Q3 2021 Criteo SA Earnings Call
Yeah.
Okay.
Good morning, and welcome to third quarter 2021 earnings Conference call.
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I would now like to turn the conference over to Eduardo saw senior Vice President Martin Relations and capital markets. Please go ahead.
Thanks, Rocco and good morning, everyone welcome to <unk> third quarter 2021 earnings call, we hope you're all doing well today.
Joining us from our global headquarters in Paris today are CEO Megan Clarken.
CFO, sorry, Glickman Tut, Boston, the Chief product Officer also in Paris.
As well for Q&A.
As usual, you'll find our investor deck on our website now as well as the script 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 reflect <unk> judgment assumptions and analysis only as of today.
Actual results may differ materially from current expectations based on a number of factors affecting cruise business. We do not undertake any obligation to update any forward looking statements discussed today, except as required by law.
More information please refer to the risk factors discussed in our earnings release as well as most recent forms 10-K, and 10-Q filed with the U S.
Well also discuss non-GAAP measures of our performance definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings release published earlier today finally, unless otherwise stated all growth comparisons made during this call are against the same period in the prior year with that let me know handing over to Megan.
Thanks, Ted and good morning, everyone and thank you all for joining us today I'm, particularly pleased to announce that Q3 results. So close to my second anniversary with <unk>.
We delivered yet another strong quarter of double digit growth and high profitability above the high end of that guidance.
Sustained momentum in our business and company transformation reflects our steady progress and delivering on the strategy that we've laid out and on each of our strategic pillars.
We continue to develop our commerce media platform and strengthen our first party data capabilities positioning us to drive sustainable growth and long term shareholder value.
On our call today I'll discuss our commerce media platform progress provide additional color on our expected business resilience with regards to Apple's app tracking transparency our ATT.
And talk about our key highlights in the third quarter as we continued to deliver against our key priorities.
<unk> will then cover our third quarter performance in more detail and discuss our financial outlook let.
Let me start with an overview that most media vision and progress.
As you know.
<unk> focuses on comments media the future of digital advertising that Leverages comments data and machine learning to target consumers throughout their shopping journey.
We differentiate ourselves by delivering the best performing comments audiences at scale to the market as a media owners that we serve on the open internet.
Our comments media platform offers a holistic suite of solutions that activate the world's largest set of comments data.
For first party based marketing and monetization similar to the proven playbook exemplified by the walled gardens were able to identify reach and monetize highly relevant consumers to drive $40 billion of comments outcomes for our 22000 marketers.
Number that continues to grow.
And thousands of media owners, we have direct access to including product consideration in sales and marketing just like new balance and Macy's.
And rich AD revenue from media owners like Yahoo, Japan, or <unk> in retail media.
Driving the best comments audiences requires rare assets and capabilities in data media and AI. It's a combination of our unique data meteor access II expertise and measurement capabilities that enables us to transform large crowds of generic consumers into highly relevant.
High performing commerce audiences.
With a global consumer reach of 650 million daily active users.
Huge scale and commerce data with first party data from 22000 customers and unique access to over $900 billion of the E Commerce sales.
Differentiated retail media offering working with various.
Top 25 retailers in the U S and in Europe, and 15 years of expertise in Commerce focused II, we're already global powerhouse and comments media with a strong first mover advantage.
Our total addressable market is expected to reach $100 billion by 2024 growing 22% per annum compared to our serviceable market last year, we're laser focused on executing on this huge opportunity while continuing to gain share across all our existing markets.
While our team has done great work already we still have a lot to do we continue to focus on growing our customer base broadening broadening our direct supply and first party media network and strengthening our first party data set.
I now want to take a moment to provide additional color on our expected business resilience with regards to Apple was ATT given the recent focus on it.
It is important to note that our business is much more orientated towards web based advertising that apps.
And while we do target and that this is a small part of our business.
As a result, we believe we're much more insulated from the overall impact of apples ATT that'll launch my golf first epic players.
At retail media onsite business does not rely on any third party identifier and is therefore not impacted by Apple's ATT.
Importantly, as well our total exposure to Apple users and our marketing solutions business across both web and App is limited to less than 10% of revenue ex Tac as of October 2021, including about 4% on App.
As part of our commitment to transparency with our shareholders.
<unk> impact from ITT, and Iowa sustained changes is already reflected in the $55 million privacy and identity impact for 2021 that we had previously communicated to the market and then <unk> will comment on shortly.
While apples change changes make it harder for market is to gain access to the data enables tracking and a fixed media owners ability to best understand and say the consumer this serves as an opportunity for us as we said the market to offer alternatives.
We've been working on alternative solutions to iOS and crime for over two years and are confident in our position today.
We used to say this another way we started out transformation journey years ago and believe we are ahead in the race to drive superior performance and environments deprived of third party identifiers.
Our comments media platform built on our first party media network allows us to collect alternative addressable identifiers to build privacy by design audiences and drive commerce outcomes on inventory consumed by Apple users.
In addition, with broad reach of 650 million daily active users globally.
Gauge consumer is not just on their apple devices, and a moat and the multiple environments in which they interact.
In the U S alone our largest single market.
And the biggest advertising market in the world, we reached over 50% of the U S population on par with Facebooks App.
This means that we have plenty of opportunities to reach and engage consumers along their shopping journey.
Shifting to our third quarter highlights.
We continue to deliver against our three strategic priorities of growth execution first party data.
<unk> growth, we achieved double digit growth for the second consecutive consecutive quarter driving revenue ex Tac up 14% at constant currency.
We delivered the highest growth in our new solutions and four quarters at plus 66%.
And we are pleased that our new solutions now represent 28% about total business up three points compared to Q2.
This fast growth evolution is accelerating our revenue diversification a key pillar of our transformation.
Second execution.
Our team continues to execute steadily with grit focus and conviction that cross sell entire solutions portfolio to marketers and media owners.
As I've said every quarter, we committed to maintaining a high say do ratio and everything that we do.
Marketing solutions performed strongly largely driven by solid growth with retail strategic customers like Macy's and born.
We also experienced strength in our core client spend and a solid re targeting business re targeting remained healthy growing 1%. Despite the expected impact from identity restrictions.
Excluding incremental identity headwinds re targeting actually grew 10%.
Within marketing solutions growth in our new solutions accelerated to 68% up 16 points since Q2.
With growing contribution from our agency partners.
Audience first targeting is a growing area of focus for us enjoying steady momentum with both our retailer and brand customers and the agencies they partner with.
Growth in our audience first targeting solutions accelerated 18 points compared to Q2 to close to 50% as market is increasingly spend across the entire marketing funnel with us.
Only channel.
That helps marketers optimize their marketing investments across online and offline now represents 20% demand new solutions business within our marketing solutions portfolio growing about 140%.
We see increased traction with customers willing to target consumers everywhere and bill will be online and offline worlds as e-commerce remains strong and economies increasingly reopen.
Lastly, we're launching very exciting tests of a new shopper both video ads offering that Todd mentioned at our Investor day.
This opportunity is very compelling for our marketing clients and for us and we're encouraged by the early results.
And retail media, we see accelerating momentum as well.
We delivered 65% growth in revenue ex Tac accelerating by 16 points versus Q2 year to date retail media is growing at an impressive 70% accelerating both on a one year and two year basis.
We see continued momentum in our onsite business largely driven by the growing network effects of our retail media platform, which provides a unified retail media offering from brands and retailers on a single platform.
Close to 80% of our retail media business in the U S already goes through RMT.
We had stronger growth without U S retail customers, adding 10, new retailers globally and launched 10 retailers on the digital media platform, including Walmart Canada.
<unk> and Douglas.
We're also thrilled to have our retail media platform powered our recently announced retail media programs of large U S players, including Ulta beauty and Lowe's.
In addition, our marketplace business delivered.
Solid performance during the quarter accelerated by our successful acquisition of my buyer performing in line with our expectations.
And we continue to make good progress Offsite business, which allows brands to extend their commerce audiences beyond retail properties to the open internet with a strong retail pipeline expected to drive accelerated acceleration in Q4.
Our third strategic priority is first party data as we've said before connecting first party supply will become the only way for both marketers and media owners to effectively advertise and monetize commerce audiences on the open internet once the industry finally moves beyond third.
Party cookies.
We continue to make progress in securing first party data via retail media.
Our commerce media platform strategy is anchored in our retail media onsite business, which is entirely built on first party data and does not rely on any type of third party identifies where the cookies are <unk> further strengthening our moat and I'll lead around first party data.
We also continue to make progress in securing first party data by our first party media network working directly with media owners like ABC and the La times to power first party data media by buying on the open Internet.
Today, approximately 60% of our daily active users on the web our addressable through Meteor owners, we have direct access to.
Building upon our legacy direct bidder.
We're actively increasing our direct integrations with publishers.
Including as part of our evolution to a full supply side platform.
Our key focus remains the quality of our direct integrations with meteor owners, ensuring key deep relationships with our most strategic players. That's why in every market. We typically ensure a direct path to the top 100 publishers, giving market is advantaged.
And transparent buying on the properties that matter most to their business success.
And without comments media platform, we also deepen our relationships with direct publishers by expanding their inventory reach to key consumers through new sources of market demand and greater publisher monetization and address the ability.
Last quarter, we discussed our initiatives to bring third party demand through the <unk> SSP and broaden our buying scale without direct media partners.
With over 550 global publishes already signed up.
Our SSP allows us to leverage our commerce data on our largest scale, bringing our direct publishes larger buys of supply executed through <unk> to other third party DSP.
And secure long term direct access to quality media.
In short.
With retail Media's unique first party data assets and a larger media purchasing scale, including through more direct media integrations, we're uniquely positioned alongside the walled gardens to drive the best Commerce audiences to the open Internet based on first party data and.
In closing, we're very pleased with the sustained momentum in our business and company transformation.
We're making steady progress in delivering with focus on each of our key priorities of growth execution and first party data.
We continue to expand our content <unk> media platform to drive the best Commerce audiences on the open Internet.
Further positioning us for sustainable growth and long term shareholder value.
With that alternative to Sarah to discuss our financial performance and guidance Sara.
Thank you Megan and good morning, everyone I'm delighted to be presenting such a strong quarterly performance today I will walk you through our financial highlights for Q3 as well as our guidance for the rest of 2021.
Starting with our financial highlights revenue was $509 million growing 8% with 72% of year over year growth driven by existing customers and 28% driven by new clients.
Our revenue growth is primarily driven by favorable pricing.
Total media spend activated by our Commerce media platform with over two and a half billion dollars over the last 12 months and close to $615 million in Q3 growing 23% at constant currency.
Revenue ex Tac grew 14% to $211 million.
Yeah.
As expected and previously communicated in our guidance. This included $17 million of incremental identity and privacy impact compared to last year on a two year basis revenue ex Tac grew an estimated 9% excluding incremental privacy impact showing solid momentum.
Revenue ex Tac margin represented 41.5% of revenue up 200 basis points year over year, largely driven by retail media and the acceleration of our client transition to the retail media platform.
Notably we grew our customer base to close to 22000 marketers in brands, adding 1200, net new clients year over year, including more than 400 clients in Q3.
Large customer wins include landmark names, such as Lowe's wafer and new balance.
We grew our same client revenue ex Tac, 9%, demonstrating the depth and breadth of our platform at 40% of live customers now use our new solutions.
Retention remained close to 90%.
Yeah.
Looking at first of course, our retail business up 16% on a two year basis at constant currency across our solutions reflects sustained strong demand as consumers continue to shop online, while enjoying heading back to physical stores.
Retailers love small adopt more of a performance focused products and are driving the solid momentum in our business.
Q3 spend with travel clients is slightly increasing and we are finding new business, particularly in the U S.
Okay.
Our performance remains solid solid and balanced across all regions. We continue to see momentum in the Americas with revenue ex Tac up 18% at constant currency driven by acceleration in our retail media business.
Large brands and top U S retailers and strong performance with strategic and core retail customers and new business and travel.
We are proud to serve our roster of top retail and e-commerce customers and continue to strengthen our leading position in the fast growing retail media market in the U S.
Asia Pac also experienced solid momentum driving revenue ex Tac, 15% at constant currency driven by higher classifieds, the strong recovery of our retail business in Japan and sustained performance with enterprise clients in Southeast Asia and Korea.
EMEA performance with revenue ex Tac growing 8% at constant currency reflects mixed performance by country and verticals, we continue to see strong traction from retail customers.
Italy, and Germany, and retail media, especially in France, partially offset by lower spend from one large Europe wide travel customer.
Now a quick note on retail media revenue dynamics as we progressive leap transition all our retail media clients to our retail media platform and increasing share of our retail media revenue or about 62%. In Q3 is now accounted for on a net basis compare.
To less than 5% in Q3 2020.
As a result of this transition retail retail media revenue is lower in Q3 2021 compared to the year.
This is a transition re impact linked to our ongoing client migrations to the platform.
Year over year at the media spend activated in Q3 by retail media grew 74% from $19 million to close to $160 million accelerating from Q2 and retail media is underlying performance reflected by revenue ex Tac remains extremely strong growing.
65%.
Once this transition is complete which we expect by the second part of 2022 revenue and revenue ex Tac for our retail media onsite business will be recognized on a consistent basis. As a result, this will drive a higher revenue ex Tac margin for retail media compared to prior periods.
Moving down our P&L, we continue to deliver strong profitability, while investing in growth our adjusted EBITDA of $68 million was up 37% at constant currency resulted resulting in an adjusted EBITDA margin of 32% up six points year over year.
Here and over three points on a two year basis.
We closed the quarter with a global headcount of 2000, and 660 <unk> the highest level since Q2, 2020, reflecting our strong employer value proposition and a tight talent market.
Our growth investments are largely funded through productivity, enabling topline leverage as we ramp up commercialization of new solutions.
Key investment areas remain new highest installation selling go to market R&D and product in particular for retail media commerce insights and contextual advertising as well as upgraded tools and processes to support our new solutions growth.
Non-GAAP expenses were $143 million in Q3 up 5% at constant currency, and non-GAAP, opex increased $7 million or percent, including 13% Ferrante and grew 5% before the impact of a higher stock price on social charges.
That same basis, we increased employee costs by $3 million or 3% at constant currency.
We incurred $2 million gain a pre tax restructuring and transformation costs in Q3, almost entirely related to lease accounting to a lease accounting impact from <unk> and amendments executed as part of our global office right sizing as.
As a result, we now anticipate pre tax restructuring and transformation expenses of about $21 million in 2021.
Okay.
Preciation and amortization increased 3% and the appreciation in our stock price year on year drove share based compensation expense up 95%.
Solid business performance and disciplined cost management.
Of course retooling of our income from operations with close to 360% growth in net income.
Our Q3 effective tax rate was 24%.
Weighted average diluted share count grew 5% to about $64 million as a result of our growing stock price diluted EPS was <unk> 37 per cent up 310% and adjusted diluted EPS was <unk>, 64% up 60%.
We canceled just short of 900000 shares in Q3 and plan to cancel over 630000 additional shares before the end of 2021, putting our total share count at about $65 $7 million by $65 7 million by year end, including $5 2 million Treasury shares.
Our strong cash generation and cash position continue to provide ample financial flexibility to execute on our commerce media Fab, Joe Reform and Commerce media strategy.
Free cash flow was $35 million in Q3, or 51% of adjusted EBITDA, reaching $112 million for the first nine months.
We closed the quarter with a strong balance sheet and $554 million in cash and marketable securities.
With financial liquidity in excess of $1 billion, we maintain a robust capital allocation process with a primary goal of investing in continued organic growth and leveraging M&A to accelerate our media platform.
We repurchased 1 million shares in Q3 at an average cost of $38 $6 per share since starting our 100 million share buyback program in March we have repurchased $73 million worth of critical shares at the end of September including $38 million in Q3.
In October we extended our current share buyback program from $100 million to $175 million.
Okay.
I'll now provide our guidance and business outlook for the remainder of 2021, which reflects our expectations as of today November 3rd.
As we head into Q4, we continue to see strong business momentum as evidenced by our revenue ex Tac growing over 15% in October.
While shops, we opened e-commerce remains strong trending significantly above pre COVID-19 levels as consumers increasingly value online shopping convenience and E. Commerce continues to benefit from some store closures and its shops continue to reopen retailers accelerate their.
<unk> and multichannel fulfillment capabilities, making omnichannel increasingly prevalent in the marketing mix.
Overall, we continue to be well positioned to capitalize on these long lasting positive trends.
We're experiencing an earlier start to the holiday season, this year carrying momentum into our fourth quarter to date.
<unk> current inflationary pressures have amplified many market just needs to advertise to more expensive products.
We anticipate the holiday season to span over an extended cyber 30 cuz similar to last year.
For our U S and European E Commerce customers and we expect the tail off in December to be earlier this year.
While global supply chain challenges have had pockets of impact in parts of the consumer electronics vertical in auto which represents some parts of our business, we have not seen any material impact on our business to date.
Our robust growth is supported by a diversified customer base of 22000 marketers.
In the current environment remain focused on reaching the right audience at the right time.
Our guidance, therefore anticipate a strong holiday season, and continued strength in retail with growth in travel and consumer electronics.
As you know we also have tough comps from last year in Q4.
Lastly, our 55 million sort of assumption for incremental identity and privacy impacts in 2021, including ATT and iOS 15 remain unchanged and include a 25 million dollar impact in Q4, specifically, including approximately $15 million for ATT and about $5 million.
For the new iOS 15 changes.
We will not be providing formal 2022 guidance on this call that being said looking ahead, we are optimistic about our growth trajectory and we are confident that the robust growth that we expect to new solutions and retail architecture. In 2022, we will continue to more than offset the ink.
<unk> identity and privacy impacts that we anticipate for next year.
As of today, we are seeing that these identity and privacy impact incremental to 2021 will amount to less than $60 million in 2022.
Taking all of these factors into consideration we are raising our full year 2021 revenue ex Tac growth guidance to approximately 10% at constant currency.
We expect our fast growing new solutions to grow above 50% in 2021, including 60% for retail media as we continue to strengthen our commerce media platform.
We are also increasing our adjusted EBITDA margin guidance to about 35% of revenue ex Tac demonstrating the strength and operating leverage.
In 2021, we expect our adjusted EBITDA conversion to free cash flow to be about 45%.
Due to stronger revenue performance and regional mix, our projected tax rate is expected to be 26% for 2021.
For Q4, we expect revenue ex Tac between $271 million and $274 million driving.
Constant currency growth of eight 9%.
We expect our new solutions to grow about 45% in Q4, as we lap strong growth and tougher comps from last year, and we expect Q4, adjusted EBITDA between $107 million $110 million or a margin of 39% to 40% as we continue to invest in our growth areas and plan for a high.
Their bonus pay out in sales commissions for the year.
In closing we are excited about the momentum in our transformation can cardio continues to be uniquely positioned to win in commerce media and with that I'll now open up the floor to your questions.
Thank you we will now begin the question answer session.
To ask a question. Please press Star then one.
If youre using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two.
Today's first question comes from Doug Anmuth with JP.
Morgan. Please go ahead.
Great. Thanks for taking the questions.
First just on the new solutions you you highlighted the acceleration partly driven by the agency partners. So if you could just talk.
More about your efforts there how you brought the company closer to agencies over the last two years, perhaps what work remains to do there.
And then secondly, just to go back to.
Supply chain I know that you mentioned.
Consumer electronics and then.
<unk> auto and not seen much impact thus far yes, just curious kind of what gives you the confidence that that will stay kind of stable.
Things.
Oh potentially get any worse as you go through the course of <unk>.
Yeah. Thanks, good to hear from you, let me kick things off here with agencies, and then all spillover to supply China.
And if.
I don't cover at all which I'm sure well until all throughout across this area to help out on the agency front.
We've got a lot of traction over the last couple of years about third of our business runs through agencies today.
It's been a it's been an effort which doesn't stop in fact, we've got a lot more work to do.
But it's showing promise sufficiently the performance agencies that we deal with are really great partners of us when it comes to marketing solutions.
And as I said, a couple of years ago, we wouldn't have acknowledged that today, we do and we've worked hard to take.
Get them. They are now important clients to us and see us as important partners for them to service.
Both fair market of clients and help them get access to media that they might not be able to get access to.
Without a partner like house that has direct.
<unk> system.
Media properties on the agency Holdco fronts.
This is really the mind of retail media retail media has had a really strong push.
In through agency whole codes to get to some of the biggest set.
That we enjoy the the company with enjoy having us our partners and clients.
What I'm, mostly excited about is that's just the beginning so I think if you start us off from not scratch two years ago, but it might be.
The percent two years ago, and we've pushed our way through.
To be trusted partners to maybe a 60% today, there's a lot of wiggle room, there for us to go deeper with agencies.
And that comes through just over time, showing them that we can help them get performance and continue to attract and retain clients, but also.
We have internally the ability to bring our commercial teams closer and closer together and be able to tell them. All holistic story of the commerce media platform and how that can be.
A lot of benefit to agencies to so long and the short of it is there's a lot of wiggle room, there, but we're pretty happy with the traction that we've made to date.
On the supply chain.
Topic.
I think it's important to always note that we are in the advertising business.
And therefore.
It's really about whether it's the question is whether or not the supply chain drives up advertising and we've not seen anything like that in fact to the country. If you look at AD spend across the globe for 2020.
One that's predicted to grow by.
About 14% and so thats far from.
That's total and you just look at digital and split it looks like it will grow by 20%, so and the clients that I've spoken to around directly around the subject of their supply chain. A couple of things to note. One is that they have seen this coming and have beefed up stuck where they can get stock and have promoted goods that they have on the shelf.
Or have access to or have access to deliver they.
They still have to advertise they still need to make money they still need to shift product and so so we have.
What we've done is we've just seen them change what they are but they haven't backed away from advertising because of the supply chain problem. That's what we've seen.
And then the other thing to note is that our businesses, both goods and services and so we see we see both of them tracking along extremely strongly and services.
Nearly list not affected by any kind of supply chain issues.
Anything to add or I mean, I think the only thing to add is we have 22000 customers. So the divestitures, but actually helps us here and then just when we look at the.
I guess the businesses that are more impacted by supply chain, yes, or maybe slightly smaller than it was a quarter ago, but it's we bought more than offset that with growth elsewhere. So that each client is different but we see growth in one client offsetting I guess less growth in another and that's been our business model and helps us through kind of old trend.
And we don't see any significant impact of supply chain for Q4.
Yeah.
Great. Thank you Meghan and Sir.
Yes.
And our next question today comes from Sarah Simon of Baird. Please go ahead.
Yeah.
Hi, I've got a few questions first one is for Sarah.
You, obviously, you refer to higher bonus provisions given how strong the number should be as we kind of head into 2022 do you think relative.
Relative to what you achieved this year youll kind of fully paid up or is that gonna be a catch up in terms of places.
Next year.
Second one for Megan just on agency relationships and so obviously, we've seen purposes by citrus ads has that resulted in a.
<unk> Holdco is coming to you as opposed to maybe get to chip decided because they've lost their independence I'd be interested in anything you can say on that.
And then.
Just another one on travel.
You've talked about it recovering.
Is it doing better than where you thought it was going to be at this point, if you compare that to say what you said to us at Q2. Thanks.
Okay, Hi, Sarah Great Great to hear from you I'll cover the bonus and travel.
So on bonus that we actively we pay for performance and we have a very structured bonus program that really does drive from from.
Most of the population.
<unk> T.
And then for kind of executives as <unk> and EBITDA.
And.
Sales Commission, obviously, that's straight from how what the sales processes and how from a new sales perspective, as well as new solutions, we don't see any true up for 2022, we do see that we want to pay for the performance that we're delivering this year and then everyone's working incredibly hard and you know that's that's what we're paying for some notes throughout for 'twenty two.
But we still with I guess, an even playing field and obviously, we hope to be in any numbers that we plan for next year. So we wanted to incentivize us for that.
In terms of travel.
So you are the one I know you referred to this as the sleeping Dragon, which we kind of love that.
It's it's waking up its way came up slowly.
Our growth is double what it was a year ago.
That's still probably about half of what it was in 2019.
In Q4, we have seen some new bookings. So we have seen some new eyes coming in and we've seen.
See traction, but we expect it to be quarter after quarter.
As we continue to kind of move forward. So those are really the key takeaways that we have we're planning for right now.
Let me jump in on the on the publicist source citrus comment Sarah and good to hear you.
We predicted it last quarter I think we were asked the question about what we thought of that acquisition.
Actually see it as an opportunity given them.
Paul Kozar, Great partners and clients to ask for retail media and are less likely than to go to.
The likes of the citrus or one or a capability thats owned by another whole kind of so what we have seen as executive at play out. Thanks.
Thanks for the question. They are what we do find is that.
We have a stronger connection to the other hold COSE and are looking to partner for this kind of capability and and have some have counted a provider in the market who has a quieter lean very heavily on want to become competitive.
Exactly as we predicted.
Great. Thanks.
Okay.
There's always questions whether it comes from Dan Salmon with BMO capital markets. Please go ahead.
Alright, good morning, everyone I have two questions.
For sure or Megan or maybe a combination of both.
Just want to follow up on the comments about the expectation for less than $60 million of privacy impact for 2022, and I just want to make sure I understand what's built in there it sounds like AT&T and iOS <unk> make up the majority of that still is in the fourth quarter, but can you remind us what else is baked into that figure.
For next year, and how timing of that impact may ebb and flow.
And then second for Todd I Hope top gun.
I would love to hear you speak about the continued drumbeat.
We're hearing around clean rooms.
Technology next generation of technology, rather that marketers are using to leverage their first party data.
How does that trend relevance of cardio and do you see it as a risk or an opportunity or a mix of both for the organization.
Yes.
I'll just start on privacy and as you know we haven't given any guidance out for 2020 twos, but given this is such a hot topic, we wanted to leave.
At least not leave you with a cliffhanger.
What we anticipate is that.
Kind of 15, plus will that's already starting early November and so there will be an impact next year. So I would assume about half the impact relates to the iOS 15 kind of hide my IP type features.
Versus this year, just given that it just began so we've got three quarters in.
Off if you will left of that and then for <unk>. The rollout there in Q2 2021, so we're anticipating probably around another.
Half of that of that $60 million relating to the ITT.
There's a small amount we're expecting for explicit consent, but as you as you know that's kind of already hit us for the most part.
Our customers continue to focus on strategies to ensure that.
They continue to protect our consumers as well so for the most part that's ious.
ITT, plus iOS 15, and that's our expectation and that relates primarily to the re targeting business.
Of course retail media has no.
Third party identifiers for vessel first policy. So that's the way we're thinking about it.
As of now.
Hey, Dan This is Todd nice to note, it's nice to join the call and to hear from you on the cleaner and point to just kind of going back to what we signaled on our Investor day and I think an earlier question you may have asked.
We continue to lean forward in this space with all the major players.
Or that are promoting clean room offerings.
There are a couple of newer ones.
That are out there that you know and then obviously <unk> has had its safe haven product, which is.
Somewhat being extended by data fleets and so forth, but we're talking snowflake info some live ramp.
Hum.
Of others.
We're definitely looking at is integration opportunities. These tend to be customer driven integration opportunities where there are two use cases, one is safely mixing first party data.
The marketer with our publishers or our data collective in a way that that makes for a better commerce media audience to be targeted.
And then the second use case, which is something we really add value to clean rooms is activating those audiences across our first party media network. So we look at the emergence of clean rooms, as being very important to us.
And a fairly neutral.
And as I mentioned.
We've made a lot of progress partnering with all the major players since we last talked.
Great. Thank you and Sir can I, just clarify the 60 million impact for next year is an absolute amount correct not incremental to this year.
Yeah.
No that would be incremental.
And it's really more kind of second half versus first half this year and this year, we obviously have more impact with other with explicit consent.
Just to follow a five folks et cetera at the beginning of the year. So it's kind of more of a year on year impact just due to the timing.
Yeah.
Okay. Thank you very much I.
Appreciate it.
Yeah.
And our next question today comes from Tim Nolan with Macquarie. Please go ahead.
Alright, great. Thanks for taking the question.
Follow on to the last on the.
Impacts on next year that $60 million Im guessing I mean, you didn't call out anything to do with Google Cookie elimination I assume that's not baked in yet I know thats kind of pushed out to like 23 ish I guess is it something yet to worry about then the following year or are you getting to a point, where you've got so much first party data driving everything you could do that.
It really doesn't affect you as much by the time. It finally comes about and then I guess related Lee you re targeting number was positive for the second quarter in a row I think it was 1% constant currency or even 10%. If you exclude some of those privacy effects.
Any color you could give us on what that looks like into Q4 and beyond as this actually.
Sustainably growing business again already.
Yeah.
Let me take the first part of the crime question.
So Google has pushed that that impact down the road and what that means to us is it.
It just gives us more time to.
Really the market.
It gives us more time to develop the product and create more and more and more first party data.
So the further it goes down the road.
Okay.
The longer we have absorb any kind of impact there.
Date.
We've been leaning into the test.
The tests at Google have them across their alternative lifelock and fledge with Brilinta and very very quickly and they are so far away from actually being ready for market adoption that it slipped.
The market place so the big question, Mark around when and even if Google will go ahead with.
Turning off the ability to use third party cookies, so we don't see any Sydney.
<unk> gone off any kind of impact from from crime and what we'll do is we'll just continue to do what we're doing continue to build the moat continue to bring in the first party data to make us more and more resilient by the day, so anything that happens across the chrome browser to eliminate our ability the ability to use any identifiers.
<unk>.
Yeah.
I can.
Okay I can quickly comment on marketing and on Q4. So we are anticipating yes, yes retail continues doing well.
We do see that we have a robust business that very resilient as we expected.
Most of the Q2 thousand 21 privacy impact about $24 million.
In Q4, so that obviously pretty much offsets the pretty phenomenal growth that we're already seeing in retail we expect to continue into Q4 and in 2022 and again I don't want to I'm, not giving guidance for 2022, but we do anticipate that we will continue to see resiliency in all.
<unk> targeting space.
And we are looking to offset the incremental impacts in privacy. So it's a great business when it when it pays it plays and we're saying that our customers really really like to do retail getting so oh good.
Yeah.
Excellent. Thanks, So I just wanted to add.
Tim to add one thing to it.
We didn't talk about obviously spot on on chrome going back to chrome, but we didn't mentioned that we're actively helping our marketers find.
And advertiser engage audiences high value audiences that are now available at lower CPM in.
Nio's so.
The impacts that we've talked about are obviously related to mostly to from web to app re targeting.
And a little bit of App to App re targeting but what we didn't talk about is that our product efforts remain full steam ahead on helping target into those environments without it being a re targeting effect.
Okay. Thanks Todd.
You bet.
Our next question today comes from Matthew Thornton with tourists Securities. Please go ahead.
Hey, good morning, everybody. Congrats on the results maybe a quick housekeeping question for for Sarah and then I've got a follow up for either a Bergen.
Or Todd.
On travel for the back half the year I think previously you talked about down 70% versus 2019, I think earlier you might have mentioned something closer to maybe down 50% I want to make sure if I heard that correctly, that's how we should be thinking about travel.
And in the back half of the year, and then for Mega or Todd.
When we think about contextual versus Rytary, obviously re targeting Korea was a dominant player in the market leader.
From where we stand now how do you think about your capabilities in contextual and your ability to be best in class a market leader in and contextual where perhaps there were already some.
Players in other competitors kind of in that market any update there would be would be helpful. Thanks, everyone.
Let's start with your second question first.
So just before I hand, it across to Mr. Contextual here in town.
I sort of want to remind you of the things that go into the mix for us.
Uh huh.
As I said before we have 650 million daily actives, that's a lot of consumers that's a lot of people.
That we see.
We have 22000 and commerce clients. So that's a lot of market is with a lot of marketing data that we can get our hands on in terms of the shopping behavior that e-commerce data, we see over $900 billion.
In E Commerce sales, we see it so we know what people are buying.
And we also from our background have.
Have a good reputation and creating outcomes. So we say we were responsible for about $40 billion worth of commerce outcomes from the client base that we have today. So if you take that capability of that data and layer on our AI capability on top of that.
Then you have this melting pot if you like of stuff.
That is being pulled into.
Our contextual product offering.
Outflows, they're jumping.
That's great.
I appreciate that and just to add a little bit to it everything that makes us different from a contextual standpoint of course, we do all.
All the regular content extraction that others do some natural language processing that would not be enough.
What does make us different is that there will always be a certain amount of first party users recognized across both app and web that have buying behaviors that are uniquely seen bike radio. So in order to match those and then to take that match into the contextual means.
<unk> that I described before is what makes us different and it will always make us different.
And I'll just quickly take the travel question, so going into if I kind of look at our quarter on quarter versus 2019, Q1, we were down about 80%.
Obviously, when we planned we expect to be slightly better than that Q2, we accelerated about 70% same as Q3, and we're anticipating Q4, we hope to exit around 50%. So we are seeing some new orders kind of coming in in Q4. So that's the way that we're thinking about it.
Okay. That's very helpful. Maybe I could just slip in one other quick one in only because you guys talked a little bit about your shop aboard video ads and obviously, we're hearing more and more about performance marketing trying to find its way into into CTV and so my question. There is I guess is any chance we could see some whether it's the CTV platform or CTV publisher any type of your partnerships.
That could come our way in the coming months and quarters.
I mean, we're really focused first of all we're really excited about about shopper bowl, mainly because we have always brokered on the promise of bringing commerce to where consumers are most.
Looking to discover our brand or to engage a brand.
For us.
The first and most meaningful scale opportunity as an online video.
And the testing that we're doing now not surprisingly leans into online video.
It doesn't mean that we won't be talking about CTV.
Well, but youre going to hear a lot of noise from us on online video because there's so much untapped opportunity for sharper ball across the open Internet right now and it really signals quite an evolution for us beyond what has already been effective in display. So we're laser focused on.
On that but we're certainly not close to any of those other opportunities.
Great. Thanks, everyone.
And our next question today comes from large to do loops loops Rosenblatt Securities. Please go ahead.
Thanks, So much maybe just a quick.