Q1 2023 Criteo S.A. Earnings Call

Speaker 2: Good morning and welcome to Credios first quarter 2023 earnings call.

Speaker 2: All participants will be in listen-only mode.

Speaker 2: Should you need assistance, please press the star key followed by zero.

Speaker 2: After the prepared remarks, there will be an opportunity to ask questions.

Speaker 2: To ask a question, please press star then 1.

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Speaker 2: Please note, today's event is being recorded.

Speaker 2: I would now like to turn the conference over to Melanie Dombre, Vice President of Investor Relations. Please go ahead.

Speaker 3: Good morning everyone and welcome to Credo's first quarter 2023 earnings call.

Speaker 3: Joining us on the call today, Chief Executive Officer Megan Clerken and Chief Financial Officer Sara Gichman are going to share some prepared remarks.

Speaker 3: The third person, our Chief Product Officer, will join us for the Q&A session.

Speaker 3: As usual, you will find our investor presentation on our IR website now, as well as our prepared remarks and transcript after the court.

Speaker 3: Before we get started, I would like to remind you that our remarks will include forward-looking statements which reflect critical judgments, assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting critical business.

Speaker 3: Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to the risk factors discussed in our earnings release as well as our most recent work 10-K and 10-SHU filed with the SEC.

Speaker 3: We'll also discuss non-GAAP measures for performance. Definitions and recommendations to the most directly comparable GAAP metrics are included in our earnings release published today.

Speaker 3: Finally, unless otherwise stated, all growth comparisons made during this goal are against the same period in the prior year. With that, let me now hand it over to Megan.

Speaker 4: Thanks Melanie and good morning everyone. Thank you all for joining us today. We're off to a solid start this year and our team is firing on all cylinders to execute on our transformation strategy and capitalize on the significant growth opportunity ahead of us.

Speaker 4: Our transformation continues to shift our business towards a broader solution for quality of, intended on the fast growing commerce media opportunity. Our commerce media platform puts the focus on both their retail media expertise and our expanded targeting solutions with commerce audiences, complementing re-targeting, which remains the lower final tactic enjoyed by marketers. Commerce media represents a market opportunity of $110 billion by 2025 and it's real. The agency hold codes have now all created dedicated commerce teams.

Speaker 4: More than offset some of the pressures we've seen in retargeting.

Speaker 4: While retargeting remains an area of continued focus and opportunity, our new solutions have now become close to half of our top line and will become the larger part of our mix going forward. This is exactly what we wanted to be at this stage in our transformation.

Speaker 4: No other play matches their market footprint, and our global presence gives us a significant competitive advantage.

Speaker 4: We secured the renewal of our multi-year exclusive partnership with Costco. As the third largest retailer in the US and one of the largest retailers in the world, Costco has significant room for growth in retail media and we're very excited to help them scale and realise this massive potential. We also won new retailers including ASOS, Rite Aid and Sun Drug in Japan, strengthening our leadership in fashion, health and beauty.

Speaker 4: Our ability to scale quickly without proven demand capabilities, IA driven performance and support for retail media experts were among the deciding factors in the decision of these retailers to partner with Pridion.

Speaker 4: We've built a leading platform for retailers to manage their entire retail media business at scale. The ASAS and Wright Aid Winds illustrate the power of our holistic value proposition and both have chosen us for multi-formats and placements, including onsite sponsor products and display.

Speaker 4: And off-site, and like most others, they've taken multi-year contracts.

Speaker 4: It's no coincidence that more retailers are choosing Christiose or exclusive retail media partner for the long term. We've worked with retailers for a very long time and understand their needs. We've built deep expertise in retail media over the past seven years and this is what we focus on every single day.

Speaker 4: Agencies are increasingly contributing to our growth and we're confident that this will continue.

Speaker 4: An increasing number of brands, including most recently Pistico, are shifting from competitors to Critio to access retail media networks at scale due to our superior performance, customer service and enhanced data analytics.

Speaker 4: Other brands such as HALIUM are increasing their annual investments to upwards of 75%.

Speaker 4: and most part due to strong return on ad spend and partnership. Looking at marketing solutions, we did a bit strong growth in commerce audiences as more clients are adopting full-final strategies to acquire and retain customers. Commerce audiences are an integral part of our commerce media strategy and create the foundation for our success in retail media off site.

Speaker 4: As we help retailers extend their advertising reach beyond their own content walls.

Speaker 4: Our AI Power and Audience modeling tech finds in-market shoppers based on interests.

Speaker 4: Demographics, location, brands, and product affinity all look like modeling.

Speaker 4: We leverage prospecting audiences to engage new consumers in any environment at not stick a third party identifiable.

Speaker 4: We're also proud of our growing global partnership of one of the world's largest marketplaces, whose leveraging the best and breadth of our offering to drive performance across multiple channels including video and CTV. With full final activation, they more than triple their media spend with video compared to a year ago, with comments audiences now representing 90% of their media spend. Similarly, the treble marketplace, Viator, doubled the media spend with a year over year with full final activation.

Speaker 4: Our clients value our best in class performance, which is further amplified when engaging with consumers across the entire biogenic. Our retargeting results in Q1 reflect the impact of a difficult macroeconomic environment on our clients, especially our retail.

Speaker 4: Starting with our growing agency relationships, we saw a 56% year-over-year increase in US retail media spend, through by the major agencies we have strategic partnerships with, and our momentum with agencies continues to accelerate. Agencies are driving 35% of our overall media spend, an adoption of our multiple solutions at speed and scale. We currently activate about 1 billion in annual retail media spend, and we believe the launch of our Commerce Max Demandside platform will be a game changer.

Speaker 4: Commerce Max gives agencies and brands one integrated sub-service platform to access premium retail media inventory on-site.

Speaker 4: with both sponsored and displayed placements and all every unique third-party audiences built on real-shopper behavior for precision targeting public sites.

Speaker 4: It offers closed loop measurements across open internet supply as well as retailers' nventr starring alongside.

Speaker 4: For the retailers, CommerceMax is the platform to best monetize their onsite inventory.

Speaker 4: and their valuable first-party data for onsite and off-site targeting with access to demand coming from agencies and brands.

Speaker 4: The integration of IPON Web accelerated the launch about DSP. Following our initial successful market test, we're now partnering with a half a dozen retailers and multiple brands. We continue to see strong results.

Speaker 4: Our clients are excited about what we bring into market and we're leveraging their feedback.

Speaker 4: clients are excited about what we bring into market and we're leveraging their feedback to add more features and functionality.

Speaker 4: This gives us a differentiated product as we build momentum and commerce media.

Speaker 4: We're on track to move to general availability in Q3 and we expect Commerce Max to help us catch a more agency in brand budgets and drive further growth than retail media through the offsite advertising opportunities that it unlocks.

Speaker 4: Importantly, we continue to advance our votes and differentiation.

Speaker 4: Importantly, we continue to advance our votes and differentiation. Only channel is an emerging...

Speaker 4: is emerging as the next frontier.

Speaker 4: And we're empowering retailers to own their entire retail media ecosystem across physical and digital stores. With the acquisition of Brand Crush, we now provide an omnichannel retail media monetization platform.

Speaker 4: and we can tap further into traditional trade marketing dollars. Our platform not only centralises online and offline retail media inventory management, but also creates great efficiencies for the retailers who otherwise rely on manual processes.

Speaker 4: to manage these assets. We best positioned to address this market needs as evidence for the success of the recent pitches including the brand-crush capabilities.

Speaker 4: The acquisition of RAC Brand Crush also expands our client footprint and capabilities in the rapidly growing Asia-Pacific retail media market, where we added 18 retailer plans over the past year, including four wins in Q1 alone. We now have five retail media clients in Japan from a standing staff and we're actively capitalizing on cross-selling opportunities. In the region, we're also pleased with the ramp up of our off-site partnerships with Flipkart, India's Homegrown e-commerce marketplace.

Speaker 4: Turning to our comments, growth software offering. Our second demand started product designed to automate our audience targeting and retargeting capability.

Speaker 4: A great example of how we plan to extend the reach of our self-service offering is our partnership with Shopify.

Speaker 4: We recently rolled out new self-registration capabilities allowing all Shopify merchants to quickly set up their account.

Speaker 4: and start activating their campaigns with CREDIO. Our Shopify merchant clients value the ease of use of our targeting tools and the performance we're driving to turbocharge their business.

Speaker 4: Lastly, please with the progress that we're making on our multi-pronged identity strategy under the helm of Todd Parsons' help, Chief Product Officer and Dr. Boris Muzikensky, our Chief Architect.

Speaker 4: We continue to scale out first-party media network to retarget consumers with first-party data matching and cookie-less environments.

Speaker 4: As part of this direct supply strategy, we've more than doubled our traffic ribbing hashed emails since last October .

Speaker 4: Among others, slate.com, cafe media and A360 media are now partnering with us to monetize their inventory more effectively. This has led to a meaningful spend increase in safari for our publishers. When looking at signals from publishers, we have direct integrations with. We collect 10 times more hash emails than similar alternate industry IDs. To support this work, we have now fully integrated our pretty-o supply capabilities with Icon Web's capabilities, taking the best of both into our comments grid, supply site platform or SST.

Speaker 4: As part of the multiple investments we've made in our identity strategy, we've also been working side by side with Google for a long time, and we remain one of the largest scale partners in the privacy sandbox.

Speaker 4: a lot of both right now about the potential for generative AI to shape advertising. Based on what we know today, we look to four main areas of impact. First, like all AI technologies, we believe it will drive better performance for those who have access to data through better use of that data.

Speaker 4: Second, the ability to have rich interactions with end users will likely change our people's search online by being able to engage in conversational exchanges with AI chat bots.

Speaker 4: But the assistance that it provides can enhance how advertisers are creating, managing and optimizing their advertising campaigns, particularly around creators, with a change could be profound. And for...

Speaker 4: Of course, the tools and efficiencies that it creates. The most important point is that AI can only make a difference with access to data at scale.

Speaker 4: ambitions that we've laid out in our 2020 to invest today. In 2023 we believe we're best position to leave the market with retail media, being a non-sticklet called growth spot and commerce audiences being the most valuable audiences to brands.

Speaker 4: As we transform our business, we're focused on driving efficiencies while at it allocating our resources to our growth areas. We hold ourselves accountable to the deliver growth, expand our operating leverage, and deploy capital effectively in an disciplined manner, all with a focus on driving shareholder value. With that, I'll turn the call out to Sarah to provide more details on our financial results and our outlook. Sarah.

Speaker 3: Thank you Megan and good morning everyone. Our first pop quarter performance reflects our clear focus on execution and cost discipline.

Speaker 5: Revenue was $445 million and contribution ex-tac was $221 million.

Speaker 5: Reported contribution attack reflects a year-over-year 10 million unfavorable 4X impact.

Speaker 5: At constant currency, Q1 Contribution XTAC grew by 6.3% on top of 6% growth in Q1 2022.

Speaker 5: Retail media, commerce audiences and IPON Web combined represent 44% of contribution extract in our first quarter up from 29% a year ago. Client retention remains high at close to 90%, and 37% of our live clients use more than one critter solution today. Turning to our business segment in retail media revenue with 38 million dollars and contribution extract grew 22%.

Speaker 5: at constant currency to $37 million in line with our expectations and was up 70% on a two-year stack basis.

Speaker 5: Our growth is primarily driven by our client base in the US and the UK as well as our retail other marketplaces.

Speaker 5: Growth from existing clients remains strong with same retailer contribution expats retention at the 122% and we continue to win new retailers.

Speaker 5: We also saw strong growth from our agency partners. Our 23,000 global brands are prioritising retail media as a key channel to advertise to consumers at a digital point of sales across multiple retail media networks.

Speaker 5: We saw strong brand bookings, main EMCPG, our largest vertical and health and beauty.

Speaker 5: In marketing solutions revenue was $382 million, and contribution X-Tact was $158 million, with strong growth in commerce audiences offset by lower return team.

Speaker 5: Retargeting was down 17% year over year or down 12% when excluding the impact of the suspension of our Russia operations and the expected 4 million impact from signal loss.

Speaker 5: Across all regions, we benefited from strengthening travel. Retail was impacted by the macroeconomic environment, which remains challenging as evidenced by the lower online traffic and lower online transactions across the majority of retail categories in the Americas and Europe in Q1. We delivered strong growth in commerce audiences.

Speaker 5: up 27% year over year and up 61% on a two-year stack basis.

Speaker 5: As clients transition to full funnel audience strategies to acquire and retain customers. This was driven by new business and cross-selling across thousands of performance marketers.

Speaker 5: Our clients value having one partner to help them engage with consumers across their entire buying journey, which we believe will drive higher media spend and enhance client lifetime value over time. As expected, ICONS web performance was down slightly on a standalone basis in a seasonally Photography make it early Bonj photographing a 4K vision forjee with a fine cut preview

Speaker 5: adjusted EBITDA of $39 million in Q1 2023.

Speaker 5: non-GAAP operating expenses increased 14% year-over-year, largely driven by iPod Web, and targeted growth investments in sales, R&D and product talent.

Speaker 5: Partially offset by planned cost reduction actions. Importantly, we lowered our expense run rate in Q1 compared to Q4, including headcount reductions, discretionary spend controls and other efficiency initiatives.

Speaker 5: We have already executed, again, many of our targeted cost savings and continue to ensure strong resource allocation measures and cost is a clean across the business.

Speaker 5: Moving down the P&L, depreciation and amltibation increased 14% in Q1 2023 to 25 million dollars.

Speaker 5: Share-based compensation expense increased to $26 million, including $10 million related to treasury shares and the IPhone web founder as part of the acquisition.

Speaker 5: The dilution from IPON Web in a season low quarter and the non-cash share-based compensation expense related to the stock component of the acquisition resulted in a net loss of $12 million in Q1 2023.

Speaker 5: Our weighted average diluted share count was 60.5 million compared to 63.6 million last year. This resulted in diluted net loss per share of 20 cents and adjusted diluted earnings per share of 46 cents in Q1 2023.

Speaker 5: We benefit from a strong financial position with solid cash generation, no long-term debt and blue-chip bank relationships.

Speaker 5: We have 814 million dollars in total equity as of the end of March, which gives us significant financial flexibility to execute our growth and capital allocation strategy.

Speaker 5: Operating cash flow was $42 million and free cash flow was $9 million in Q1, reflecting planned capex investments related to the five-year renewal cycle of our data centers as we transition to a more cost and energy efficient data center architecture.

Speaker 5: program as we continue to see attractive value in repurchasing our shares.

Speaker 5: In Q1 we repurchase 1.7 million shares as an average cost of $29.90 per share. Turning to our financial outlook, which reflects our expectations as of today May 3rd. We remain cautious about our outlook for the remainder of the year given the ongoing volatility in the macroeconomic environment.

Speaker 5: But we remain confident in our trajectory towards high single digit to low double digit contribution extent growth at constant currency in 2023. This assumes low single digit organic growth and a full year impact from our acquisition of IFLWait.

Speaker 5: We continue to expect contribution ex-tax growth of approximately 30% for retail media.

Speaker 5: For Commerce audiences, we expect contribution to the next pack of approximately 20% as advertisers continue to shift more budgets and adopt full-spinal activation.

Speaker 5: Looking at the cadence for the year, we expect stronger organic growth as we map the impact of the suspension of our Russia operations in March 2022 and easier comparison in back call for the year.

Speaker 5: We also expect to benefit from the ramp up of recent Retailer partnership and the continued rollout of our commerce media platform capabilities and features. As our business mixes evolving, we expect more pre-announced sustainability with Q4.

Speaker 5: including IPON Web's strongest quarter and expected high growth in retail media. Lastly, our Outlook incorporates our expected front-end load in signal loss impact of $10 million and currency headwinds in 2023.

Speaker 5: We continue to anticipate an adjusted eBizal margin of approximately 28% for 2023, including about 200 basis points of dilution from IPON Web.

Speaker 5: We are on track to deliver over $60 million in annualised cost-fading those of the course of the year, largely offsetting the annualised impact of our 2022 growth investment.

Speaker 5: We expect approximately half of our four-year Adjusted E-Basal to be realising Q4, given business and analysis with IPON web and realisation of our expected cost savings.

Speaker 5: In addition to our top line growth engine, a key part of our transformation is to realign our organisation and optimise our operating model to enable scale and operational efficiencies.

Speaker 5: with strong profit contribution from all our products.

Speaker 5: This includes streamlining our processing processes and leveraging our assets to work better and faster and ensure best-in-class client experience while driving meaningful operating leverage over the coming years. We expect a normalized tax rate of 28% to 30% in 2023.

Speaker 5: We anticipate capex of about $90 million, mainly related to the planned renewables of our data centers, of which most vendors expected in the first half of the year. We expect free cash flow conversion rate of about 45% of the adjusted Yvida.

Speaker 5: For modeling purposes, we assume a flat number of shares outstanding in 2023. For Q2 2023, we remain cautious given the impact of a slower macro environment on consumers, our clients, and conservative ad budgets. Overall, we expect Q2 contribution X-tags.

Speaker 5: of 228 million to 234 million dollars growing by 8 to 10% of cost and currency.

Speaker 5: This assumes that low single digit organic decline and I-POM web in organic growth.

Speaker 5: As a reminder, Q2 is a seasonally low porter for iPod Web in terms of contribution ex-tac, adjusted even dollar and cash contribution.

Speaker 5: Importantly, we expect retail media and commerce audiences to continue to show robust growth. We estimate 4X changes to drive a negative year over year impact to about $3 to $5 million on contribution tax tax in Q2.

Speaker 5: We expect a just an either-dial between $40-$50 million and $50 million, reflecting the lowest Q2 seasonality exacerbated by the dilution from IPON Web. To conclude, we are committed to driving shareholder value.

Speaker 5: We have a resilient business model and we are executing our transformation with rigour and discipline. We have built a high-scalable commerce media platform to enable sustainable growth and support margin expansion over time.

Speaker 5: The future is wide open for Christiot. And with that, I'll turn it over to the Operator to begin the Q&A session. Thank you. To ask a question, please press star of the one on your touch tone phone.

Speaker 6: to each other questions please press star them to. Today's first question comes from Mark Kelly at Steve Fowell. Great, thank you. Good morning everybody. I appreciate the extra color just on the moving pieces of the full year outlook. I was hoping maybe you could walk here a little bit more of the retail media piece. You know, can you help us bridge the gap? You know, what's going to get you to that 30% growth for the full year? You know, obviously it applies in a nice acceleration in the second half. So maybe a way to think about splitting it between same retailer growth and some of the new wind that you have, you know, visibility too. And then second, you know, you brought up CTV a bit today. Can you maybe help us think through?

Speaker 6: A, how big that is today, and then as the DSP washes and scales, what's the right way to think about that as a contributor from a channel perspective over time? Thank you.

Speaker 5: So just on retail media, we're accelerating because there's no signs of slowing down. Clearly this is an area of massive growth, not only to the industry but also for pretty old. To achieve the 30% growth our assumptions are...

Speaker 5: that we have strong cons coming in to Q1 and for Q2 and those obviously become easier over the year. Q1 is seasonally a low quarter for retail media and obviously Q4 brings the highest, the strongest quarter. We are expecting most of our growth to continue to come from our 200 retailers and our same contribution.

Speaker 5: shooting display and video and of course we have the launch of Commerce Max coming in Q3 so all of those you know the factors that we've built into our forecast we have line of sight to our customer forecast and we feel that we're tracking in line with with their forecast as well.

Speaker 4: Yeah, I'm not going to pick up the CTB just for us, I think we'll hand it across the top. Our present there is still pretty small. We announced a partnership with Meg Night last time around and that's got off the ground. Remember for us, CTB is a channel.

Speaker 4: And for some of our advertiser clients, it's an important one, but for performance, middle, bottom of the funnel, it's still a little ways away. And our focus is on retail media and commerce media. But to have an opportunity and to have availability to the CTV.

Speaker 7: Screen as a channel is an important one to get off of our clients. And that's how we see it. Talk with you. How do you do that? Not much at that. I would just say that just to add to Megan's point that closing the loop between the living room and CTV with our retail media partners advertising.

Speaker 7: from a product perspective is sort of job one. The second thing is making sure that we continue to innovate in formats that work in the living room and bring commerce into those environments. We've invested in both and the partnership with Magdite really gives us a scale out of doorway into the business.

Speaker 8: just to start on the macro if you could talk a little bit about the role, I know it was a few days in May, but you know, we're at this point, my thanks to Major Shocks from last year, and how advertisers are thinking about the rest of the year and how this budgeting. I am thinking.... Um....

Speaker 8: a lapping some of those comps, but also potentially heading into a recession. So just make for us a little bit more color on the overall macro. Yeah, absolutely. So in terms of what we're seeing on the macro, and maybe just to give a couple of data points.

Speaker 5: Now from our commerce insights we saw for Q1 the number of transactions in department stores was down about 13%, fashion was down about 9%. Those are key categories obviously for us in our retail space. And the traffic for those was down about 4% and 8%.

Speaker 5: respect of me. We do know that we're going to move into, I guess, I wouldn't say that easy cons, but easier cons kind of going through the year. We are seeing traction in retail media as I discussed before. We're starting to see some small glimmers of hope, I would say, in retargeting, starting to reopen small budgets, you know, kind of across the board.

Speaker 5: So we see those being the key factors for us as we look at the year. We are anticipating...

Speaker 5: continue top environment for the year. Now as Megan said, all of our clients are doing much more frequent re-bork casting, every dollar counts. And our plan with our client teams is to ensure that we're working hand in hand with our customers to show the performance we deliver.

Speaker 5: and to continue to drive more of that budget coming in not only to the retargeting space, but for us it's around acquisition and retention, budgets and being able to put those together for them and showing performance across the board and of course in the retail media continuing. How you make sense whispering.

Speaker 4: to shift more of the dollars for the brand into the point of sale for the retail media networks, which is the front-end fenger for us in the CMACC launch. Yeah, I will just pile on for one second. I want to reiterate that Recon Media and Commerce audiences continue to be strong for us in Q2.

Speaker 8: And so that's just an important point when you're thinking true that businesses are whole. Okay, thanks. Maybe second. You just, you got to highlight the cross-selling opportunity before and all that we talked about it today. It's Thomas Max.

Speaker 8: which closer to coming into market. I just found the comments about using the first-party retailer data to build out on retargeting. I thought that was really interesting. Can you update us on the cost selling opportunity, how that's trending, and what opportunities you see there as we work our way through the year? Thank you. Is the question around commerce max? I'm sorry, the line is all...

Speaker 7: Yeah. Yeah. Yeah. Okay. So let me address that one. Obviously, the core of everything we do is being drawn back to data that were privileged to operate for our retailers. Where that becomes different product wise is... You know that house is full of all the credits, it would make me very proud. I know you've got that being?

in the different tactics that an advertiser might be using. If it's someone a retailer is selling to, selling advertising to, we're going to use data to help them find audiences that are offsite, qualify them, and also to target recommendations, sponsor recommendations to them that are onsite.

And that's really important. One selling tactic that's important. The second one is I think what you're talking about which is that every one of those same retailers needs to still acquire new customers. And for us that really means putting out a product which uses their first-party data much like Performance Max and Advantage Plus would use if it were Google.

and as we use it for optimization and all of those things which are incredibly important to commerce media comes to life for our clients. So having the platform play in there is absolutely key to making the best of the service that we offer. Thank you so much. Thank you. And our next question today comes from Matthew Koft with Morgan Stanley . Please go ahead. Great, thank you. So you mentioned your expanded partnership with Shopify. Maybe can you just walk us through a little more detail in terms of what you are doing for them now that you weren't doing before, and really how that conversation played out. What did you have to prove to them to get them to double down with…

Yeah, I can take both of those. The first is Shopify. Really, there are a couple of things there that we focused on proving to them as a partner. One is that we make it a lot easier for their shopkeepers to onboard and do their first campaigns with Criteo, whether for acquisition, retention, or both, retargeting that is. And we've gone ahead and done that. So we've delivered that product and we're in their apps marketplace and beginning to see that play through. The second thing is that we're watching very interestingly and how we might combine our commerce audiences with their own audience product.

And we have some hopes of testing that in the future and being partner there as well. Underpinning both of these things, I think you mentioned is just pure performance. Small shopkeepers especially, really don't have a lot of time to do a V testing for their acquisition retention. And that's something that we're very good at. We're very good at delivering performance.

the beginning point.

The second thing I think you talked about was the C Max launch. Let me just say like our Alpha and Beta period has been incredibly informative to the way that we think about the Max product. Just really going back a little bit, a key point of differentiation for Commerce Max.

is the ability for buyers to plan and activate commerce media starting with products they want to sell, and where those products are well stocked per purchase. This really changes the DSP model entirely. In fact, it changes how advertising works, and it makes it a lot more effective. So the CommerceMax launch has really focused on taking the deep integrations within the retailer's commerce Sh

So that's been really exciting part of the learnings in our process of launching Max. And of course, we want to make sure that holistic measurement and optimization across the different types of tactics that retailers sell to advertisers are accommodated in that product as it reaches general availability. Great, thank you.

Thank you. And our next question today comes from Mark Zagitowicz with The Benchmark Company. Please go ahead.

Thank you. Good morning. I wanted to focus on the offside. It's certainly a hole in the market today.

And I'm not sure if I overemphasize this a bit too much, but it seems like it could be a really big opportunity for you guys. And I'm just hoping you can maybe specifically talk about progression there and how that might be being received in the market today.

What further progress you can see there, you know, maybe it's too early to talk sort of case studies on outside, but any progression there would be helpful. Thanks. Yeah, I'm like let me start by just sort of giving an overview of how we feel about outside, which is an important part of comments max.

the other 90 being on-site. And so when we think about the commerce media opportunity for us, we focus on on-site first, which has been every time media play for the past seven years. We started with sponsor ads and then we extended to display so that we can manage.

as much of the page as possible for the retailer.

Then we move, once we have that we have access to their data to be able to drive that page or manage that page for them. We have retailer data. Then we move to offsite which is the next opportunity for retailers to extend beyond onsite and that is partly the next opportunity.

which is differentiated for us through, as Todd said before, the focus on product rather than they consume it first, so product for retailers. Once we have offset, we also have access to data. And then to add to that, we want to extend on that is Omni Channel, which is a brain crush opportunity.

which gives us another whole set of data. So now we're on the page, we're off the page on the open internet and we're across the channel into the actual retail stores. All the way we're getting access to data and we're getting asked to do more and more things.

This is incredibly important because as we alluded to before, the ability to have that data at the source gives you the ability to provide the best measurement that you possibly can for closed loop and it gives you the ability to offer optimization using that measurement real-time back to the retailer. Out and?!!

but we're making sure that we're there at the right time with the right solution.

Yeah, not much to add to that except that during the course of our testing, to emphasize the interplay between onsite and onsite working together and using the data that we're operating at the source of the retailer that we've seen two things. One is we've seen as much as double the conversion when onsite and onsite are put together.

that our clients that have tested want to use it again. They are excited to come back. Some of them have been incredibly enthusiastic. As a product professional that's very rewarding to see these kind of worlds of distinct media coming together, and the buying work for such great performance improvement. So we are pretty fired up about offsite, but only in the larger context. Awesome. Thanks Megan and Todd. Very helpful.

Thank you. And our next question today comes from Richard Kramer with REIT Research. Please go ahead. Thanks very much, folks. Two things I think haven't really been touched on yet. Megan.

Can you talk a little bit about where you are in terms of strategically accessing other large pools of social commerce inventory, whether it's Facebook, interest or elsewhere, where you're seeing a lot of commerce and also a lot of signal. And Todd, given the work you were talking about, Megan was referencing with hash emails and Safari and

testing privacy sandbox with Google, is there a chance that these collaborations on especially an attribution against new forms of ID potentially could reverse the decline or extend the retargeting window because we've all been watching that decline for some time and I don't know if you see a chance that could reverse as privacy sandbox comes in and you have an advantage in attribution. Thanks. Thanks, Richard. I'll be the first. I'll be probably

But what I will say is that part of that work has really surfaced for us the ability to explore additional opportunities for comments, audience, extensions and things that we can do with Meta, which are very interesting and potentially very exciting for us. We also look to formats and other social environments we talked about.

partnership.

I'll pop it across that. Yeah, I have you in Richard. So just to add to that a little bit, I think it's important to re-emphasize that our addressability strategy is a multifaceted one. We're making a variety of investments. In other words, we're not all in on one ID solution that could potentially be a point of failure for us.

hold up for all the scale and matching that you get the additional signal to the economics hold up for our clients or our retailers who are selling into those audiences. So that's something that we continue to work through with better bidding and better the testing that we've been doing with Metta, as Meghan said.

with us since the beginning of their work on Sandbox. And we've seen that partnership accelerate. Our teams, product and engineering teams, spent a lot of time in person with the Privacy Sandbox team helping inform the way the APIs work, both the PAA product and the topics product, but especially PAA.

Richard, so that we can increase our coverage model for retargeting and maybe make up some of that difference. At this point, it's upside and we're very excited to continue to contribute and make that solution something that does scale and provides precision. We still keep an eye out for the economics and those are the things that we measure our addressability.

agencies contributed minimal amounts to Criteos revenue and now it's like a third or more. I'm curious because agencies talk about retail media a lot. I wonder if there's a bit of a competitive dynamic with some versus a collaborative dynamic with others, maybe a little bit of both. I wonder if you could just talk about how those relationships work and what you are gaining from agencies. Thanks. Yes, sure. Hi, Tim. We have definitely ramped up our relationship with agencies over the last three years.

And we see now a lot of our ad spend being driven through agencies and increasing through agency relationships. So that area is only getting stronger and stronger. One of the agencies out there of course competes with us on retail media. That's no secret in publicists who have a product set themselves.

But the other holding companies work very closely with us, hand in hand with us, to get access to the retail media or the retail media networks that we have access to. What they love about what we're doing is that we bring retailers together into one.

place for them to buy retailer advertising or advertising across those retail media networks, as opposed to them having to have access to each big retailer one by one by one and maybe not even getting real access to smaller retailers that don't stand up their ability for them to see them in some DSP that's sitting out there.

So, long story short, the agencies really like what we're doing to make sure that they have another channel in which they can buy against, which is a retail media channel, which gives them access through one place and to the growing retail media sector, which has become so much more compelling for their brains and advertisers.

and we're in a front row seat. What I love about is about Brian Glieson, was many things I love about Brian Glieson, but of course bringing him and with his connection and his understanding of H&T has really given us a big, a big leg up in this area as well. So this is exciting territory.

Thanks. Thank you. And our next question today comes from Matthew Thornton with Truist Securities. Please go ahead. Good morning, everyone. Thanks for taking the question. I've got one on Commerce Max and one on Privacy Sandbox.

On Commerce Max, the beta clients that you have as we head into full commercial availability, are they signaling that they are going to shift the budget from another DSP to your DSP? Are they not currently using a DSP? And as we think about take rate I guess, without getting into specifics, are we thinking about a market rate, take rate, below market rate, above market rate?

of third-party ID deprecation in the next couple years here. Thanks, guys.

I can take the, why don't I take the second question first and just say that we don't see the timeline changing. We're still counting 14 months from here to there and obviously there's a conditional acceptance by the CMA that plays into that. But we...

All things seem to point to the timeline staying the same. So from our perspective, you know, we're deeply into testing the efficacy of the API. Again, very much focused on PAA. That's not to ignore topics. And we think that it's very promising.

provided the economics hold up, promising for scale, promising for precision, the economics need to be there. And there are a variety of things that we're testing to prove that out. And we have time to do it, which is all that needs to be said. On the second one, it's tough to say where the budgets are going to come from. And we have some interesting dynamics there. More traditional DSPs, DSPs.

budget to another DSP. So we expect some of that to happen. An interesting observation is that some of those DSPs that control a tremendous amount of spend also want to get to the same inventory and that we have lethal method to try with them with our Commerce grid product and they? design.

and SSP that we bought in the Ipon web acquisition. So we've got a couple of different things playing out. Obviously, those things would impact take rates depending on how people want to buy and what they're getting to. Ultimately, we don't talk about take rates, but we think about how do we get more of the goodness of retail media, commerce media out.

That concludes our course for today. Thanks, everyone, for joining. The investor relations team is available for any additional questions. We wish you all a great day.