Shares in retargeting business Criteo fell off the cliff today after it became apparent that the impact of Apple’s Intelligent Tracking Prevention (ITP) solution in its Safari browser could be much more than the 10-12 per cent figure the French based Nasdaq listed company initially indicated.

ITP limits the ability to collect information on website visitors which creates huge problems for businesses like Criteo that retarget advertising based on a user’s cookies.

Criteo’s problems don’t stop there — the IRS in the US is coming after them for an amount of money the company acknowledges is material, although it denies the liability.

There is also potentially significant negative implications for its revenues in Europe as a result of the EU’s General Data Protection Regulations, though the CEO Eric Eichmann told analysts that he sees benefits from the regulation. Not everyone agrees with him. 

And of course, there are ongoing questions over whether its platform is more susceptible to exploitation by ad fraudsters than its peers.

Shares fell more than 22 per cent today and at one point they were down more than 25 per cent. They have continued to drop in after-hours trading. Not only is the price down, but the volumes are comparatively huge as the chart below indicates.

Criteo took steps to mitigate against Apple’s privacy approach, however in the last 24 hours it has conceded a newer version of ITP gazumped the work around, acknowledging it will have to try another approach.

In a statement released to the markets overnight (AEST) Criteo said, “Earlier this month, Apple launched a new version of its mobile operating system, iOS 11.2, which disables the solution that some companies in the advertising ecosystem, including Criteo, currently use to reach Safari users. As a result, we believe the projected 9 per cent to 13 per cent ITP net negative impact on Criteo’s 2018 revenue ex-TAC relative to our pre-ITP base case projections, communicated on November 1, 2017, is no longer valid.”

The statement indicated that if it could not mitigate any ITP impact, the net negative impact on Criteo’s 2018 revenue ex-TAC, relative to its pre-ITP base case projections, would become approximately 22 per cent.

“We will provide formal guidance on revenue ex-TAC and adjusted EBITDA for fiscal 2018 mid-February 2018, when we report earnings for the fourth quarter and fiscal year 2017. At that point, we will incorporate in our guidance the latest assessment of the projected effectiveness of our alternative solution.”

Happy new year

Criteo has been much in the news over the last year and not always for the right reasons.

Question marks over its cost per click business model and the capacity of bad actors to use its platform for fraud abound. Earlier this year ad fraud specialist Method Media Intelligence said it found significant discrepancies between what Criteo told one of its clients, and what it said the clients own data revealed.

Then in September Gotham City Research released the first of several reports highlighting the vulnerability of Criteo’s solution to ad fraud. Gotham City said that this, plus the impact if ITP could see the stock decline by between 67 and 77 per cent. 

It is off over 40 per cent since Gotham first made that prediction.

“Several hours ago, Gotham City Research tweeted: “On September 21st we wrote “Criteo: The true Fraudster in the Adtech Industry?”… $CRTO stock promoters dismiss us for being wrong about Criteo & ad fraud. If so, why did Criteo start offering domain level transparency, starting November?” 

GCR in November also indicated that it believes Criteo has a problem with the US tax man.  

This is based on an SEC filing (page 19) for the quarter ended September 30, 2017 where Criteo acknowledges, “On September 27, 2017, we received a draft notice of proposed adjustment from the Internal Revenue Service (“IRS”) audit of Criteo Corp for the year ended December 31, 2014. The amount of adjustments that may be asserted by the IRS in the final notice of proposed adjustment cannot be quantified at this time; however, based on the draft notice received, the amount to be assessed may be material. We strongly disagree with the IRS’s position as asserted in the draft notice of proposed adjustment and intend to contest it.”

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