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The ad tech company that lost 7% in stock value after Apple's ad blocking plans were revealed explains why it's not actually a big deal
(Criteo) Criteo president and COO Eric Eichmann.
The value of France-based ad tech company Criteo's stock fell as much as 7% in the week that reports emerged detailing Apple's apparent plans to allow ad blocking on iPhones for the first time in its latest operating system update.
While some people initially freaked out about Apple's ad blocking plans — with one Wall Street analyst writing "in a worst case scenario, this is Apple against the entire mobile publisher and advertiser ecosystem" — the worry amongst Criteo investors appears to have been short-lived. Its share price has risen from a low of $45.32 in June and is currently trading at an almost record-high of around $51.73.
Business Insider spoke to Criteo president and COO Eric Eichmann shortly after the company posted a record quarter and raised its full-year guidance on Tuesday. We asked him whether the threat of Apple introducing ad blocking is a real concern, and what the company is doing to address the wider issue of the growing number of users installing ad blockers.
The short answer is: We're not worried ... but we are working to circumvent ad blocking's impact.
Eichmann thinks what many people ignored in the Apple developer documentation is that the company is merely allowing developers to build content-blocking extensions. Apple is unlikely to be launching a full-scale attack on ads that user have to opt-out from.
Eichmann said: "What's required for a person to block some of the ads is installing an app on your phone that does it for you. So it's quite a bit of a step you have to take. How many people are going to do it? It's a very obscure type of app ... this is not something Apple will be pushing or something that will become mainstream. So we are not worried because these kinds of things in the past have been available and never made any in-roads."
Blocking ads by default would also be damaging to the Apple app ecosystem. "These devices that we carry around wouldn't be worth anything if they didn't have all these apps on them. And many of these apps exist not because Apple pays them money, but because a lot of them are ad-supported. Yes, Apple generally wants to provide consumers with a great experience and the ability to do things to control this experience, but to go as far as saying Apple would not want to have advertising would, in my opinion, be taking it a bit far considering how much they rely on the ad ecosystem. So I don't think it's a big issue, and that's why we didn't address it directly [when the news first came out about Apple.] "
Criteo's business model might be the reason it's not too concerned
(IAB UK)
And while, more broadly, consumer use of ad blockers is on the rise (up 70% last year to 144 million people, according to PageFair and Adobe,) Eichmann says "we don't see it as a huge threat."
Criteo's specialism is working with retailers to target ads at users who are likely to be in the market for buying products. It has been dubbed, by Pivotal Research analyst Brian Wieser, the "poster child" of re-targeting — serving an ad at a customer that has already visited that advertiser's website or viewed a particular product.
Criteo only gets paid for serving ads that a user has clicked on, and it only gets credit if the user then went on to buy a product from that advertiser. Therefore, it's not in Criteo's interest to serve users billions of ads that they're never likely to click on anyway.
Eichmann said that if you look at surveys on what makes consumers download ad blockers (like this one from the UK's Internet Advertising Bureau,) people mostly block ads because they are interruptive to their web experience. That means things like annoying autoplay videos, and pop-ups.
I put it to Eichmann that many people also complain about re-targeting. Often the word "creepy" is used, and people get annoyed that the shoes they bought a week ago keep following them around the internet.
He said that it's other re-targeting companies giving the industry a bad reputation — not Criteo.
"If you book a hotel in Majorca, we won't serve you another ad for a hotel in Majorca. It's not in our interest because we don't make any money if you are not clicking on it and we are not converting. Ultimately our technology filters all that out and I feel good about our ability to do that. Since the beginning, we've also provided users the opportunity to opt-out of all of our campaigns, using the triangle [symbol] on top of the ad ... we can't control the other ad targeters that don't have sophisticated technology that just serve the ad for the thing you've already viewed on the website. That's actually quite easy to do, and that does lead to the industry getting a bad reputation," Eichmann said.
That said, Eichmann said Criteo is working with the industry to help circumvent the ad blockers. One such solution is "native advertising" — advertising that fits naturally and uses the same formatting as the other content on a web page or within an app.
Facebook is probably the biggest native advertising player in the world, with its News Feed ads, and Criteo has been working with the social network to develop "dynamic product ads" to encourage people to make purchases directly from the News Feed.
Criteo's Q2
Criteo reported a 64% lift in revenue (excluding traffic acquisition costs) to €271 million ($297 million) in the three months to June 30. Net income increased 100% to €4 million ($4.4 million.)
The company set a new record for client wins in the quarter, adding more than 730 new customers as it grew its sales operations geographically. Eichmann said Criteo has also managed to keep its retention rate at more than 90% for 16 quarters in a row.
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