by Laurie Sullivan @lauriesullivan, August 2, 2017

Predictive search has been a focus of Criteo for some time. The company’s second-quarter earnings demonstrated how the move to combine creative optimization and performance advertising will pay off long term.

Criteo reported Wednesday that second-quarter 2017 revenue rose 33% to $542 million, but net income fell 44% to $8 million, driven by the accounting impact of the HookLogic acquisition and restructuring costs in China.

“We are building the highest performing and open commerce marketing ecosystem for retailers and brands, allowing them to compete with large ecommerce companies,” said Eric Eichmann, CEO, in a prepared statement. “Our unique solution opens up a large opportunity for us.”

The company said it added 950 clients, ending the quarter with more than 16,000 commerce and brand clients, and managed to maintain a 90% client retention across the business.

Criteo Direct Bidder, the company’s “next-generation” header-bidding technology, is now connected to more than 450 publishers globally, helping increase their average yield by 20% to 40%. The company is also testing several new product initiatives, including app installs, CRM onboarding for brands and retailers, and Store-to-web retargeting campaigns.

Criteo launched predictive search in the fourth quarter of 2016, bringing in technology from the 2011 acquisition of Datapop, as well as other technologies.

The acquisitions have helped to predictive optimization to drive sales on Google Shopping. The company in second-quarter 2017 now supports more than 100 clients.

Criteo still faces challenges. “Criteo wants to become the marketing solution for anything with a performance metric,” wrote Mark Mahaney, analyst at RBC Capital Markets, in a research note published Wednesday. “Though the company is primarily focused on display right now, expansion into creative optimization, e-mail, cross-device, native, and audience targeting are all on the horizon.”

Competition remains a risk to its rating and stock price, per Mahaney. While Criteo remains the largest independent company, several factors could hinder performance. Mahaney points to a cookieless environment for mobile tied to large probabilistic campaigns based on device IDs could result in lower advertiser ROI. Another is Apple iOS policy changes, and the “Walled Gardens” at Google, Amazon, Apple, and Facebook that keep data within their platforms.

Mahaney writes that long-term success will depend on Criteo’s ability to deliver performance, and incremental revenues to publishers. And with a growing focus on transparency, control, and measurement, he and fellow analysts at RBC believe advertisers increasingly prefer a self-service programmatic ad-buying solution.

MediaPost.com: Search Marketing Daily

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