Targeted Ad Firm Criteo Gains From E-Commerce Trends

With consumers buying more goods online via smartphones, tablets and PCs, marketers feel pressure to come up with ever more sophisticated ways to catch their attention.

Fortunately, the marketing industry is evolving fast, and one of the leaders in this evolution is Criteo (NASDAQ:CRTO), a French provider of targeted advertising products to e-commerce firms.

Criteo went public in November 2013 at 31 and currently trades near 48. Its revenue has nearly tripled over the last couple of years, and annual earnings growth is projected to be 31% or higher over the next three years.

Mobile phone transactions are prevalent in Asian markets like Japan, where Criteo has preferential access to Yahoo Japan's inventory.

Mobile phone transactions are prevalent in Asian markets like Japan, where Criteo has preferential access to Yahoo Japan’s inventory. View Enlarged Image

Group Leader

The company’s first-quater earnings rose 76% from the previous year to 30 cents a share, topping consensus analyst estimates.

Criteo is the top stock among 25 names in IBD’s Commercial Services-Advertising industry group. The group is ranked 111th out of 197 industry groups that IBD tracks. Other names within the group include Lamar Advertising (NASDAQ:LAMR), Clear Channel Outdoor (NYSE:CCO), Viad (NYSE:VVI) and Interpublic Group of Companies (NYSE:IPG).

Criteo was founded in 2005. Its original focus was on developing technology to predict what might interest people. It evolved into an advertising company with the goal of driving incremental sales for its customers.

Today it provides a full set of advertising solutions that it offers on any device and operating system. Much of its business focuses on leveraging large pools of data as a way of engaging and winning customers on behalf of ad clients.

Its Criteo Engine technology provides algorithms that predict the probability and nature of a user’s engagement with an ad.

The technology also provides recommendation algorithms that create and tailor ads to specific user interests.

“They pioneered deep-data integration,” said Andrew McNellis, director of Internet equity research at Evercore ISI.

Criteo also has one of the best supply organizations among pure-play ad-tech companies, he added. That’s partly because the company goes out to publishers, forms direct relationships with them and accesses their inventory.

“They have access to ad supply that others don’t,” McNellis told IBD. “They’ve been able to build up these relationships and this inventory over years. They focused on quality ad supply early on, and it’s paid off.”

On the supply side, Criteo has a network of more than 10,000 publishers, with Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) the largest.

Criteo has been a significant buyer of Facebook’s desktop ad inventory and recently gained access to its mobile ad inventory via Facebook’s recently introduced Dynamic Product Ads. In addition, Criteo has been working closely with Google on similar ad formats.

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