Wednesday, June 4, 2014

Online marketing is all about performance

There are two simple messages from the history of the online industry since 2000:

1. The Internet is free and funded by advertising; 
2. Advertising is about post-click performance.

While some people consider the second point controversial, the evidence is now compelling. The two behemoths of the industry, Google and Facebook, rest on this business model.

Google has grown to $40bn+ revenue per year, by selling a product "search" that delivers clicks to your site, which then convert into sales. The pitch has always been very simple: spend more money, make more money.

Facebook has experimented with many different advertising models, but has seen its revenue (and stock price) explode with its mobile news feed advertising product. Mobile is now more than half its business. The model is again post-click and performance: the advertiser pays for clicks, and measures the cost of a new app install. This focus on the cost of an app install reflects the lifetime value that is generated from installing this app (if you don't believe in this value take a look at king.com's IPO prospectus and the $1.9Bn of revenue they generated in 2013. )

At Criteo, post-click performance has been our guiding light since the very beginning. Five years ago, people used to tell me that you couldn't make display advertising perform like search. I don't hear that anymore. But performance is an ambition not a destination - it can always be improved with better technology, more data and better integrations. And the good news is that it creates great alignment with all parties involved: increasing performance for advertisers allows them to spend more money with you profitably.

I'm therefore particularly pleased with today's announcement of a dramatic improvement to the Criteo Engine - the technology that predicts and recommends what ads to show, to which users, and at what price. By being able to predict not just clicks, but conversions, we have delivered a 38% increase in the number of sales our clients can generate at the same cost of sales. Huge credit to the Engine R&D and product team for all their work on this - and it has been a lot of work! A lot of the fun at Criteo is geeky conversations about how to improve performance based on new features or capabilities, and it's nice to be able to be public about a big improvement that has come about from this.

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