Latest / Retail Media Breakfast Club / Criteo’s Frenemies Pile On
Transcript
- Criteo's Frenemies Pile On === [00:00:00] when Criteo's own tech partners publicly celebrate a writeup of its struggles, you know that something's shifted dramatically in retail media's power dynamics [00:00:12] last week, Catherine Lundstrom [00:00:15] Adweek piece laid bare. The mounting challenges of Adtech firm Criteo, which has reportedly lost clients like Target's Round L and Uber Eats [00:00:29] and is [00:00:30] facing a growing army of nimble competitors. Nipping at its heels. It was an excellent article and a link up to it in the show notes. It's must read if you follow this industry, but what really caught my eye [00:00:45] wasn't the article itself, it was the LinkedIn victory lap that followed John Flugs ~dad.~ [00:00:51] ~John Flugs, John Flugs dad ~from Moeloco, a CRI competitor, posted a cheeky Spotify link to a song about time running out [00:01:00] for incumbents. Andreas Reen, CEO of rival Penta Leap chimed in about how the next phase of competition will be all about technology, and that's where this new cup of startups are ahead. [00:01:14] [00:01:15] Even Drew Cashmore from Vantage couldn't resist adding that. The industry owes credit for educating the market, which is corporate speak for thanks for warming up our customers. [00:01:28] This is so interesting to [00:01:30] me because I think we can learn a lot about the state of the retail media industry from this frenemy situation. And so in this episode, I'm going to explore why Criteo's own integration partners are [00:01:45] prepared to throw them under the bus. Let's jump in. [00:01:49] [00:01:50] Here's the irony that should keep Criteo's executives up at night. They wrote this playbook themselves back in the [00:02:00] early 2010s. Criteo was the scrappy upstart that knee capped the incumbent ad networks of the era. Criteo's innovation was retargeting technology that let marketers buy display ads [00:02:15] just like they bought search ads. [00:02:17] In a measurable, accountable, and cheaper way than was possible at the time. It was textbook innovator's Dilemma. Criteo was able to attack from [00:02:30] below [00:02:30] with a good enough solution that the big players couldn't match without cannibalizing their margins. [00:02:36] Fast forward to today and Criteo has become the incumbent of retail media. They're stuck defending a [00:02:45] tasty margin, which I'm told by insiders can be three or four times as much as what a retailer would spend on an in-house solution. [00:02:55] Now, this kind of premium made sense when Criteo had a near [00:03:00] monopoly on advertiser demand, as in brands wishing to advertise on publisher networks, or in this case, retailers. Running on Criteo's tech, but that moat is evaporating faster than you can [00:03:15] say, real time bidding. I've talked about real time bidding in the past. [00:03:18] I'll link up to an article that I wrote on this topic, but [00:03:22] it is a mechanism that lets any demand side platform match to supply side inventory in real [00:03:30] time, and it strips away the handshakes required and the markups along the way that once padded. Criteo's manage service fees. When prices get set in open auctions. The [00:03:45] fee that the retailers are paying for these intermediaries along the way to route advertiser demand to their inventory supply, suddenly that looks irrelevant and like an avoidable surcharge. [00:03:59] [00:04:00] CEO of Pen Leap. Andreas Refin spelled out this dynamic on LinkedIn on a comment on the Adweek article. He said, with RTB, real-time bidding now live, that moat is eroding fast. By the [00:04:15] end of the year, challenges like Pen Leap or Cody will have the same or even more demand flowing through their pipes. Just as a disclaimer, Penta Leap is a client of mine. [00:04:25] Just like any industry incumbent, the danger is in [00:04:30] defending the business model of the past while the market rewrites the rules around you. And here's where things get kind of awkward. Critio often partners with the very companies that are [00:04:45] now trying to nibble away at it. [00:04:47] Ad tech startups tend to initially go after a specific segment of the retail media value chain, like the SSP or the ad server or order management. So [00:05:00] initially these startups need to integrate with the incumbent like Criteo, who provide the bones of the rest of the stack, and Criteo may agree to integrate with these newcomers in order to retain. [00:05:14] Their [00:05:15] existing customer to keep the majority of the business. The new startup may be so specific in what they offer that at the time it doesn't necessarily appear to be super competitive. [00:05:30] But these startups, of course, have bigger ambitions. Some begin to extend their reach through the value chain by adding new capabilities. [00:05:39] Some end up partnering with complimentary players and in the case of [00:05:45] real time bidding, that's technology that allows those players to hook directly into advertiser demand from buy-side platforms like Sky and Teas, which essentially [00:06:00] cuts out Criteo, the company that was initially essential to making the whole thing work. [00:06:05] So how does this whole dust up end Two scenarios seem most likely to me, and they may not be mutually [00:06:15] exclusive. Did you know that 60% of shoppers abandoned carts when product info is wrong? Before you ramp up your ad spend, [00:06:30] fix the shelf Acosta group's. Award-winning connected commerce crew is trusted by brands like Coca-Cola and Sanofi to deliver critical content updates. [00:06:43] Acosta Group handles it all. [00:06:45] Then layers on media buying. Learn about Acosta group's connected commerce capability at Acosta Group and tell them Retail Media Breakfast Club sent you. That's A-C-O-S-T-A [00:07:00] group [00:07:02] So scenario number one, Criteo goes shopping, Criteo's done it before they've acquired. Many, many companies in the past from very early on in the company's history. [00:07:15] Some of the big ones, hook Logic in 2016 which was their initial entry into retail media and then a few years ago I Icon Web that bolstered their tech stack. [00:07:26] But they have been very acquisitive throughout their [00:07:30] whole history as a company. So it's conceivable that they would snap up one or maybe even more of these newer tech players that would eliminate a competitor while also acquiring the nimble tech [00:07:45] that they need in the future. [00:07:47] Scenario number two is that the challenges consolidate among themselves. These partnerships already have developed extensive partnerships. Penta Leap has partnered with Tess, A [00:08:00] DSP. Cody connects through Sky, another DSP, and [00:08:07] so partnerships are already extensive among complimentary players, but there could also be consolidation among direct [00:08:15] competitors. The venture capital backing that a lot of these companies have won't wait forever to see their money back. [00:08:21] In any event, the clock is ticking. I wrote earlier this week about a future scenario where the shopper audience [00:08:30] pendulum swings away from retailers and their.com sites and apps. Towards LLMs as a primary surface for shopping and transacting. Consumers are gonna rely on AI agents to do more of the [00:08:45] researching and transacting on their behalf. [00:08:48] So all the retail media tech players need to either make hay while the sun shines, or be prepared to reinvent themselves if consumer behavior [00:09:00] indeed thens in that direction. Criteo knows reinvention. Well. They've already transformed from retargeting pioneer to commerce media platform. [00:09:09] They know how to disrupt even themselves. The question is whether they'll move [00:09:15] fast enough this time. Their own history proves that they can evolve. Now they need to remember that playbook before someone else uses it on them.