OPINION Microsoft and Criteo: what does its partnership agreement mean?

The most compelling media announcement in recent weeks has been the partnership between Microsoft and Criteo. This development has sparked significant interest and speculation within the industry.

Here are few reasons why this is significant:

1. Microsoft’s advertising ambitions: Microsoft has significantly ramped up its advertising efforts in recent years. In 2019, it acquired PromoteIQ, which had a few key clients but did not match the extensive reach of Criteo, which boasts over 200 retail media partners. This acquisition marked the beginning of Microsoft’s serious commitment to advertising.
2. Expanded reach and demand: The recent partnership announcement highlighted that Microsoft Advertising will integrate with Criteo’s network of 225 retailers, significantly expanding their digital footprint. With over 500,000 active advertiser clients, Microsoft brings a substantial increase in demand to Criteo’s platform.
3. Preferred onsite media partner: Microsoft Advertising plans to work with Criteo as its preferred onsite media partner, effectively replacing the legacy PromoteIQ technology. This transition will leverage Microsoft’s sales team to promote Criteo’s Sponsored Products, indicating a strategic alignment.
4. AI and cloud capabilities: Microsoft’s advancements in AI and cloud technology are a key advantage. Their AI-powered Retail Media Creative Studio helps advertisers create and optimize ad creatives at scale, using generative AI, showcasing their innovation in the advertising space.

Why is this interesting?

• Microsoft’s partner-first approach: Microsoft is renowned for its partner-centric business model, which contrasts with companies like Oracle, who have recently closed their ad network. This approach positions Microsoft well to capitalize on the growing retail media market.
• Retail media market growth: Retail media is rapidly expanding, now accounting for 16% of global advertising spend. This sector is relatively untapped by giants like Google and Meta, presenting a significant opportunity for Microsoft and Criteo.
• Competitive landscape: Amazon remains a key competitor with its established advertising networks and cloud services. However, Microsoft’s advancements and strategic partnerships could position them as a formidable contender in the retail media space.

Criteo’s retail media business reported $50mn revenue in Q1 2024, with a 20% year-over-year growth, although its performance business remains flat. 

Given Criteo’s history of acquisitions, such as Hooklogic, there is potential for strategic restructuring, including the possible sale of its performance business – leaving the business with the fast-growing retail media business, which would have a higher valuation than the performance business.

What conclusions can we draw?

The Microsoft-Criteo partnership is more than just another business deal; it’s a strategic move that could reshape the retail media landscape. Whether this partnership leads to an acquisition remains to be seen, but the signs suggest a deeper integration is on the horizon. 

As retail media continues to grow and evolve, this partnership positions Microsoft in particular to leverage their strengths and capture a larger market share in the advertising business.  

The final question is where this would leave the holding companies like WPP or Dentsu. Publicis snapped up Epsilon and Citrus over the years, and Criteo would help build out a digital commerce story.  Would the holdcos be brave enough to acquire Criteo?  Stranger things have happened.

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MTSOfan via Flickr