What happened

Shares of advertising technology company Perion Network (PERI -3.16%) were up 18% in October, according to data provided by S&P Global Market Intelligence. The S&P 500 was up 8% in October, giving Perion stock a partial boost. But the larger boost to the stock price came after the company announced preliminary financial results for the third quarter of 2022.

So what

As of this writing, Perion stock is only down 9% year to date compared to a 22% decline for the S&P 500 -- it's a rare market-beater in 2022. And the reason Perion stock has performed relatively well is because the business continues to perform well, despite headwinds in the ad industry.

Perion will report official Q3 results on Nov. 9. However, it reported preliminary results on Oct. 6 and the market loved it. According to the unofficial numbers, Perion generated Q3 revenue of $158 million, an increase of 31% from the same quarter of 2021.

To be momentarily critical, that's the slowest top-line growth Perion has had all year. First-quarter revenue jumped 40% year over year and second-quarter revenue was up 34%. However, growth has not come easy for adtech companies in 2022. Inflation is hurting consumer spending and marketers are consequently pulling back. Therefore, even if Perion's growth has slowed, it's still impressive considering the broader advertising landscape.

Preliminary profit numbers were also strong for Perion. Like many companies, it uses a lot of adjusted numbers. But it did give its preliminary operating income according to generally accepted accounting principles (GAAP). GAAP operating income came in at $27.5 million, which is a healthy 17% margin.

Now what

Perion, like other adtech players, is hoping to position itself for success in a world where third-party identifiers are done away with. Alphabet and Apple are making changes and will make more changes in the future. And these third-party identifiers are instrumental in making ads effective.

The Trade Desk has created a solution called Unified ID 2.0 and many companies have signed on. However, Perion is blazing its own trail with its SORT platform, which it believes better addresses privacy concerns.

Perion's largest source of revenue comes from its partnership with Microsoft's Bing. And Bing has a large European presence. In Europe, privacy laws for advertisers can be more strict. Therefore, it makes sense that management is concerned about coming up with a solution that can hold up to scrutiny regarding privacy.

That said, Unified ID 2.0 and SORT work with first-party data. And the more data that's available, the more effective these alternatives can be in theory. Therefore, Perion investors will want to watch SORT adoption in coming quarters. It needs to attract as many brands to the platform as it can to ensure it can still deliver results for advertisers in the future.