are strengthening and I'll call mass media platform with a false grabbing the installation expected to grow at the 50% in 2020.1.
We maintain all of a assumption of and incremental identity and privacy impact of about $56 million and 2021 relative to 2020 and.
And we are also increasing our adjusted EBITDA margin guidance to 32% of Rev. Ex Tac demonstrating operating leverage and all the top line strength.
We expect our EBITDA the free cash flow conversion to be about similar in 2021 to the 2020 range between 45% and 50%.
And Q3, we're guiding for revenue ex Tac between 202, and $205 million or approximately 8% to 9% growth constant currency we.
We see momentum and I'll come of media platform with continued strength and retail and new solutions, which we expect to grow around 60% we.
We expect of underlying growth can be targeting to be reduced by $17 million for incremental identity and privacy and facts.
On the book in line, we expect Q3, adjusted EBITDA between 47, and $50 million and we make higher investments and our growth areas and the highest social charges for all of our ashis.
Finally, I am excited to be and our Paris headquarters the meeting more of our amazing team.
Chris you always have been integral and delivering terrific results and have helped shape of flexible hybrid workplace. The enables innovation collaboration and teamwork, while integrating flexibility and work life balance.
In closing we continue to be pleased with the momentum of our business is enjoying powered through a broad platform offering and execution by our global teams.
The laser focused on providing the worlds, leading conduct media platform driving sustainable profitable growth and creating long term value for our customers and for our shareholders and.
With that I'll now open to the floor to your questions.
[noise], ladies and gentlemen at this time, we'll begin the question and answer session.
And I ask a question you May press Star and then 1.
Are you seeing the speaker phone and we do ask you. Please pick up the handset before pressing the keys to ensure the best sound quality.
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Once again that is the star and then 1 to ask a question.
We will pause momentarily to assemble the roster.
Our first question today comes from Doug Anmuth from Jpmorgan. Please go ahead with your question.
Thanks for taking the questions I've 2.
True.
First just wanted to ask about the privacy outlook.
It seems like all of it was $14.5 cost changes were slower to rollout and initially anticipated and obviously you heard that from the number of other companies just wanted to get a sense of how you're thinking about maintaining.
And maintaining the $55 million.
Privacy.
The impacts of the full year and maybe some of the puts and takes share and then also just hoping to get an update.
On the innovation side, just in terms of more and contextual targeting and also perhaps.
The 2.0 and is there any damage and your view that you gain some of these products just with Google subrogation and pushed out some of them. Thank you.
Well I can't Yeah, Craig Hallum, and Don I was kind of concept to you Sarah Don that's true.
Okay wonderful. Thank you so I can take the privacy and the privacy of impact so.
So yes, you're right. The we had a slower than expected privacy and the first Tulsa, mainly due to the iOS banner that would flow to rollout and and the second half of the alright, we are anticipating and.
And a higher increase.
Both of them, but mainly for I O S. H T T and in terms of the I'm sorry in terms of the the upsets we actually have seen the explicit consent is less than we anticipated and atti and west is slightly higher than anticipated largely due to the other.
That rates of being around about 65%. So that's why we went with the middle down the road I'm assumption, we want you to take the benefit of what we've seen and the path and we continue to update every single quarter of all outlooks and we feel comfortable for 2020.1 and.
And we feel comfortable about the the areas that we're focused on to ensure that we mitigate that risk as well and I can hand over to tell them, who can take you through some of those developments.
Yes sure.
Doug just to address your question about timing and impact of the extension from Google as it relates to contextual specifically.
Really we had a fast start with our contextual product and.
This gives us more time to tune that product and to get it further and market than we already have it.
It remains of top of mind share.
<unk> as an alternative to date of deprecation.
The board or things that are the debt that our reliance on third party cookies or mobile AD Ids. So we feel very very good about.
How the market is sitting in terms of wanting our new products reflected by our growth our new solutions growth and things are going very well just to dig into contextual of tiny bit since our last call. We opened 5 new markets and bringing us to 9 total.
And we have and alpha going in Japan, which is actually very promising in terms of the results. We have about 70 advertisers using that solution and the performance gains are quite good for mid funnel metrics for cost per qualified visit and and and most importantly income.
Mentality of the qualified traffic that we're able to drive, meaning and duplicated new audience to our customers' websites and exceeding 80%. So this is the as you know of Cookie free salute.
<unk> solution.
And you know.
And the dynamics in the market and both the performance of the product are quite strong. The extra time, we will not just used to continue getting into market and tuning, but we will also be bringing some of our other core capabilities to the contextual product we've started to do so with advertising.
The personalization of product recommendations and also on site product recommendations that match. So that overall performance continues to grow while we have that extra window to work all good stuff I would say we're firing on all cylinders.
Okay.
Great. Thank you both I appreciate it.
Okay.
And our next question comes from Sarah Simon from <unk>. Please go ahead with your question.
Yes, Hi, I had 2 questions I'm, sorry, you thoughts of travel still being down significantly, but I think at least and the U K. We have just started to hear about what travelers going on and Oh, I know very much but if you're in Europe people have been really starting to move around quite a bit. So as you look through each of Q3.
And how does that trajectory in terms of travel the couple of cause I think it's most concentrated and in European segment.
And then the second question was on retail media.
And do see publishers acquisition of Citrus and change anything for you guys. It sort of as she is a ringing endorsement of of retail media.
But I think publicist was working with you guys anyway. So I'm just interested in and you all sorts of not deal and how that might change anything for you. Thanks.
Yeah, Hi, Sarah and I imagine you're supposed to began to see my parents and the UK, which is not happening yet so I hear you on the U K travel and.
And so our assumption for all of that travel continues to be sluggish and what we all see and as people are starting to fly, but the targeting business the travel which is where we were stronger.
And that's not coming back not coming back quickly I should say so searches is aggressive and some of the larger players that have that.
The large footprint and travel.
That definitely getting a share of that market. We do anticipate is coming back every single day every single week, we're getting more budget, but it is just coming from a very low base. So all of anticipation is that where we don't see net shaping dragon rise yet so all of our anticipation is that we will continue to be down probably.
70% versus that say, we expect it to be 65 per cent exiting this year and we think it's probably going to be cut 70%.
And then and.
And just think about it.
Or should we should basically think about it.
And stuff like that.
And the normal.
All of the funnel and search activity.
Yeah, correct, yes that is that I mean, I would say bookings are strong Gulf we've seen that.
And such is definitely stronger we're seeing that and we're seeing some of the competitors kind of ensuring you know I'm traveling to a certain extent for all the players that they work with them, we expect to be targeting to be kind of after that but right now people know where they go and they know where they want to go and and there's less of it.
And that's activity and we're starting to see it pick up and and again, you know healthy healthy budgets coming every day, but nowhere close to I'd say the span of yeah, we had in 2019.
And just to emphasize we are really focused on right now of retail and CPG, that's being the large verticals that we see massive growth and a lot of opportunity.
But we are working incredibly closely with all travel and travel teams, especially on the first party data as they look to houses they kind of move for the and this new world.
And I think the second question on the citrus might be making.
No I cant and I can take that 1 hum.
Hi, Sara and market to you hate it.
So yes, you're exactly right in terms of its it is of CLIA validation to us all of the retail meatier opportunity to C.
You see that company and we we knew the citrus was and play.
And we think that.
Debt publicist picking up the citrus.
And as you know there's a positive is a positive for us for a couple of reasons.
1 is the citrus is has been the small and.
And quite aggressive player.
And and having them go under the wing of publicists will sort of take them out of that area.
And and that will become part of a much much bigger company and it might it may slow them down and I'll have them focus and a different direction, we don't know yet, but that's generally what I've seen and the Pos.
The 1 that really stands out is that.
Is because of our independence, and we're pretty confident that with.
Citrus going on the publicists at Omnicom the W. P T. The dentsu.
The rush to channel budgets to citrus and on behalf of their large brand customers.
So now and by Publicists low.
He also has an independent player and we're already getting calls from brands that and looking to a strong independent player.
Which is of a great sign of what we also are around the retail media and won't be offered to the market.
There is a you know the retail media time is the 32 billion dollar of Tam So theres room for several players but.
We see ourselves as the biggest player outside of Amazon and and.
And so what you said before you know how aspiration is to be the Amazon advertising of the open Internet and that's where we're laser focused.
We have 50% of of the top retailers and the U S and Europe.
And the acquisition of the buyer just goes to strengthen the portfolio that we have the retail media.
So so yeah. It is the validation of <unk> and Oh This is oh.
The area and and independence is incredibly important as we service our clients.
Perfect. Thanks, a lot.
Okay.
Our next question comes from Matt Thornton from Suntrust. Please go ahead with your question.
Hey, good morning, everybody, maybe a couple on retail and me as well first obviously you guys outperformed the guidance and second quarter, but when we look at the the gross spend versus the revenue ex Tac and growth can you just kind of remind us and walk us through the puts and takes in terms of how the.
I guess I'll call the take rate is ebbing and flowing there in that business and how it will continue the ebb and flow of in that business.
And then just secondly, coming back to the consolidation when you think about.
And that market.
When you look like a traditional SSP as a as an example, the the logic has been.
The mergers of 2 as equate.
The lesson too and not greater than 2 so that they really haven't worked I'm curious in this space. If you look at some of them like a cardio and a and a promote IQ or something like that if the if the logic goes the other way and there is accretion to be to be had in the past. The direction. This this category will continue to go and.
Thought there would be great. Thanks.
Well I'm I'm happy to so how a great great to hear from you and I'm happy to address the first of all of that question and and.
And then and so I'm sure there'll be other people will pay channel and the second ball.
And so we said this all Florida from Q1, as we moved to a retail media platform. Yeah. She moved the gross accounting for revenue to net accounting for revenue. So in other words of revenue and all of Rex T. All of the same.
And so there's really no impact other than accounting and the we show that within the hour I'll tables.
What we look at gross media spend which is effectively.
The amount and trig, we activate for all customers and that's why we started to include those metrics, but our revenue was up 10% Rex Tee up 49% and yeah. We're very happy with those numbers you know and we see continued traction so.
And I can hand over to towards the for the second part.
Yeah, Matt I think if I understood your question correctly.
It's the kind of is there a collision between.
Retail media, which has largely been and the onsite business.
So far with with the more traditional <unk>.
Market place views of an S. S P and and we would take the position debt and that.
And that is the case that the debt and the reason for that is because.
Anyone who is trying to monetize their onsite audiences would would also like to monetize those audiences off site and that means that you have to be able to to blend both on and off site audiences is 1 of them.
Which means that more traditional supply aggregation, where those onsite audiences can be reached.
And to actually expand total revenue available revenue is a is a sensible thesis.
Our next question.
Comes from Andrew Byrne from JMP Securities.
Hi, guys. Good morning, and thanks for taking the question.
I think you mentioned the 60% of of audiences is is the is now of direct integration with the publisher.
Can you just talk about it and you kind of go to market strategy, how how high can that go how of.
Are you guys building that just break that down and then new solutions continues to grow nicely can you just talk about the drivers there and and you know outside of retail media like 1 of the products that are that you're seeing that are really resonating. Thanks. So much.
I'm just wondering.
So and I said.
Todd wants to jump in on that book.
Yeah.
I'm sorry, Tim can you repeat the first question I just cut out on my connection here.
Yeah. So so I think the stat that you guys put out there is the 60% of the audience is now 3 of direct integration with publishers.
You know I think that was 50% the last time, you guys kind of disclosed that.
And so the question and just kind of how are you guys driving that and then on a go forward basis, how high can that debt right.
The word at what point clearly with the deprecation of cookies and the importance of first party data.
That's it that's the strategic lever for you guys. So how are you guys doing that and and kind of and.
And it kind of on the the kind of the go forward progress there.
Yeah I mean.
And.
And we're heavily.
Leaned into direct connections and the and you're seeing the results of of that commitment for pretty obvious reasons going back to what we were talking about at Investor day, and the reduction of kind of overall take rates and what we called the tech tax.
So that you know our marketers achieve stronger marketing outcomes is really dependent on removing extraneous take rate of what could be looked at as extraneous take rate.
Between.
Between our marketers and our media owners. So the the direct connecting that we're doing is is aimed squarely.
And at reducing debt expense by going direct obviously, you know, we're saving them our marketers from the additional assets.
That's S P take rate.
And in doing so we're able to achieve better outcomes for them. So you can look for us to you know of.
Obviously continue that investment with Firth <unk>.
And as we get into the first party media World and obviously, we have gotten a bit of of repreve for from getting that perfect. But we're already racing ahead with those connections to enable them. So that media owners are more able to activate their first party data from their domain across our network.
So of direct connection is the only way to achieve that Andrew I'm not through and S. S. P. As we have gotten a good portion of our user base supply in the past and hence.
Hence our investment, but hopefully that helps.
Yeah, and I can I can take the the second Paul on the on the new solution. So yes, there's a few areas that the.
And we've been focused on and I'll say, the performing incredibly well and order.
And so is that the 31 per cent and that's largely due to our customers, especially as they look to first party data and they look the hell. They can move up the funnel themselves. How can we help them that so we're seeing terrific buy and on all solutions and then only which are really focusing.
On the retail stores and going and getting back into the stores, especially and preparation for back to school and Q3, that's up about 200%. So that's largely due to the stores reopening in terms of retail media of scent.
And there's some pretty terrific I think stats on this but I'll say retail revenue increased 65% year over year and so that's really where we were not only going country by country, but also the brand by brand and we continue to extend that into all of all key customers and then of course well.
Ramping up of new customers all the time and we've just won some awesome deals the 1 with the announced this morning with the bestbuy renewal and the other deals and just seeing a lot of traction there. So it's very robust.
Contextually is relatively new so again, a small number but the tux at a.
Terrific kept by and as well so really across the board with all the new solutions of all ramping up and the that's sort of thing in the way of having both of them conversations with our customers, especially around the first party data that's the way to think through how we can help them to attack to the more media spend as well.
Thank you.
Yeah.
Our next question comes from Tim Nolan from Macquarie. Please go ahead with your questions.
Thanks, I'd like to come back to the.
Impact of idea of Fei and potentially cookies and the work that youre doing there just to be clear it looks like you're calling out.
Incrementally worse impact in Q3, and then again from that and Q4.
From identity and privacy issues just to be clear, that's mostly idea of Fei and why is that getting worse, even though most of the new platform of installs I think of taking place and you seem to know what the what the opt out rates are and then also given the delay and the cookie elimination.
I guess is there any impact from cookies currently in 2020, 1 numbers and and what can we think about in terms of what it will mean and 22, if anything meaning could you re targeting business again be flat to up again next year, if there's no cookie impact next year. Thanks.
Okay.
Yeah, Hello, I can I can take the first part of that and the Michelle can Omega and Ken kind of pitch them on all the areas, but in terms of our overall privacy impact kind of the beginning of the event and we anticipated about $60 million impact we were at about $56 million now and we expect the impact to buy it.
First to be around half of that $56 million.
During Q2, where we had a very that was.
The implementation with later than anticipated so that kind of really the only impacted the end of Q2. So we're seeing today I would say we know what those opt in right. So, but that's largely quite new information. So we've adjusted our assumptions for iOS and the idea of a slightly less.
And we stand and the ballpark of where we had anticipated at the end of Q1, and our Investor day, and there's a small I would say kind of offset to that which explicit consent of slightly better. So well with we did anticipate this would be a it's a very the simply accelerated ramp up of the Iowa and.
And so we are anticipating the impact in Q3 and Q4 to ramp up from what was the and you know.
The small impact for Q2, largely because of the the late implementation.
So that's what we're saying, but all within I would say the numbers that we would expect we'd expected and and just price and then I can hand over to Todd and kind of what we what we're doing and what we're seeing.
The only 1 thing to add a distinct Sarah to that Tim which is Sarah accentuated the the slow rollout there there's still a lot of apps that debt haven't.
I Havent implemented and we're seeing those numbers come through against our conservative model, but but we you know you can think of us as being a little bit more insulated.
From the overall impact of the ATT opt outs and large single apps.
And b because of our network reach and.
So what we want to see come through as you know how much audience.
We have debt has consented on both publisher and advertiser side and of course, we have a huge amount of breath to match too.
So the the backdrop of our Conservative model is just seeing through the data and how much of audience with that we're able to match across.
Across mobile apps.
As well as well of course, you know because but because we look at both of them.
But just app specifically to your question and we we have a better opportunity to get more matches and a higher degree of targeted audience because we're looking at so many apps and.
And so many marketers at the same time and we want to be conservative about how we model those numbers out and that's what you're seeing and the guidance.
And I guess.
Yeah dumping just quickly on re targeting and <unk>.
And crime and so we we had we are not giving guidance right now I would say for 2020.2 but yes, you know we all see the I'll be targeting businesses is buoyant and we expect that to continue into 2020.2 so.
And that's yes, and we feel we feel good about where we always feel good about the traction we see and and we see that he's going to continue.
Thank you.
Our next question comes from Dan Salmon from BMO Capital markets. Please go ahead with your question.
Hi, Thanks, Good morning first for Megan.
Affiliate marketing is often seen as a pretty old school ecommerce advertising tactic, but it also seems to be getting a little bit of a renewal with players like Instagram and shopify and that area.
So how does that fit into your view of the competitive landscape for your broader commerce media positioning and.
And then for Todd just as the dust settles after the Chromed away can you just speak high level about what Youre hearing from your technical partners from the industry groups, you're involved with maybe mixing a little of what Youre hearing from Google itself, but the wrap it all up maybe like what are the 2 to 3 most important high level of themes you are hearing about why the day.
And they happened and what it means for Googles passport. Thank you both.
Yeah, I'm going to.
So its parts of ex pit around affiliate marketing, so I'm not going to pretend and I'm more than him. So I'm gonna get him to answer the right.
[laughter] sort of jumped.
Jumped jumped in there and you're jumping at the cool thanks, Meghan and good to hear from you and I'm really glad you brought up that point. We you know there's a lot of things that we want to do within our media owner of networks that debt, we haven't done and the past.
As our business was focused on re targeting and you know the there's a lot of video opportunities without stream for instance, before you even get to affiliate and right now on the affiliate point.
We're actually testing shop of both formats in video and and we will do so and and display as well and you'll hear from us on.
And what those tests look like later on and the year, but the premise of that of course is that we have the incredible makings of and affiliate network of our own that is untapped. So we don't talk about it because it's very much the aspirational view at this point book, but we are testing them and the process of of.
Looking at partners and beginning testing on those shop the ball format. So I think you're suggesting are so important to 2 of them.
2 to Instagram and Shopify.
There are some additional really interesting developments will talk about you know over the next quarter or 2 on that so stay tuned.
And with with the with affiliate.
Okay.
And just all the way you.
I asked about the about the industry groups and industry groups I mean.
A lot of people are are are cheering them a lot of people are happy to have more.
More time to be thoughtful about solution design, and what what really the way that it and it teases out and you know just practically is that we can do more with the entire community and to show that the.
And the approaches that Google are taking of my my might work and be leveraged through cardio better and because of our position and how we manage the first party data on behalf of of our marketers and media owners. We have a lot more time to 2 worked out. So the you know the flock origin and trials what will hopefully do with floods.
And going forward or are things, we've talked about on this call and the other thing that that we haven't is that we actually have been asking the community to test data.
Data of the hours in relation to the those capabilities.
It's pretty cool. So you know you'll you'll look for some press on that and the near future here, we call. It the add Katy the.
Machine learning competition, so youre going to see a lot more of.
The feeding the ecosystem.
With our own data to show how it can be used better and to improve our flock or of fledge and the and that just wouldn't be as possible ban. If we just didn't have more time and.
Now we do so it's it's a really really good position to be and well.
And we targeting is just rocking on and what we're able to develop these new things without having a.
Of landing zone date, that's maybe tighter than anyone really it would benefit from.
That's the round yeah, yeah, I want to reiterate that I go back to what I said and I was playing around you know that the.
Crime delay it doesn't change of strategy whatsoever.
And it gives us more time to bring the market on board and make sure that they are ready for a world of first party data and the Commerce media platform is the platform on which we can provide that and the capabilities that that offers across the open internet using our DSP and SSP solutions, that's what we're laser focused on them.
It's a it's a good thing for the market because it gives them more time and would've been a incredibly uncomfortable for all of us at sort of ahead of happened before time, which.
Which would it be and middle of next year, but it it just gets to the market and more time and it gives us the market more ability to use of first party solution that provides them are equal or better ability to get a return on their marketing investments are of course, using our ecosystem and that is the.
The other comments media platform that connects the sell side to the buy side and takes out the pick techs and noise and between sorry.
And then just it doesn't change what we're doing we're laser focused on it and we go as fast as we possibly can and what it does do it gives us and the market more time to come on board and get ready for such a change and the environment.
Great. Thank you Greg closing Mega.
Thanks, Sloan and thank Sara and thanks, everyone for joining the snow concludes the coat today.
Our teams are is available for any additional requests as usual. So we wish you all of the good day and and thanks, all for joining thanks Bye bye.
Ladies and gentlemen that does conclude today's conference. We do thank you for attending you may now disconnect your lines.