When Don Draper of the TV show Mad Men roamed the hallways of Madison Avenue, the number of opportunities for businesses to connect with customers was a fraction of what we have today.
Measurements such as share of voice were easy when looking for brand mentions on billboards, radio or television or in magazines and newspapers. Now, the number of possible measurements is staggering, opening investment opportunities for those who know where to look.
One company that is in the vanguard of digital-advertising measurement is Criteo (CRTO) . It is an exciting mid-capitalization player with sustainable earnings growth momentum in a bull market that appears to be running out of gas.
To grasp the expansion of digital advertising, just consider the explosive growth of applications, most of them with advertising or social-media components.
On New Year's Day, Apple smashed app records. Jan. 1 was the Apple App Store's busiest day ever, generating $240 million. Last year, app developers earned $20 billion, a year-over-year increase of 40%.
As of today, about 2.2 million apps are available in the Apple App store.
Today, Draper would be lying on his couch with an ice pack on his head trying to make sense of the myriad ways businesses can engage customers. For him, measuring column inches or radio and television airtime were easy ways to assess the share of a brand's voice, but this leaves little for subjective interpretation.
The Internet is more complex and pervasive than "old media."
That is why investors should consider Criteo, which controls proprietary ad-targeting technology that functions on any platform, whether it is a desktop computer, laptop, smartphone or tablet.
Criteo's technology can re-target online ads with pinpoint precision, predicated on a consumer's buying habits, demographic profile, expressed interests and online surfing history.
This technology is more than just a means for Internet giants such as Alphabet's Google, Facebook, Verizon Communications and Yahoo! to increase revenue. It is a lasting transformation in the way that companies do business online.
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With a market cap of $2.86 billion, France-based Criteo occupies the mid-cap "sweet spot," offering more room for growth than the mega-caps but large enough to ride out the ups and downs -- and shake-outs -- of its volatile sector.
Criteo's campaigns include algorithms that customize advertisements to user interest by determining the specific products and services to include in the advertisement; algorithms that predict the probability and nature of a user's engagement with a given advertisement; and a bidding engine for executing campaigns based on goals set by clients.
The company also collects information about the interaction of users with its clients' digital properties. With these data, the company creates solutions that allow online businesses to follow up with visitors who have left the website without making a purchase.
Through the deployment of personalized banners, Criteo attempts to drive potential customers back to the client's website.
Founded in 2005, Criteo went public in 2013, and it is already the global leader in digital performance display advertising, with clients in a wide variety of industries.
Criteo's earnings momentum bodes well for shareholders.
According to the consensus analyst estimate, the company is on track to post earnings growth of 27.9% for the fourth quarter; 37.1% this year; 25.5% next year; and 20% over the next five years on an annualized basis.
And yet the stock trades at a reasonable valuation. Criteo's trailing 12-month price-earning ratio is 35.33, compared with the staggeringly high trailing P/E of 333.6 for the industry of Internet software and services.
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