Engine Innovation Romain Niccoli, Chief Product Officer & Co-Founder Investor Day, September 2016 - Criteo
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Romain Niccoli, Chief Product Officer & Co-Founder Investor Day, September 2016 Engine Innovation
Safe Harbor Statement This presentation contains “forward-looking” statements that are based on our management’s beliefs and assumptions and on information currently available to management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, projections, competitive position, industry environment, potential growth opportunities, potential market opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this presentation. You should read the Company’s most recent Annual Report as filed on Form 10-K, on February 29, 2016, including the Risk Factors set forth therein and the exhibits thereto, completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in the forward- looking statements, even if new information becomes available in the future. This presentation includes certain non-GAAP financial measures as defined by SEC rules. As required by Regulation G, we have provided a reconciliation of those measures to the most directly comparable GAAP measures, which is available in the Appendix slides to today’s “Financial Update” presentation. In addition, certain financial information contained herein with respect to years ended prior to December 31, 2013 has been derived from our audited consolidated financial statements that were prepared in accordance with IFRS and presented in Euros. Financial information contained herein with respect to quarterly periods has been derived from our unaudited condensed consolidated financial statements. 2 | Copyright © 2016 Criteo
Technology
Our Engine solves highly complex problems in real time
For each user
Advertiser 1 Creates Unique user
Personalized Unique
Advertiser 2 Creates
Product Personalized valueuser
Creates creative Unique
valueuser
Product
Recommendation Personalized
creative prediction
Advertiser 3 Creates
Product Unique
valueuser
prediction
Recommendation Personalized
creative
Product
Recommendation valueuser
prediction
Unique
Advertiser 4 Product Personalized
creative prediction
Recommendation value
recommendation creative
Advertiser 5 prediction
Internal
Publisher/ Custom ad
advertiser
platform bid serving
auction
3 | Copyright © 2016 CriteoEngine innovation has always been a significant growth driver
Some examples of significant Engine releases over the past few years…
Release year Release name Revenue ex-TAC impact
2013 Conversion Optimization +20% uplift
2014 Revenue Optimization +8% uplift
1st generation
2015
Dynamic Creative Optimization +10% uplift
Note: the uplift in Revenue ex-TAC corresponds to the increase in Revenue ex-TAC for Criteo on a representative sample of clients, where clients use the
4 | Copyright © 2016 Criteo corresponding new Engine feature on 50% of their user pool and do not use the corresponding new Engine feature on the other 50% of their user pool, pursuant to a
proven 50/50 A/B test methodologySome examples of significant releases in our Engine roadmap for 2016/2017
1 2 3 4
Customer Targets Universal Catalog Kinetic Design Smart
Header Bidding
5 | Copyright © 2016 CriteoSome examples of significant releases in our Engine roadmap for 2016/2017
1 2 3 4
Customer Targets Universal Catalog Kinetic Design Smart
Header Bidding
6 | Copyright © 2016 CriteoTechnology
We constantly tune our Engine to meet advertisers’ objectives
Our advertisers’ ultimate objective
Advertisers have an incentive
to spend more with us
We get closer to advertisers’ ultimate goal
through an iterative process
Maximize gross margin
Past Present & Future
$ %
Click Conversion Revenue Gross Margin Further
optimization optimization optimization optimization optimizations
7 | Copyright © 2016 CriteoWe are improving performance while simplifying advertisers’ lives
We let advertisers bid on a cost-of-sales target instead of a CPC
Target COS Result
Bidding decision is based
Maximize advertiser ROI by automatically
on user value against a
adapting to seasonality and trends
cost-of-sales target
Align advertisers’ long-term and
short-term interests with Criteo’s
8 | Copyright © 2016 Criteo Note: Cost-of-sales target means the marketing expenditure advertisers are willing to spend with Criteo as a percentage of the revenue
generated by Criteo on a post-click basisThe logical next step is to go all the way to advertisers’ gross margin target
We are building a new generation of the Engine In development
optimizing for gross margin for 2017*
Objective: Maximize our clients’ gross margin
Engine feature Result
Bidding decision based on user Advertisers maximize gross margin for
value against a gross margin each product in catalog and optimize
target per product target ROI
Gross Margin
Optimization
9 | Copyright © 2016 Criteo * EstimatedSome examples of significant releases in our Engine roadmap for 2016/2017
1 2 3 4
Customer Targets Universal Catalog Kinetic Design Smart
Header Bidding
10 | Copyright © 2016 CriteoWe enrich all products with universal metadata and match them between advertisers
We are building a product graph of all products across our advertisers
Enriched Catalog
4bn products Original Catalog
in client catalogs Google
Image Color Brand
Category
Image Color Brand
Cocktail
Product 1 Maje
Product 1 Dress
Product 2 Football
Product 2 Blue Nike
Shoe
The largest
Product 3 Product 3 Dior Sunglasses
product database
Universal Catalog
Google
id Image Color Brand Retailers
Category
Bigger than Universal Cocktail House of Fraser,
Maje
Amazon and Alibaba Product 1 Dress ASOS
Universal
Blue Nike Football Shoe ASOS, Sears
Product 2
Universal
Dior Sunglasses Fnac, Best Buy
11 | Copyright © 2016 Criteo Product 3Universal catalog is a new powerful asset for Criteo
Leveraging Objective: Uncovering deeper We will use this key asset for
cross-merchant data relationships among products
and consumer preferences • Remarketing
• Prospecting
Benefits to advertisers:
Linking products with • Understand consumer • Search
attributes, users and intent across advertisers
• Other new initiatives
other products short- and long-term
• Build relevant user profiles
12 | Copyright © 2016 CriteoSome examples of significant releases in our Engine roadmap for 2016/2017
1 2 3 4
Customer Targets Universal Catalog Kinetic Design Smart
Header Bidding
13 | Copyright © 2016 CriteoWe are constantly evolving our creative capabilities
2015 2016 2017
Template-based Perfectly branded Template-free
personalized design personalized ads Kinetic Design
in any size enabling an infinite
number of unique ads
14 | Copyright © 2016 CriteoKinetic Design will bring many opportunities to optimize performance
Infinite number of
Scalable solution
unique banners Improved performance
to a manual problem
generated by Engine
15 | Copyright © 2016 CriteoSome examples of significant releases in our Engine roadmap for 2016/2017
1 2 3 4
Customer Targets Universal Catalog Kinetic Design Smart
Header Bidding
16 | Copyright © 2016 CriteoWe are leveraging machine learning to adapt to header bidding
User value = $1.5 CPM
2nd price auction 1st price auction
1 (before header bidding) 2 (after header bidding – near term)
• Criteo bids $1.5 • Criteo bids $1.5
Clearing price: Clearing price:
• Bidder X bids $0.9 $0.9 • Bidder X bids $0.9 $1.5
• Bidder Y bids $0.3 • Bidder Y bids $0.3
1st price auction 1st price auction
3 (after header bidding 4 (after header bidding – smart bidding) 2nd price
-33% market correction) prediction
• Criteo bids $1.0 Clearing price: • Criteo bids $0.61 Clearing price:
• Bidder X bids $0.6 $1.0 • Bidder X bids $0.6 $0.61
• Bidder Y bids $0.2 • Bidder Y bids $0.2
17 | Copyright © 2016 CriteoLonger-term, we have many additional opportunities to optimize our Engine
Continue to improve the display to conversion ratio ofThe World’s Performance Marketing Platform
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