Shares of Criteo SA (NASDAQ:CRTO) were down 9.7% as of 1:30 p.m. EDT Friday after a Goldman Sachs analyst confirmed that the advertising retargeting specialist has been decertified as a preferred Facebook Marketing Partner.
In a note to clients obtained by website TheFly, Goldman's Heath Terry says that Criteo has confirmed recent reports that it lost its Facebook Marketing Partner status at the beginning of July. But at the same time -- and keeping in mind that revenue excluding traffic acquisition costs (TAC) derived from Facebook was only 4% of Criteo's total revenue last quarter -- Terry reduced his revenue ex-TAC estimates for Criteo by a modest 2%. And he reiterated his neutral rating on the stock.
To be fair, this shouldn't be a big surprise. When I spoke with CFO Benoit Fouilland shortly after the company's most recent quarterly report last month, he stressed the company's opportunity to capture incremental market share and revenue from advertisers concerned about their over-reliance on Facebook and Alphabet's Google -- two tech titans that he notes currently enjoy a "virtual duopoly" in the digital advertising industry.
During last month's earnings conference call, CEO JB Rudelle elaborated, saying, "Outside of Google and Facebook ... we have the opportunity to be the third pillar of any advertiser playbook -- that is, the ad platform of choice for the open internet."
It likely doesn't help that Criteo is in the middle of a business transformation aimed at reaccelerating growth, including revamping its go-to-market strategy and correcting delays in hiring that it told investors last quarter will constrain top-line growth in the second half. As it stands, Criteo shares are now down around 12% so far in 2018. And until shareholders see some fruits of its efforts to become that "third pillar" for advertisers, I won't be surprised if the stock remains under pressure.