Catching your clicks

 
Source: 
The Business Times
Monday, 8 October, 2018

It's a French firm you've never heard of that's taking on the likes of Google -- in the digital advertising software market, that is. Ad tech company Criteo's founder JB Rudelle explains how he is repositioning the firm from an ad platform of choice into a strategic partner for the open Internet.

"New discovery - that's what we're trying to do. We have no interest in showing a banner ad to someone if we don't think there's a reasonable likelihood that they're going to click on the ad. We get paid only if there are true engagements." - JB Rudelle.

 

All is for the best in the best of all possible worlds. This line from Voltaire's Candide also applies to the advertisements that follow you from site to site on the open Internet.

 

So says JB Rudelle, founder of advertising tech firm Criteo. The Frenchman puts it this way: "Is advertising just visual pollution or is it adding some real value? If people find it useful, then it's the best possible advertising.

 

"Our purpose is to show the right ad to the right user at the right time and the right place.

 

Read also: An interview with Alban Villani, General Manager of Criteo SEA, HK & TW on how AI and machine learning can be used for marketing

 

"New discovery - that's what we're trying to do. We have no interest in showing a banner ad to someone if we don't think there's a reasonable likelihood that they're going to click on the ad. We get paid only if there are true engagements."

 

One of the fiercest independent contenders in the ad tech space, Criteo has built a centralised platform where retailers can buy digital ad inventory programmatically to retarget online shoppers who have previously browsed their products.

 

Last year, Criteo's revenue accounted for 7.4 per cent of the worldwide market for digital advertising software - the top market share - according to market intelligence firm IDC. Google was the second largest vendor with a 6.5 per cent share.

 

But Criteo has since faced growth challenges, and earlier this year the firm's board sought out Mr Rudelle - who founded the firm in 2005 as a startup in a Parisian salad bar - to pick up the reins again, so he did.

 

He returned to the role of chief executive in April, double-hatting as chief product officer to accelerate product innovation. He had earlier tried to wind down his involvement in Criteo by moving from CEO to executive chairman back at the end of 2015, when the company was in a steady state.

 

Speaking to The Business Times during a visit at end-August, Mr Rudelle says: "We got hit last year by a change in the set-up of Apple which created some truckwaves in the company. So there was some necessity to change the way we were doing things and to reinvent the company."

 

Apple launched iOS 11 in September last year, and followed up with iOS 11.2 in December. The new software includes a feature called Intelligent Tracking Prevention (ITP) that prevents third parties from tracking users on the Safari Web browser for more than 24 hours after a user visited a website.

 

So while popular sites like Facebook and Google avoided calamity, Criteo, a third-party system that coordinates cookies in the background, was hit hard.

 

In the three months ended June 30, user coverage limitations in Safari resulted in a 3 per cent dip in same-client revenue excluding traffic acquisition costs from the same period a year earlier, Criteo reported in August.

 

Mr Rudelle refers to last year's developments as a "very good wake-up call".

 

He adds: "It took probably a bit too long for us to react on this. In the last 12 months we made a big re-engineering of our platform to be much less cookie-dependent.

 

"In the early days of Criteo, 100 per cent of our ID (consumer identification) solution was based on cookies. Now a growing part of this is based on other type of IDs."

 

He won't say exactly how much Criteo has reduced its reliance on cookies. Instead, he notes that the company is now less vulnerable to surprise actions by any one browser manufacturer. Other factors are driving change too.

 

Smartphone users are increasingly spending more time glued to native apps, rather than the mobile Web. Mobile apps cannot share cookie information with each other, so cookie tracking can't be relied on.

 

"Especially in South-east Asia, apps are already 60-70 per cent of our business. Everyone is on mobile, not mobile Web, but mobile apps. In those countries we run the majority of our business without any cookies," Mr Rudelle says.

 

App retargeting is now the fastest-growing area for Criteo. It also uses other technologies including hashed e-mails and login data from various client portals to get the job done.

 

In Asia, phone numbers are particularly important, Mr Rudelle adds: "More and more users identify themselves with not e-mail, but phone numbers. A lot of service providers don't even bother asking you for your e-mail."

 

The man has other trends to reckon with.

 

Consumers, once unwitting cash cows who gave their data up freely to Big Tech, are starting to question the lack of transparency surrounding how their data is tracked and monetised by companies like Criteo.

 

In the European Union, this movement is embodied by the General Data Protection Regulation (GDPR), a new legal requirement that governs how personal data is processed, stored, used and exchanged.

 

Though the impact to Criteo's topline has not been as bad as it had braced for since the new rules came into force in May, Mr Rudelle notes that GDPR could eventually influence privacy regulation around the world.

 

California passed its own digital privacy law in June.

 

Yet Criteo is up to the challenge, he says: "You have to find the exact right balance between providing a safe, controlled environment for the user and at the same time you don't want to kill the browsing experience by forcing users to agree every five seconds about how their data is used.

 

"(Consumer) privacy, this is something that started in Europe. We're building a lot of experience, and I think the experience we are gaining in Europe is going to help us get an edge in other markets. We already know what are the best practices."

 

Another question being asked is whether consumers should be better compensated for the data they generate, which companies aggregate and build businesses upon.

 

For this French boss, the equation is very simple. His reply is firm: "You have two kinds of consumers. You have the ones that are highly sensitive to the usage of their data and they don't want anyone to use their data in any respect. Which is totally OK, you have to respect those users. The consequence for these guys is that you see ads that are highly irrelevant. There is no way to show them anything relevant. So it's a trade-off.

 

"The vast majority of users accept controlled use of their data, and you have to give them something in exchange. Typically what they get in exchange is added-value advertising. I think this is the right balance. Especially when it is non-sensitive data like buying a phone."

 

Independent advantage

 

As tumultuous as it gets in the highly-competitive ad tech industry, Mr Rudelle is convinced that the dominance of Google and Facebook in digital advertising can be played to Criteo's advantage.

 

By most counts, media owners Google and Facebook are a duopoly in digital ad spending (not ad tech spending).

 

But Mr Rudelle has observed that brands and retailers are increasingly trying to reduce their reliance on the two giants, and are eager to work with Criteo strategically to do so.

 

He explains: "Facebook is an ecosystem on its own with its own rules. In that closed ecosystem, they (advertisers) don't have the freedom to use their data, and they don't have any choice. This is the Facebook way, that's it.

 

"We think there is a huge opportunity outside of those ecosystems for our clients. The open Internet is pretty much everyone else outside of social and search where there is empowerment of buyers to use their own data in the way they want."

 

Criteo's advantage is that it's seen as a pure tech partner, with no hidden agendas, he explains.

 

"We are not in the business of replacing our clients with our own services. You've seen all the giants trying to control the direct relationship with the end user. They are themselves media companies so they are not completely neutral in terms of the destination for the end user. Us, we do tech and just tech, nothing else."

 

His pitch to small and medium-size enterprises is that Criteo will help them maintain control of their own "destiny", namely control over the relationship they have with their end users and control over their own data.

 

Basically, it's a power play. Mr Rudelle illustrates: "Search is typically part of your marketing mix. If you are very dependent on Google for buying search, do you want to rely on the same company for your display buying? Do you want to rely on the same company for all your advertising stack?

 

"You never know when these companies may change their policies. And I know numerous examples where a company gets crushed. Not always intentionally but when you are facing something very big and you are small, you are in an uncomfortable position where you don't have much say about how things are going to be."

 

This, in essence, is Criteo's new strategic direction. Google has cornered search and Facebook has cornered social media. So the open Internet is where Criteo is playing for keeps.

 

The right business model

 

Mr Rudelle is only at the beginning of the journey to reposition Criteo from an ad platform of choice into a strategic partner for the open Internet.

 

But he's no stranger to change and iteration. After all, Criteo had pivoted four times to find the correct business model before growth took off.

 

The company began in 2005 as a modest film recommendations site, with a B2C (business to consumer) model of traffic monetisation that was "completely unsuccessful", Mr Rudelle recalls.

 

He founded the company with two former Microsoft engineers, Romain Niccoli and Franck Le Ouay, while managing an organic salad bar with his wife in Paris. Criteo operated out of a spare room in the back.

 

Mr Rudelle says: "We had a great technology but in the first place we didn't have a right business model. And you learn the hard way that you can have the best technology in the world, but if you don't have the right go-to-market strategy and the right pricing model, it's useless.

 

"You see a lot of companies with good tech that just die, because they don't find the right marketing mix. We started to grow really fast three years later once we found the right business model."

 

Criteo made its initial public offering on the Nasdaq in 2013. At the end of June this year, it had 18,936 clients, with a retention rate of close to 90 per cent. It engages 1.4 billion users across the world, and sees over US$700 billion in annual e-commerce sales data.

 

He may have got into the business of ad tech through a rather indirect path, but Mr Rudelle is no less clear in his purpose.

 

He's an entrepreneur, he says, and therefore an optimist. So competition and regulatory risks are opportunities to him, not challenges.

 

"Advertising is part of the business milieu of the Internet. There are a lot of services that cannot survive without advertising dollars," he adds.

 

JEAN-BAPTISTE RUDELLE

CEO and Founder, Criteo

1969 Born in France

EDUCATION

1989 - 1991: Imperial College London

1991 - 1993: Supélec engineering school

CAREER

1993 - 1996: Engineer, Asia Pacific Export

1996 - 1999: Senior Consultant, Roland Berger & Partners

1999 - 2004: Founder and CEO, Kiwee (mobile ringtone downloads)

2005 - 2015: Founder and CEO, Criteo

2017 - 2018: Founder and CEO, LESS (ride-sharing service)

Since April 2018 - CEO, Criteo