Criteo S.A. 10-K

Item 1. Business History and Development of the Company Criteo S.A. was initially incorporated as a société par actions simplifiée , or S.A.S., under the laws of the French Republic on November 3, 2005, for a period of 99 years and subsequently converted to a société anonyme , or S.A. We are registered at the Paris Commerce and Companies Register under the number 484 786 249. Our agent for service of process in the United States is National Registered Agents, Inc. Business Overview We are a global technology company powering the world's marketers with trusted and impactful advertising. We operate at the intersection of ecommerce, digital marketing and media monetization. We enable brands' and retailers' growth by providing best-in-class marketing and monetization services on the open Internet. We do this by activating commerce data through artificial intelligence ("AI") technology, reaching consumers on an extensive scale across all stages of the consumer journey, and generating advertising revenues from consumer brands for large retailers. Our vision is to build the world's leading Commerce Media Platform to deliver measurable business outcomes at scale for global brands, agencies and retailers across multiple marketing goals. Our data is pooled among our clients and publishers and offers deep insights into consumer intent and purchasing habits. To drive trusted and impactful advertising, we activate our data assets in a privacy-by-design way through proprietary AI technology to engage consumers in real time with highly relevant digital advertisements ("ads") across devices and environments. Our focus is on ecommerce. Our clients include some of the largest and most sophisticated ecommerce companies in the world, along with world-class consumer brands. We partner with them to capture user activity on their websites and mobile applications ("apps"), which we define as digital properties, and optimize the performance of their ads based on that activity and other data. Demonstrating the depth and scale of our data, we collected data on over $950 billion in online sales transactions 1 on our clients' digital properties in the year ended December 31, 2020. Based on this data and other assets, we delivered 1.6 trillion targeted ads in the year ended December 31, 2020. As of December 31, 2020, we served more than 21,000 clients and, in each of the last three years, our average client retention rate, as measured on a quarterly basis, was approximately 90%. We have established our leading market position by focusing on three pillars: actionable commerce data, predictive technology to activate this data for multiple marketing goals, and large consumer reach through our extensive direct publisher network. While continuously improving our technology and broadening our reach, we leverage and strengthen Criteo Shopper Graph, a highly differentiated group of data collectives built through collaboration and data pooling within our open ecosystem of commerce and consumer brand clients and publishers. Criteo Shopper Graph is one of the world's biggest data sets focused on shoppers, retailers and brands. Each day, we are presented with billions of opportunities to connect consumers with relevant advertising messages from our commerce and consumer brand clients. For each of these opportunities, our algorithms analyze massive volumes of shopping data to predict consumer preferences and intent, and deliver specific messaging for products or services that are likely to engage that particular consumer. The accuracy of our algorithms improves with every ad we deliver, as they incorporate new data while continuing to learn from prior interactions. Historically, the Criteo model had focused solely on converting our clients' website visitors into customers, enabling us to charge our clients when users engage with an ad we deliver, usually by clicking on it. This pay-for-performance pricing model clearly links the cost of an advertising campaign to its effectiveness in driving conversions, and continues to be valued as such by our clients. We have since expanded our solutions to address a broader range of marketing and monetization goals for our clients, including audience targeting and brand awareness. We leverage pricing models consistent with industry standards that include cost-per click, cost-per-impression and cost-per-install, as well as volume-based fees for brands and large retailers using Retail Media, and, in certain cases, a set fee for the use of our platform capability. During 2020 we operated in 104 countries. ___________________________________________________ 1 Excluding Criteo Retail Media. 2 Our financial results include: • Revenue of $2,072.6 million, $2,261.5 million and 2,300.3 million for the years ended December 31, 2020, 2019 and 2018, respectively; • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC, which is a non-U.S. GAAP financial measure, of $825.0 million, $946.6 million and $966.0 million for the years ended December 31, 2020, 2019 and 2018, respectively; • Net income of $74.7 million, $96.0 million and $95.9 million for the years ended December 31, 2020, 2019 and 2018, respectively; and • Adjusted EBITDA, which is a non-U.S. GAAP financial measure, of $251.0 million, $299.0 million and $321.1 million for the years ended December 31, 2020, 2019 and 2018, respectively. Please see footnotes 3, 4 and 5 to the "Other Financial and Operating Data" table in "Item 6. Selected Financial Data" in this Form 10-K for a reconciliation of revenue to Revenue ex-TAC, net income to Adjusted EBITDA and net income to Adjusted Net Income, respectively, in each case the most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States or "U.S. GAAP". The Criteo Commerce Media Platform Our offering, the Criteo Commerce Media Platform, is powered by AI technology and provides marketing and monetization services for brands and retailers. Our technology is optimized to drive trusted and impactful business outcomes for our retailer and brand clients, including, for example, consumer visits to a client website, installations of an app, product sales and monetization of retailers' inventory with consumer brands. We deliver these measurable results by efficiently and effectively driving engagement for our clients' brand, shops, apps, products and services, and generating advertising revenue for retailers by monetizing their data and audiences with consumer brands. Criteo solutions work seamlessly across digital devices (desktops, laptops, smartphones and tablets), commerce and advertising environments (browsers, apps, connected TV and physical retail stores), platforms and operating systems, advertising channels (display, including social and native, video, and ads on retailers' properties) and publisher environments (thousands of direct publishers and mobile app developers in the open Internet, and all major real-time bidding exchanges). The Criteo Commerce Media Platform is made available as individual products and services as part of our offering. The Criteo Commerce Media Platform is comprised of: • Criteo Shopper Graph • Criteo AI Engine • Criteo Solutions: Criteo Marketing Solutions and Criteo Retail Media In addition, the Criteo Commerce Media Platform leverages the extensive scale and user reach of our first-party media network across the open Internet. 3 Criteo Shopper Graph Our data assets include all insights derived from our clients' proprietary commerce data , such as transaction activity on their digital properties, representing over $950 billion in online sales on a combined basis in 2020, representing approximately 48% of the global retail ecommerce sales excluding China 1 , or $2.6 billion worth of transactions per day on average. Through direct integration with our clients' digital properties, we obtain large volumes of first-party data, expressed consumer shopping intent and engagement, and transactional data at individual product or service levels, which do not rely on cross-site tracking technologies, such as third-party cookies. The information we collect is anonymized and does not enable us to personally identify any particular consumer. Our high quality first-party data assets fuel the accuracy of our algorithms, which improves with the increasing quantity and quality of data we obtain from our clients and publisher partners, as well as insights gained through our own extensive operational history. The combination of advertiser data, publisher data and proprietary metadata gives us powerful insights into consumer purchasing habits that we use to price inventory and create the most relevant ads to drive user engagement and impactful results for our clients. In addition to commerce data at the granular product SKU level, we seek to use as much relevant information as possible about the context and intent of a given user, collected from clients and publisher partners, to further refine our prediction accuracy. We believe our access to highly granular first-party commerce data validates the trust that our clients place in us . Most of our clients typically provide real-time access to the products or services a visitor has viewed, researched, added to their shopping cart, or bought from them, and continuously receive updated information on over 4 billion products or services 3 across 3,500 product categories, including pricing, images and descriptions, which are typically characterized as non-Personally Identifiable Information ("non-PII"). A large number of our clients also provide us with their customers' purchase history data in formats that are also non-PII. Over the past few years, we have built data collectives through data pooling among our clients and publishers . The combination of these data collectives forms Criteo Shopper Graph. For each of these data collectives, we ask our clients to grant us the permission to mutualize a significant portion of their proprietary data in an anonymized way with other clients who also contribute data to this collective data pool. With Criteo Shopper Graph, we have built one of the world's largest and most open data sets focused on shoppers and their commerce activity across retailers and brands, and their activity on publisher properties. Criteo Shopper Graph is comprised of the following data collectives : • The Identity Graph allows us to match user identifiers provided by clients and publishers across devices and environments, both online and offline. Our algorithms link user identifiers together when they are deemed to belong to the same user. Examples of user identifiers in the Identity Graph are: hashed customer logins and hashed emails, first-party and third-party cookies, app identifiers such as Apple's IDFA and Android's AAID, in addition to linkages such as the Trade Desk's Unified ID 2.0 or LiveRamp's IdentityLink. The graph has billions of identifiers, which we believe cover about 2.5 billion unique users globally. With Criteo's reach, we collect commerce data in real time on an estimated 500 million Daily Active Users, half of which are identifiable by a hashed email. As of December 31, 2020, over two third of our clients grant us access to some of their first-party identity data to enable us to match users across multiple digital devices or environments. In addition, the Identity Graph allows us to leverage offline CRM data of our clients' physical stores to match it with online user profiles, based on their offline shopping history. The Identity Graph supports and benefits the entire suite of solutions of our Commerce Media Platform. • The Interest Map collects and organizes consumer intent and purchasing data across the products available in our network of commerce clients, in order to build a comprehensive and accurate non-identifying shopper profile for all consumers on whom we have collected data. Our Interest Map applications include the Universal Catalog , which provides category and/or brand enrichment, as well as a unified view of the 4 billion products SKUs, across 3,500 product categories, available across the combined catalogs of our 21,000 commerce clients 2 . Every day, we collect data on over $2.5 billion in online sales on average through 75 million buyer journeys. With the Interest Map, we seek our clients' permission to use their data, on an aggregated and anonymized basis, to power products that are jointly offered to our clients in the collective. ___________________________________________________ 1 Source: eMarketer. 2 Products are not unique and may appear in different retailer catalogs. 4 The design and governance of Criteo Shopper Graph are based on strict and differentiated guiding principles : • Openness : we commit to a two-way exchange of data with our clients and publishers, whereby all parties contributing data to the collectives, in return for their contribution, benefit from the collective dataset via the Commerce Media Platform, and access cross-device user IDs and relevant Key Performance Indicators to better inform and optimize their advertising. • Transparency : our clients' contribution and sharing of data within the data pools are based on a clear and permission-based usage by Criteo for the mutual benefits of all participants in the data collectives. • Security : we apply the highest data security and user privacy standards to our data collectives. • Fairness : our data collectives are designed and governed in ways such that the value gained by each participating client largely exceeds the individual client's contribution to the collectives, irrespective of its size. Consistent with our data minimization principles, our technologies only rely on categories of data that are strictly necessary for the purpose of our services. The user information we collect relates primarily to purchase intent and is therefore not considered as information that can directly identify a user. In addition, we provide consumers with easy-to-use and easy-to-access mechanisms to control their advertising experience and opt out of receiving targeted ads we deliver. This transparent, consumer-centric, and controllable approach to privacy empowers consumers to make better-informed decisions about our use of their data. We also actively encourage our clients and publisher partners to provide transparent and clear information to consumers about our collection and use of data relating to the ads we deliver and monitor. Criteo AI Engine Criteo AI Engine consists of multiple artificial intelligence algorithms, and the proprietary global hardware and software infrastructure that enables the Commerce Media Platform to operate in real time at significant scale, and activate our datasets for effective advertising. Criteo AI Engine leverages the Shopper Graph, with the goal of maximizing consumer engagement to drive impactful business results for clients through the delivery of highly relevant and personalized ads in real time. Criteo AI Engine consists of: • Lookalike finder algorithms. These algorithms create user audiences, or groups of consumers likely to be interested in and engage with a specific category of our clients’ products or services, from a predetermined audience seed based on other clients’ audiences that were already targeted and exposed to similar products or services in the context of previous advertising campaigns. Once created, these audiences are used by Criteo AI Engine as targets to reach and be exposed to tailored ads for relevant products or services for the purpose of a dedicated campaign. This set of algorithms typically supports campaign types addressing Audience Targeting objectives, i.e. driving new prospects to consider products or services with which they have not yet engaged in the past. • Recommendation algorithms. These algorithms create ads tailored to specific consumer interest and intent by determining the specific products or services to include in the ad. These products and services may be ones that the consumer has already been exposed to, or that the algorithms predict the customer could be interested in. Alternatively, these may be products and services that other consumers within Criteo Shopper Graph have been interested in. • Dynamic Creative Optimization+ (DCO+). Based on the results of our dynamic creative algorithms, Criteo AI Engine automatically and dynamically assembles customized creative ad content on an impression-per-impression basis in real time, by optimizing each individual creative component in the ad, from the font, color, size and format of product images to the "call to action" or price discount. Our patented Dynamic Creative Optimization+ technology offers virtually unlimited personalization, with up to 17 trillion visual ad variations, without the need to define ad sizes or layouts upfront, while always maintaining the consistency of our clients' brand image. • Predictive bidding algorithms. These algorithms predict the probability and nature of a user's engagement with a given ad. Such predicted user engagement can take the form of, for example, retailer site visits, clicks, conversions, shopping basket value, specific product categories purchased, or even the gross margin of the purchased product or service that our client generates from such purchase. This prediction of engagement incorporates data from our clients, publishers and third-party sources, including user intent, who the client is, the products offered in the ad, as well as data on the creative content of the ad and the publisher context in which the ad is displayed. 5 Together with our recommendation algorithms, the prediction algorithms allow us to determine the most appropriate price to pay for an ad impression, based on an individual user's predicted engagement, what the client is willing to pay for that engagement, as well as Criteo's own target Revenue ex-TAC margin from placing that individual ad. Our bidding engine executes campaigns based on certain objectives set by our clients (such as cost-per-click, cost-per-order, cost-of-sales, cost-per-visit, cost-per-impression, cost-per-install or total campaign budget). After a bid for an ad impression is placed and won, Criteo AI Engine assembles and delivers individualized ads, and provides campaign reporting in near-real time. • Software systems and processes. Our algorithms are supported by robust software infrastructure that allows us to operate seamlessly at a very large scale, through our network of more than 49,000 servers as of the end of 2020. The architecture and processing capabilities of this technology have been designed to match the massive computational demands and complexity of our algorithms in real time. This technology enables data synchronization, storage and analysis across a large-scale distributed computing infrastructure in multiple geographies, as well as fast data collection and retrieval using multi-layered caching infrastructure. • Experimentation platform. We use an online/offline testing platform to improve the capabilities and effectiveness of our prediction models by measuring the correlation of specific parameters with user engagement, usually measured by consumer visits, clicks and conversions, typically in the form of sales. A dedicated team is constantly testing new types and sources of data, as well as new variables, to determine whether they help diminish the gap between, for example, predicted visits, click-throughs and conversions, and actual visits, click-throughs and conversions over the course of a live campaign. A key attribute of Criteo AI Engine is the vast metadata of learnings on advertising and commerce effectiveness that we have accumulated from having delivered and measured responses to over 9 trillion advertising impressions since our Company's inception. Our Research & Development team constantly tunes Criteo AI Engine via experimentation and A/B tests. For example, in 2020, we performed about 1,000 online A/B tests and over 70,000 offline experiments and tests. In addition, we have long established and adopted Privacy-by-design as a central element of our technology and product design and development cycles, with a strong commitment to ensuring best practices in privacy, security and safety for consumers and our retailer and brand clients. Since 2013, we have had a designated Data Privacy Officer along with a team of privacy experts. These experts are integrated within our R&D and Product organizations and processes, and consider all facets of user privacy as key elements in the very design of any new technology, solution or feature of the Commerce Media Platform. They also perform ongoing Privacy Impact Assessments to monitor potential risks during the product lifecycle and proactively mitigate those risks. The Data Privacy team delivers company-wide privacy training, enforces our privacy policies and is integral to ensuring that we build the best solutions and services. We regularly review and document our internal privacy policies, amend existing policies as necessary and enforce these policies with our clients, publisher partners and vendors. Our Solutions Our marketing and monetization solutions for retailers and brands are grouped under two families: • Criteo Marketing Solutions allow commerce companies to engage consumers with personalized ads across the full marketing funnel, leveraging online and offline store data. ◦ Examples of expected business outcomes include: ▪ Awareness: creating and building brand awareness for a client's existing or new product or service, by targeting relevant high-quality consumer audiences showing intent for that particular product or service and reaching these audiences, for example, through video ads across the breadth of our premium publisher network on the open Internet; ▪ Audience Targeting: driving visits from new prospects on the website of our clients, or driving installations of our clients' apps by new customers, by engaging such prospect visitors online (either on the web, in apps or on connected TV), with personalized ads offering products or services tailored to their predicted interest through our audience targeting capabilities, based on our Shopper Graph data and/or contextual signals; ▪ Conversion: driving sales for commerce clients by engaging consumers online, with personalized ads offering products or services for which they have already expressed shopping intent; or driving more sales from existing customers of our commerce clients, by accurately targeting and re-engaging these existing customers online with personalized ads offering new products or services that they have not yet purchased nor been exposed to. 6 ◦ Our clients' use and consumption of Criteo Marketing Solutions is made flexible through a set of tools and services: ▪ Our clients have access to an integrated self-service customer interface, called the Management Center , providing transparency, control and visibility over their marketing investments and campaigns with us, whatever their business and marketing goals may be . This interface enables the flexible and modular consumption of our various solutions directly by our clients, as well as the execution and management of their campaigns through a suite of software and services that automates key campaign processes, and a high level of control over the objectives, parameters and performance of their various campaigns with us. Criteo Management Center reduces unnecessary complexity and cost associated with manual processes of having to use multiple Demand-Side Platforms ("DSPs") and sources of inventory supply, delivering efficiencies across the marketing funnel, even as campaigns grow in size, complexity and mix of marketing goals. ▪ In addition to self-service access to Criteo Management Center, we also offer a managed-service approach to our larger clients , providing deep business intelligence and analytics services. Our teams of advisers aid our larger clients in setting goals for, extracting insights from, and evaluating trends and performance of their various advertising campaigns with us across multiple marketing goals, sources of inventory, advertising channels, and the multiple digital devices that consumers may use. ▪ In addition, we offer multiple API integrations for certain partners and clients to enable the management of our clients' advertising investments with us in a unified and integrated way with some of their other advertising or marketing technology partners which makes Criteo solutions directly available in their back-office. ▪ In parallel with accessing transparent reporting and measurement from Criteo Management Center, a large proportion of our clients regularly use their own attribution tools and solutions from third-party vendors (such as, for example, Nielsen’s Digital Ad Ratings, Google Analytics, IBM Coremetrics or Adobe Analytics) to independently measure and assess the performance of the results that Criteo delivers, including visits, sales and other key metrics. • Criteo Retail Media allows retailers to generate high-margin advertising revenues from consumer brands looking to address multiple marketing goals, and/or to drive sales for themselves, by monetizing their audiences through personalized ads, either on their own digital property or on the open Internet. ◦ Examples of expected business outcomes include: ▪ generating advertising revenue for retailers on their online store, by providing retailers with self-service access to our technology platform for them to monetize their commerce data, traffic and audiences directly with consumer brands across various marketing goals; ▪ driving sales for consumer brand clients on the site of retailer partners, by connecting consumer brands and retailers and engaging consumers on the retailer's digital property with personalized ads offering specific brand products available on the retailer's digital store and for which consumers have expressed interest; ▪ driving sales for consumer brand clients on the site of retailer partners, by connecting consumer brands and retailers and engaging consumers outside of the retailer property on the open Internet with personalized ads offering specific brand products available on the retailer's digital store and for which consumers have expressed interest; ◦ Our retailer and brand clients respectively manage their Retail Media revenues and budgets using a self-service interface called the Retail Media Platform. The Retail Media Platform provides flexible pricing options to brands: guaranteed placement (cost-per-impression) and auction-based (cost-per-click). We charge retailers a negotiated supply-side platform fee and sometimes a technology fee, while brands pay us a negotiated demand-side platform fee. In addition, we may charge brands a managed-service fee and other fees for accessing additional insights. In 2020, Criteo Retail Media accounted for more than 10% of our total consolidated revenue. 7 The below chart shows the product mix evolution of Criteo's business and the year-over-year growth in new solutions in fiscal 2020. Our Publisher Network We provide our clients with extensive real-time access to advertising inventory through direct relationships with thousands of publisher partners, as well as real-time bidding (or "RTB") Display Advertising exchanges. We define inventory as the combination of desktop web, mobile web, mobile in-app display, including social, native, and video displays, connected TV, and ad inventory on major retail ecommerce properties, including standard banners, native and sponsored product formats. In some cases, we have negotiated direct and privileged access with publishers, giving us the opportunity to select, buy and price, on an impression-per-impression basis and in real time: (1) inventory that a publisher might otherwise only sell subject to minimum volume commitments; and/or (2) particular ad impressions before such impressions are made available to other potential buyers. Among their multiple benefits, these direct relationships give us access to first-party publisher data which allow us to bid on impressions without using third-party cookies. We call this network of direct publisher relationships, together with direct integrations with retailers, our First-Party Media Network . We believe that many of our direct publisher partners have granted us preferred access to portions of their inventory as a result of our ability to effectively monetize that inventory. For example, within Criteo Retail Media, we access inventory and first-party data from ecommerce sites that are generally not available to traditional advertising demand. We believe this inventory and data from ecommerce retailers is particularly valuable for consumer brands looking to advertise their products in a multi-brand retail environment. In addition, in Japan, we have entered into a strategic relationship with Yahoo! Japan, that grants us preferred access to its advertising inventory for delivering personalized display ads. We price and buy inventory in real time a nd typically do not pre-buy any impression. In addition, in some instances, we may commit to buying minimum volumes of impressions to certain publishers partners for our Marketing Solutions and Retail Media solutions. Across both our direct publisher relationships and inventory purchasing done on RTB exchanges, we leverage Criteo AI Engine's ability to quickly and accurately value av ailable advertising inventory, and utilize that information to bid for inventory on a programmatic, automated basis. 8 Alongside our existing technologies to integrate directly with publishers, we have developed Criteo Direct Bidder , our header-bidding technology. Header-bidding allows publishers to make their inventory simultaneously available for public auction to several competitive bidders, including RTB exchanges. Thanks to our large scale, Criteo Direct Bidder allows us to connect directly to the ad server of publishers in situations where publishers use header bidding to monetize their inventory, allowing us, among other advantages, to bypass RTB exchanges in the bidding process and to save publishers the take-rate RTBs would typically charge them. As a result, Criteo Direct Bidder helps publishers increase the average monetization of their inventory sold through Criteo Direct Bidder, relative to our overall spend through all channels. Using Criteo Direct Bidder, we were connected to approximately 5,000 large publishers globally, on both web and apps, as of December 31, 2020, including: IBM Watson Advertising, Globo, OLX, NBC, Forbes, Wall Street Journal, Leboncoin, Daily Mail, Viber, Axel Springer's websites, Marktplaats, M6, AJA Japan and EstSoft. We take a variety of brand safety measures to ensure that the brand equity of our clients is preserved at all possible times. These measures include determining that each publisher's inventory meets our content requirements and those of our clients to ensure that their ads are not shown in inappropriate content categories, such as, for example, adult, violent or sensitive political content. In addition, we are an active member of the Coalition for Better Ads , supported by Google, and are compliant with their recommendations for the most user-friendly advertising formats. In 2020, we entered into a partnership with Oracle Data Cloud to strengthen our existing brand safety offering. Criteo’s AI Engine is now integrated with Oracle Contextual Intelligence, a solution providing real-time content review and pre-bid classification to clients across brand-suitable categories. For Criteo Marketing Solutions, we typically purchase inventory programmatically on a CPM basis from our direct publisher partners and RTBs, through standard terms and conditions for the purchase of advertising inventory. This means that inventory purchased for Criteo Marketing Solutions is paid to the publisher irrespective of whether the user engages, in whatever form, with the advertisement delivered on that publisher's digital property. Pursuant to such arrangements, we purchase impressions for users that Criteo recognizes on these publishers' digital properties. Such arrangements are cancellable upon short notice and without penalty. For Criteo Retail Media, we may pay for the inventory of retailer partners based on a revenue share , effectively paying the retailer a portion of the click-based revenue generated by customers clicking on the ads displaying the products of our consumer brand clients. This means that, with these Criteo Retail Media solutions, retailer publishers only get paid if a user effectively clicks on the ad that is displayed on their site. We may also buy inventory on a CPM basis or do not incur any media cost at all when we provide retailers with access to our Retail Media Platform for them to sell their inventory directly to consumer brands. We believe that our ability to efficiently access, value and monetize inventory at scale results in a deeply liquid marketplace for both buyers and sellers of advertising, allowing us to deliver effective ads at the right price for our clients, even as the size and complexity of the marketing campaign increases. Industry Trends The ability to engage customers across the various steps of the consumer journey is critical for businesses in the broader commerce and consumer brand sectors, who often dedicate a significant portion of their cost base to developing such an ability. We believe the following trends are relevant in assessing our current and future business. E-commerce is Booming: According to GroupM, global retail ecommerce (excluding food and delivery services) amounted to close to $4 trillion in 2020 or 17% of global retail sales in 2020 and is forecast to represent 25% by 2024, or $7 trillion. The COVID-19 pandemic accelerated the boom of ecommerce, and we saw brands and retailers rapidly transform their ecommerce presence, and gain share from ecommerce giants. With lockdown restrictions imposed by the COVID-19 pandemic, U.S. online product searches on retailers' websites in the open Internet increased by 21 percentage points to close to 30% of total shares, while the share of searches on Amazon properties declined from 66% to 43% 1 . As a result of new habits developed by consumers, and as the pandemic has brought in older and less tech-savvy demographics to online shopping, we expect this trend to continue. 81% of online buyers who tried a new retailer indicate that they expect to continue to shop with them in the future 2 , creating a shift in brand loyalty towards open Internet retailers, which today represent approximately 40% of global e-commerce sales 3 . Trade Marketing Shifts to Digital: Taking advantage of this surge in ecommerce, brands accelerate the shift of their trade marketing budgets to online. We believe digital trade marketing already exceeded $23 billion in global spend in 2020, after growing by an average 82% each year since 2016. ___________________________________________________ 1 Question Asked: “When you want to buy a new product online, where do you typically start your search?” 1,2 Sources: Activate Consumer Tech & Media Viewpoint Study April 14, 2020 (n = 2,027), ComScore, Freedive, Marketing Dive, Activate analysis 3 Source: 451 Research, China Internet Watch, Company filings, Company press releases, Company sites, Digital Commerce 360, eMarketer, Forbes, GeekWire, Internet Retailer, Marketplace Pulse, Retail Dive, TechCrunch, UBS, Activate analysis 9 Brands, Retailers and Publishers Increasingly Depend on AdTech Partners: In today's highly competitive environment, commerce companies and consumer brands increasingly focus on profitably reaching, engaging and converting consumers. In addition, we believe they increasingly look at diversifying their significant reliance on walled-garden digital advertising partners. On the other hand, consumers' shopping journeys have become increasingly fragmented between various websites, apps, devices, and physical stores. Consumers' time is increasingly spent online, creating a new environment for advertising, such as Connected TV. The ability for publishers, retailers, brands and agencies to identify users, given restrictions in some environments, to create and monetize audiences, and to drive sales and customer loyalty, today relies on having the right technology partner, able to activate the right data in an efficient way and to measure results in a transparent way across channels. Addressable Market We estimate that the total addressable market for the marketing and monetization services provides by our Commerce Media Platform on the open Internet represents $61 billion in ad spend or revenue opportunity for us. Our Competitive Strengths We believe the Commerce Media Platform is transforming digital marketing and media monetization for our ecommerce and brand clients. We enable brands' and retailers' growth by making their marketing and monetization efforts more efficient, effective and measurable by driving trusted and impactful business outcomes across multiple marketing goals. We believe the following competitive strengths have enabled us and will continue to enable us to capture a significant share of the digital marketing and monetization opportunity: Shopper Data. Our Shopper Graph leverages massive amounts of granular and first-party data focused on commerce and shopping behaviors, through data sharing among our clients. With an estimated 2.5 billion unique users in our Identity Graph, we are building one of the largest data sets focused on shoppers, with a scope and scale among the largest in the industry. Over $2.5 billion worth of daily transactions across 4 billion product SKUs from 3,500 product categories are ingested by our graph, which allows us to analyze about 75 million daily buyer journeys. Our Interest Map offers a comprehensive, accurate and non-identifying shopper profile for all consumers on whom we have collected information, and is the foundation for the development of compelling advertising solutions - existing and new - that help our clients span the full marketing funnel, across brand awareness, audience targeting and conversion marketing goals. Importantly, we believe the guiding principles of Criteo Shopper Graph - in particular its open, transparent and fair approach to sharing and leveraging data within collectives -, highly differentiate it from the proprietary data management approaches of most of the large Internet platforms and Walled Gardens, and therefore represent attractive guarantees for marketers willing to protect and control their data. Reach, Scale and Network Effects. Our large and loyal base of clients and first-party publisher partners provide for stability and positive network effects. As of December 31, 2020, we had over 21,000 clients, including some of the largest ecommerce companies in the world, and our client retention rate was approximately 90%. In parallel, as of the same date, we were working with approximately 5,000 direct publishers on both web and apps, in addition to all of our large global and local RTB partners. These direct integrations on both the demand and supply sides ensure access to data in privacy-compliant ways, shielding from the consequences of third-party cookie limitations. As we continue to grow our client base, we continue to grow the number of users who interact with our ads, allowing us to benefit from greater scale when buying inventory from publisher partners, many of whom have granted us preferred access to portions of their advertising inventory. We believe this large and loyal base of clients and publisher partners provides for stability in our business, as well as for significant opportunities to cross-sell and up-sell our product portfolio within our large existing client base. As clients spend more with us and we attract more publisher inventory and deliver more ads, our data assets grow, enabling us to deliver even more precisely targeted and personalized ads and generate a greater impact for our clients. As a result, we believe more commerce and consumer brand clients may use our offering and potentially increase their spend with us. This, in turn, may enable us to increase monetization for publishers and retailers, further expanding our publisher network and enhancing our ability to drive performance for all clients. This cycle of self-reinforcing network effects, based on our large scale and loyal base of clients and publishers, may continue to fuel our business in the future. Retail Media. Our Retail Media offering provides unique opportunities to both brands and retailers. Our Retail Media value proposition, helping retailers to monetize their data and inventory with brands, is quite unique in the marketplace outside of Amazon. It provides opportunities for brands to advertise on retailers' on-site media, while creating a new source of profitable revenues for large retailers. Criteo's Retail Media Platform is the industry's first self-service and transparent software providing an easy way for brands to manage their online marketing budgets to drive immediate, measurable commerce outcome directly where shoppers search and buy their products. We enable brands, agencies, and multiple retailers to buy and sell retail media using a common platform, thus benefiting 10 from meaningful network effects due to our unique position as the technology supporting a multi-retailer ecosystem, whereas most competitors in the retail media space focus on supporting siloed retailer Walled Gardens. Brands and their agencies use this platform to access unique inventory at meaningful scale, and retailers get access to brand marketing budgets at a scale they would not be able to access on their own. This creates a network effect where the value for customers only increases as more brand and retailer participants join the ecosystem. In addition, our deep technical integrations with retailers, requiring meaningful engineering investment from the retailer, make us very sticky with them and enable us to offer preferred or exclusive inventory to brands and agencies, as well as a superior shopper experience to consumers. We primarily use a server-side technology to integrate our platform with retailer sites and apps. In addition, we require multi-year commitments and product ads exclusivity as part of our standard retailer services agreements. Both our unique inventory access and increasingly deep technical integrations with other advertising technology and reporting platforms provide defensible relationships with brands and agencies. For example, our recently launched API partner program embeds our technology into ad platforms that brands and agencies already use to buy search, social, and other large platforms' ad inventory. Additionally, with many major brand and agency clients, we directly connect our reporting data directly into client analytics and reporting platforms via our APIs. Superior Insights and Measurement. We believe we have superior capabilities for Commerce Insights and measurement. Our technology provides our clients with the unique ability to measure against product sales at the product SKU level. For example, our commerce insights can bring together organic shopping data with paid media metrics for brands. Scaled Global Presence. We do business in 104 countries and have a direct operating presence through 29 offices in 19 countries. We have achieved this global presence by replicating and scaling our effective business model across all geographic markets. Large businesses are increasingly seeking global advertising partners able to provide comprehensive offerings that are effective across multiple geographies. We believe we are able to meet this demand by leveraging our scalable AI technology and global network of relationships and are well positioned to serve our clients in virtually every market in which they seek to drive trusted, impactful and measurable business results. Strong Financial Model. Our profitable, cash-generative financial model allows us to invest for growth while maintaining healthy profitability. Our company has a sustainable, robust profitability margin. In the year ended December 31, 2020, our operating profit margin was 5.3% of revenue and our Adjusted EBITDA as a percentage of Revenue ex-TAC was 30.4%. In addition, we manage our expense base in a disciplined way and focus on driving productivity through operational excellence and automation across the organization. Productivity and efficiency gains enable us to reinvest into strategic growth areas, while maintaining healthy profitability. Our financial model generates a sustainable and significant amount of free cash flow. For the year ended December 31, 2020, we generated free cash flow of $120 million, despite the negative economic conditions triggered by the COVID-19 pandemic. In addition, our company maintains a comfortable cash position, standing at $488 million at the end of fiscal 2020, which, together with marketable securities and our Revolving Credit Facility, provides for financial liquidity of about $960 million, offering ample flexibility. We believe having a profitable, cash-generative financial model providing for financial flexibility and allowing for an investment capacity is a competitive advantage, in particular compared to multiple sub-scale companies in our industry. Our Business & Growth Opportunities Our mission is to power the world's marketers, brands, retailers, publishers, content creators and agencies with trusted and impactful advertising. We enable brand and retailers' business growth by providing best-in-class marketing and monetization services and driving measurable business outcomes at scale through Commerce Media. As described throughout, our vision is to build the world's leading Commerce Media Platform for brands, agencies and retailers. We are currently strengthening the Criteo Commerce Media Platform and expanding our business through several opportunities, both within our existing suite of solutions and in new areas, always focused on driving trusted and impactful business outcomes for clients. One key priority is to drive sustainable and profitable growth for our business. This involves increasing our focus even more on the fast-growing ecommerce space and broadening our value proposition to cover all Commerce Media marketing goals in a holistic way, while always driving measurable business outcomes to clients, including sales. In parallel, we are focused on investing into our strategic growth priorities and self-funding for these investments by driving efficiency across the organization. The core elements of our business strategy include: Strengthen the Core. We intend to strengthen our retargeting product, aimed at converting our clients' customers in both the web and apps. We intend to achieve this by strengthening our strong differentiators, including around Criteo Shopper Graph and user identification thanks to our first-party media network, continuously improving Criteo's AI Engine technology and the strong performance of our core product in all environments, providing more transparency on our value proposition, and adding new clients and publishers. We are also adding multiple capabilities, like third-party measurement, through industry partnerships to enhance our core solution. 11 Over the past three years, the growth of retargeting has been slowing down and turned negative since 2019. Over the period, cookie restrictions on several browsers have had a significant negative impact on our business on the web, including on retargeting . The COVID-19 pandemic was an additional headwind to this business in 2020, impacting in particular our clients in the Travel and Classifieds verticals, as well as some large brick-and-mortar retailers. Beyond these headwinds, and while retargeting continued to grow in the midmarket, the softness has been more pronounced with large customers. We are taking several measures to stabilize our retargeting business over time, including: • Maintaining a high level of preferred direct publishers relationships, allowing us to grow our first-party media network and reduce our exposure to third-party cookies. We expect to continue to expand our first-party media network, sheltered from cookie restriction, by increasing the deployment of Criteo Direct Bidder with large publishers, both on the web and on mobile apps; • Encouraging our clients and publishers to adopt Unified ID 2.0, an open-sourced identity framework dedicated to digital advertising and respectful of users' privacy, providing a replacement to third-party cookie bearing users' consent; • Growing our capabilities as a differentiated Demand-Side-Platform specifically for commerce, including for upper-funnel marketing on top of our strengths in lower funnel, offering more flexibility throughout the stack, and adjusting our pricing model to increase the transparency of our value proposition for our core product; • Further expanding our global client base across customer categories. We have a track-record of entering new geographic markets, adding new clients successfully and rapidly gaining commercial traction. We intend to continue to grow our client base, both in the large customer and midmarket categories. In particular, we continue to build and roll out our self-registration sales channel for smaller clients, and to expand our partnerships with Ecommerce Platform Partners, to increase our penetration of the large opportunity we see in the low end of the midmarket. We believe opportunities also remain to grow our business with large customers in markets where we already operate, including in Western Europe, the U.S. and Japan; and • Providing even more transparency and control to advertisers and their agencies through our self-service platform. Expand Our Product Portfolio . We intend to continue to leverage our existing assets to strengthen our business outside of retargeting , continue to build and expand our suite of fast-growing marketing and monetization solutions, and build further competitive moats around our core assets. In fiscal year 2020, our new solutions outside of retargeting already represented close to 20% of our total business, as measured on a Revenue ex-TAC basis, including 24% in the fourth quarter 2020. We are investing in the growth of these new solutions and expect them to represent close to 30% of our overall business in 2021. Our new solutions are focused on the following areas: • Retail Media: We believe Criteo Retail Media is a particularly differentiated offering in the marketplace and offers significant growth opportunities for us. We will continue to roll out the Retail Media Platform to new markets and move all our Retail Media campaigns to the platform, making the digital stores of large retailers a key advertising channel to generate high gross margin revenue from consumer brands. In addition, we intend to grow the number of retailers we work with in the U.S. and Europe, deepen our share of wallets with existing retailer and brand customers, accelerate our geographic expansion in Europe and enter new markets in the APAC region, grow our offsite advertising capabilities for brands across our premium publisher network on the open Internet, potentially enter Retail Media for retailer marketplaces, bring more commerce insights to brands as a key value-added service and provide brands with an integrated view on the Retail Media spend on Walled Garden retailers • Brand awareness: We are extending our offering to allow for more brand awareness campaigns for both brands and retailers on the open Internet, including in video formats and through the Connected TV channel. • Audience Targeting: We already address customer acquisition as a marketing objective and intend to continue growing it, along with similar use cases building on audiences based on our shopper data. In addition, we are investing resources in enhancing the efficacy and impact of cohort advertising on our ecosystem and help shape the end solution which will replace third-party cookies in the Google Chrome browser environment. 12 • Contextual advertising: We are also developing new solutions for contextual advertising to accompany our clients in the fast-changing identity landscape. We believe our approach to contextual advertising is different from what currently exists in the market as we are using first-party data to add a commerce “signature” to the content consumers are reading and watching across the Open Internet. This enables us to go beyond traditional contextual inferences of interest and intent to indicate what combinations of content are actually driving purchases. • Omnichannel: Within Criteo Marketing Solutions, we also intend to grow our Omnichannel capabilities. A large portion of our commerce client base operates physical stores and still generates a significant percentage of their sales from these stores. While retailers extract massive amounts of sales data from their physical stores, they often lack the sophisticated technology necessary to activate this dataset for sales generation, both online and offline. As a result, retailers are increasingly interested in omnichannel advertising solutions that allow them to target their customers everywhere and bridge the gap between online and offline. Omnichannel is one of the fastest-growing opportunities for Criteo: in fiscal year 2020, our Omnichannel business grew close to 120% on a Revenue ex-TAC basis. We intend to further expand our solutions for omnichannel advertising, including by feeding our clients' offline CRM data into our Identity Graph, in order to further grow the match rate of offline consumers with their online profile. Explore Strategic Game Changers. We look for opportunities to extend and accelerate the growth of our business by exploring and bringing strategic assets and capabilities through partnerships and M&A , in addition to executing organically. For example, in 2020, we entered and expanded a number of partnerships. • We joined the open-source Unified ID 2.0 initiative, a new approach to identity that represents an upgrade to third-party cookies, preserves the value exchange of advertising on the open Internet, while providing improved consumer controls; • We launched the Criteo Partners program, helping our ad agency channel partners, to better utilize Criteo Marketing Solutions and shopper data, in particular by accessing training and certification programs; • We launched the Criteo Product Ads module in ecommerce platform PrestaShop, allowing PrestaShop merchants to attract users to visit their online stores and buy from them. The Criteo Product Ads module enhances customer experience through relevant product ads while helping merchants automate their efforts to attract new visitors for their site and encourage them to complete their purchase; • We integrated Nielsen’s Digital Ad Ratings (DAR), the industry standard for digital ad measurement, and Digital Brand Effect to help advertisers better measure and optimize brand lift metrics with Criteo solutions; • And we partnered with Oracle Data Cloud to strengthen our existing brand safety offering. Criteo’s AI Engine is now integrated with Oracle Contextual Intelligence, a solution providing real-time content review and pre-bid classification to clients across brand-suitable categories. In the future, we intend to continue to collaborate with existing and new industry partners to extend the capabilities and functionalities of the Criteo Commerce Media Platform, beyond what we currently offer on a standalone basis. This may include partnerships with other Demand-Side-Platforms or other ecosystem players to extend our customer reach to new client categories or agencies. In addition, we may look at further expanding our access to video inventory, both in the Web and mobile apps, as well as extending our access to Connected TV inventory on a much larger scale. We continue to evaluate and execute on M&A transactions, with a critical assessment on technologies and businesses that have the potential to enhance, complement or expand our strategic capabilities, including our technology, our marketing and monetization solutions, go-to-market, or R&D team. We target acquisitions that, over time, can be efficiently integrated into the Criteo Commerce Media Platform, including into our AI technology, global operations and company culture, while preserving the quality and performance of our offering. Key criteria for acquisitions include demonstrated revenue traction and a proven value proposition for clients and partners and are easy to integrate. Our entrepreneurial culture, growth opportunity, global scale, financial profile, strong brand and market position enable us to be an attractive acquirer. Drive Technology and Operations Excellence. We take a Portfolio Management approach to managing our business, organization and expense base: right-sizing or streamlining the parts of the business with declining revenue in order to enable investments on the growing parts of our business into technology innovation and other strategic priorities. We intend to continue to invest in the growth of our business, while driving productivity and efficiency gains through operational excellence across the company and maintaining healthy profitability. We believe these investments will feed the long-term sustainable growth of our business. 13 We intend to continue to make investments in our technology innovation and new product development, including in Retail Media, our first-party media network, Contextual advertising, video, Connected TV and Commerce Insights. We expect these investments to further strengthen our Commerce Media Platform. Driving operational excellence through the company to self-fund for our investments involves increasing automation and the scalability of our operations, as well as having a responsible and effective approach to expense management, across all teams, functions and global offices. The below graphic illustrates where Criteo stands in 2020 in executing on its strategy to build the Commerce Media Platform. Strategic Relationship with Yahoo! Japan In August 2012, we entered into a strategic relationship with Yahoo! Japan, a leading provider of advertising inventory in Japan, which grants us preferred access to their performance-based display inventory. In connection with this strategic relationship, Yahoo! Japan invested in our subsidiary, Criteo K.K. We retain 66% ownership of Criteo K.K. and Yahoo! Japan holds a 34% ownership. Yahoo! Japan has the right to require us to buy back its interest upon the occurrence of certain events (such as bankruptcy or breach of obligations), and we have the right to require them to sell their interest in Criteo K.K. under specified circumstances, such as a termination of the commercial relationship. This strategic relationship may be terminated by either party for material breach or other customary events. The term of this strategic relationship was renewed to August 2021 and will continue to renew automatically thereafter for one-year terms if neither party provides advance written notice of its intent not to renew within a specified period of time. Infrastructure Our ability to execute depends on our highly sophisticated global technology software and hardware infrastructure. As of December 31, 2020, our global infrastructure included over 49,000 servers through a global network of nine data centers, including two Hadoop clusters, that comprise to 10,350 servers hosting 200,000 processing cores, providing a storage capacity exceeding 750,000 terabytes and 2,000 terabytes of random-access memory. Our global infrastructure is divided into three independent geographic zones in the Americas, Asia-Pacific and EMEA. In each of these geographic zones, our services are delivered through data centers that support this particular zone. We generally rely on more than one data center in any given zone. Within large zones, the data centers are strategically placed to be close to our clients, publishers and users. This provides the benefit of minimizing the impact of network latency within a particular zone, especially for time-constrained services such as RTB. In addition, we replicate data across multiple data centers to maximize availability and performance. We also generally seek to distribute workload across multiple locations to avoid overloads in our systems and increase reliability through redundancy. 14 Within each data center, computing power is provided by horizontal build-outs of commodity servers arranged in multiple, highly redundant pools. Some of these pools are dedicated to handling incoming traffic and delivering ads while others are devoted to the data analytics involved in creating these ads. In particular, we use software specifically designed for processing large data sets, such as Hadoop, to run offline data analyzes and to train our AI and Machine Learning models. The results are then fed back to refresh and improve our prediction and recommendation algorithms. We use multiple-layered security controls to protect Criteo AI Engine and our data assets, including hardware- and software-based access controls for our source code and production systems, segregated networks for different components of our production systems and centralized production systems management. Our Clients Our client base for Criteo Marketing Solutions consists primarily of companies in the retail, travel and classifieds verticals, which we refer to as "commerce companies" or "commerce clients", and includes some of the largest and most sophisticated commerce companies in the world. These companies range from large, global, diversified commerce companies to mid-sized regional companies. With Criteo Retail Media, we also serve consumer brand manufacturers, which we refer to as "consumer brands" or "consumer brand clients". As of December 31, 2020, we had more than 21,000 clients (both commerce and consumer brand clients combined). In 2020, approximately 68% of our client relationships were held directly with the client, whereby there was no advertising agency or any other third-party involved in our client relationship on the Criteo Marketing Solutions side of the business, whereas 49% of our Criteo Retail Media revenue comes from agencies. We believe our business is not substantially dependent on any particular client or group of clients. In 2020, 2019 and 2018, our largest client represented 3.5%, 2.8% and 2.0% of our revenue, respectively, and in 2020, 2019 and 2018, our largest 10 clients represented 13.7%, 11.4% and 11.7% of our revenue in the aggregate, respectively. There is no group of customers under common control or customers that are affiliates of each other constituting an aggregate amount equal to 10% or more of our consolidated revenues, the loss of which would have a material adverse effect on Criteo. We define a client to be a unique party from whom we have received a signed contract or an insertion order and for whom we have delivered an advertisement or monetized an advertising inventory during the previous 12 months. We count specific brands or divisions within the same business as distinct clients so long as those entities have separately signed insertion orders with us. In the case of some solutions within Criteo Retail Media, we count the parent company of the brands as an individual client, even if several distinct brands pertaining to the same parent company have signed separate contracts or insertion orders with us. On the other hand, we count a client who runs campaigns in multiple geographies as a single client, even though multiple insertion orders may be involved. When the insertion order is with an advertising agency, we generally consider the client on whose behalf the advertising campaign is conducted as the “client” for purposes of this calculation. In the event a client has its advertising spend with us managed by multiple agencies, that client is counted as a single client. Our client base is composed of two client categories: the large customer category and the midmarket category. We define large customers as the top-50 or the top-100 commerce websites per vertical in a given geographic market, depending on the depth of that market, based on the number of monthly unique visitors as measured by comScore or other third-party providers of such information. We define a midmarket client as any client outside of the large customer category per vertical in a given geographic market, depending on the depth of that market, and with a certain minimum threshold number of unique monthly visitors to their digital property, as measured by comScore or other third-party providers of such information. This minimum threshold varies by market, but is generally around 40,000 unique monthly visitors for our more developed markets. The delineation between the large customer and midmarket categories is fluid and the Company may decide, from time to time, to move some clients from one category to another. We may segment our client base in different ways in the future and adjust our go-to-market strategy accordingly. Research and Development We invest substantial resources in research and development to conduct fundamental research on artificial intelligence, machine-learning models, enhance the algorithms in Criteo AI Engine, develop new features and solutions, conduct quality assurance testing, improve our core technology and enhance our technology infrastructure. Our engineering group is primarily located in research and development centers in Paris, France, Grenoble, France and Ann Arbor, Michigan. We expect to continue to expand capabilities of our technology in the future and to invest significantly in continued research and development and new solutions efforts. We had 624 employees primarily engaged Research and Development and Product as of December 31, 2020. Research and development expenses, including expenses related to the Product group, totaled $132.5 million, $172.6 million and $179.3 million for 2020, 2019 and 2018, respectively. 15 Intellectual Property Our intellectual property rights are a key component of our success. We rely on a combination of patent, trademark, copyright and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish, maintain and protect our proprietary rights. We generally require employees, consultants, clients, publishers, suppliers and partners to execute confidentiality agreements with us that restrict the disclosure of our intellectual property. We also generally require our employees and consultants to execute invention assignment agreements with us that protect our intellectual property rights. Intellectual property laws, together with our efforts to protect our proprietary rights, provide only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. The laws of certain countries do not protect proprietary rights to the same extent as the laws of France and the United States and, therefore, in certain jurisdictions, we may be unable to protect our proprietary technology. Agreements with our employees and consultants may also be breached, and we may not have adequate remedies to address any breach. Further, to the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights to know-how and inventions relating thereto or resulting therefrom. Finally, our trade secrets may otherwise become known or be independently discovered by competitors and unauthorized parties may attempt to copy aspects of the Criteo Commerce Media Platform or obtain and use information that we regard as proprietary. As of December 31, 2020, we held sixteen patents issued by the U.S. Patent and Trademark Office, one patent issued by the French Patent Office, one patent issued by the European Patent Office, one patent issued by the Japan Patent Office and one patent issued by the Korean Intellectual Property Office, and had filed 10 non-provisional U.S. patent applications and four European patent applications. We also own and use registered and unregistered trademarks on or in connection with our products and services in numerous jurisdictions. In addition, we have also registered numerous internet domain names. Our industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patent and other intellectual property rights. In particular, leading companies in the technology industry have extensive patent portfolios. From time to time, third parties, including certain of these leading companies, have asserted and may assert patent, copyright, trademark and other intellectual property rights against us, our clients or our publishers. Litigation and associated expenses may be necessary to enforce our proprietary rights. 16 Privacy, Data Protection and Content Control Legal and Regulatory Privacy and data protection laws play a significant role in our business. The regulatory environment for the collection and use of consumer data by advertising networks, advertisers and publishers is frequently evolving in the United States, Europe and elsewhere. The United States and foreign governments have enacted, considered or are considering legislation or regulations that could significantly restrict industry participants’ ability to collect, augment, analyze, use and share personal data, such as by regulating the level of consumer notice and consent required before a company can utilize cookies or other tracking technologies. In the United States, at both the federal and state level, there are laws that govern activities such as the collection and use of data by companies like us. At the federal level, online advertising activities in the United States have primarily been subject to regulation by the Federal Trade Commission, or the FTC, which has regularly relied upon Section 5 of the Federal Trade Commission Act, or Section 5, to enforce against unfair and deceptive trade practices, including alleged violations of consumer privacy interests. Various states have also enacted legislation that governs these practices. For example, on September 27, 2013, the governor of California signed into law AB 370, an amendment to the California Online Privacy Protection Act of 2003, or CalOPPA. This amendment requires that we disclose in our privacy policy how we respond to web browser "do not track" signals. Our current privacy policy discloses that we do not respond to web browser "do not track" signals but that we do respond to opt-out requests made through our proprietary opt-out button or through industry opt-out platforms (namely Network Advertising Initiative and Digital Advertising Alliance). However, the US privacy law framework may be subject to significant evolutions in the near future both at a federal and at a state level. At a federal level, lawmakers are currently considering the possibility of adopting a federal privacy law. In 2018, the State of California adopted the California Consumer Privacy Act, or the CCPA. The CCPA has been characterized as the first “GDPR-like” privacy statute to be enacted in the U.S. because its scope, and a number of the key provisions, resemble the GDPR. The CCPA establishes a new privacy framework for covered businesses by, among other requirements, creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California, imposing special rules on the collection of personal data from minors, creating new notice obligations and new limits on the sale of personal information, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. As currently enacted, we and partners in our industry have been required to comply with these requirements since January 1, 2020, when the CCPA became effective. As with GDPR, the advertising technology marketplace may have to adapt to operating under the CCPA where it applies. Our advertising or publishing partners may impose new CCPA restrictions with which we must adapt and comply. This past November, the voters in California voted to pass the California Privacy Rights Act (“CPRA”), an Act that both amends and expands the scope of the CCPA. The CPRA will become effective on January 1, 2023, with a look back period to January 1, 2022. The CPRA creates new criteria by which businesses can be regulated, expands the definition of “personal information” to more closely match Europe, a new audit requirement, and the creation of an agency to oversee enforcement of the CPRA. The CPRA also explicitly provides an opt-out right for cross-contextual behavioral advertising. We cannot predict the timing or outcome of this adaptation or the effect on our business. Adapting our business to the CCPA and the forthcoming new requirements under the CPRA could involve substantial resources and expense, and may cause us to divert resources from other aspects of our business, all of which may adversely affect our business. In addition, the Criteo Commerce Media Platform reaches users throughout the world, including in Europe, Australia, Canada, South America and Asia-Pacific. As a result, some of our activities may also be subject to the laws of foreign jurisdictions. In particular, data protection laws in Europe can be more restrictive regarding the collection and use of data than those in U.S. jurisdictions. In the European Union, the two main pillars of the data protection legal framework are the E-Privacy Directive (Directive on Privacy and Electronic Communications) and the General Data Protection Regulation (GDPR), which was implemented in May 2018. The E-Privacy Directive directs EU member states to ensure that accessing information on an Internet user’s computer, such as through a cookie and other similar technologies, is allowed only if the Internet user has been informed about such access and given his or her consent. A recent ruling by the Court of Justice of the European Union clarified that such consent must be reflected by an affirmative act of the user, and European regulators are increasingly agitating for more robust forms of consent. These developments may result in decreased reliance on implied consent mechanisms that have been used to meet requirements of the E-Privacy Directive in some markets. A replacement for the E-Privacy Directive is currently under discussion by EU member states to complement and bring electronic communication services in line with the GDPR and force a harmonized approach across EU member states. It is possible that the proposed e-privacy regulation could further raise the bar for the use of cookies and the fines and penalties for breach could be significant. In December 2016, the EU institutions reached an agreement on the GDPR. The GDPR has updated principles drawn from the 1995 Data Protection Directive while imposing new levels of sanctions for non-compliance. The EU data protection authorities have also been granted power to impose administrative fines of up to a maximum of €20 million or 4% of the data controller's or data processor's global turnover for the preceding financial year, whichever is higher. 17 We believe that the regulation has no material impact on our business or the way our technologies operate. However, GDPR is still a relatively recent regulation with no established case law. Therefore interpretations of the GDPR may vary, especially with respect to the articulation between GDPR (lex generali) and E-Privacy Directive (lex speciali) and the conditions for the collection of a valid "cookie" consent, and thus there can be no assurance that this will not have any particular impact on our business, technologies or practices in the medium to long term. On October 1, 2020, the French data protection authority ( Commission Nationale de l'Informatique et des Libertés , or CNIL) issued the final version of its guidelines on the use of cookies and other trackers and its final recommendations on modalities for obtaining users’ consent to store or read non-essential cookies and similar technologies on their devices. The recommendations provide that, when required, consent must be indicated by a clear and positive action of the data subject, such as by clicking on an “accept all” button on the first layer of the consent management platform. CNIL also noted that it should be as easy to refuse consent to the use of cookies as it is to accept consent, and a “refuse all” button should be present on the first layer of the consent management platform, equivalent to the “accept all” button in terms of size, position and color. Further, the ability to withdraw consent must be readily available at all times. The recommendations are not binding, nor are they intended to be prescriptive and exhaustive. Companies have until March 2021 to ensure compliance with these guidelines. As we continue to expand into other foreign jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business. Self-Regulation In addition to complying with extensive government regulations, we voluntarily and actively participate in several trade associations and industry self-regulatory groups that promulgate best practices or codes of conduct relating to targeted advertising. For example, the Internet Advertising Bureau EU & US, the Network Advertising Initiative, the European Digital Advertising Alliance and the Digital Advertising Alliance have developed and implemented guidance for companies to provide notice and choice to users regarding targeted advertising. In addition to complying with such guidance, we provide consumers with notice about our use of cookies and our collection and use of data in connection with the delivery of targeted advertising, and allow them to opt out from the use of such data for the delivery of targeted advertising. In an effort to harmonize the industry’s approach to internet-based advertising, these programs facilitate a user's ability to disable services of integrated providers, but also educate users on the potential benefits of online advertising, including access to free content and display of more relevant advertisements to them. The rules and policies of the self-regulatory programs that we participate in are updated from time to time and may impose additional restrictions upon us in the future. Criteo became one of the first companies to broadly include an "Ad Choices" link in all the advertisements we deliver, which gives users access to clear, transparent, detailed and user-friendly information about personalized advertisements and the data practices associated with the advertisements they receive. In addition, we provide consumers with an easy-to-use and easy-to-access mechanism to control their advertising experience and opt out of receiving targeted advertisements we deliver. We believe that this transparent consumer-centric approach to privacy empowers consumers to make better-informed decisions about our use of their data. We also actively encourage our clients and publishers to provide information to consumers about our collection and use of data relating to the advertisements we deliver and monitor. Content Control and Brand Safety To protect against unlawful advertiser and publisher content, we include restrictions on content in our terms and conditions. We also take a large variety of brand safety measures to ensure that the brand equity of our clients is preserved as much as possible. These measures include determining that each publisher's inventory meets our content requirements and those of our clients to ensure that their display advertisements are not shown in inappropriate content categories. For that purpose, we use numerous internal systems and processes to filter out inventory in real time, including the list of suspect IP addresses from the Trustworthy Accountability Group and the lists of invalid traffic from several specialized external vendors. With respect to our inventory purchased through RTB exchanges, we utilize a mix of proprietary methodologies as well as third-party software to verify that inventory where the advertisement placement is shown conforms to our advertising guidelines and the content expectations and branding guidelines of our clients. 18 Government Regulation In addition to the laws and regulations governing privacy and data protection described above, we are subject to numerous domestic and foreign laws and regulations covering a wide variety of subject matters. New laws and regulations (or new interpretations of existing laws and regulations) may also impact our business. The costs of compliance with these laws and regulations are high and are likely to increase in the future and any failure on our part to comply with these laws may subject us to significant liabilities and other penalties. Competition We compete in the broader market for digital marketing and media monetization, primarily through Display Advertising. Our market is complex, rapidly evolving, highly competitive, still fragmented and yet rapidly consolidating. We face significant competition in this market, which we expect to intensify in the future, partially as a result of potential new entrants in our market, including but not limited to large well-established internet publishers and players, in particular as we continue to expand the breadth of the Criteo Commerce Media Platform. We currently compete with large, well-established companies, such as Amazon, Facebook, Google, and Microsoft, independent Demand-Side Platforms ("DSPs"), such as The Trade Desk or MediaMath, as well as smaller, privately held companies. Potential competition could emerge from large enterprise marketing platforms, like Adobe Systems Inc. ("Adobe"), Oracle Corporation ("Oracle") and Salesforce.com, Inc. ("Salesforce"), or public and private companies specialized in the Marketing Technology ("MarTech") space. In addition, web browsers, and desktop and mobile operating systems developed by large software companies like Google and Apple Inc. ("Apple") can have a significant influence and impact on the way we operate. We believe the principal competitive factors in our industry include: • access to granular commerce data on a large scale; • technology-based ability to activate data, in particular commerce data, for multiple digital marketing and media monetization goals, along the entire consumer journey; • technology-based ability to generate advertisers' desired business outcomes, including, but not limited to, high return on advertising spend at scale; • relevance and breadth of solutions to address numerous digital marketing and media monetization goals; • breadth and depth of consumer reach, including across the open Internet; • marketer and publisher control over the objectives, parameters and performance of their advertising campaigns through modular, flexible and easy-to-use tools and services available on a self-service interface; • measurability of the advertising spend performance, based on clear and transparent measurement metrics; • completeness and effectiveness of solutions across digital devices, commerce and advertising environments, platforms and operating systems, advertising channels and publisher environments; • transparency of pricing models, aligning with the value propositions provided to marketers; • openness, transparency, security and fairness of data sharing and data management practices; • client trust; • global presence; • client service and detailed, transparent client reporting available on a self-service basis; • commitment to data protection and user privacy; and • ease of use. We believe that we are well positioned with respect to all of these factors and expect to continue to capture an increasing share of digital marketing and media monetization budgets worldwide. 19 Seasonality Our client base consists primarily of commerce of companies in the Retail, Travel and Classifieds industries, which we refer to as “commerce companies” or “commerce clients”. In the digital Retail industry and the consumer brand verticals in particular, many businesses devote the largest portion of their advertising spend to the fourth quarter of the calendar year, to coincide with increased holiday spending by consumers. With respect to Criteo Retail Media, the concentration of advertising spend in the fourth quarter of the calendar year may be particularly pronounced. Our Retail clients typically conduct fewer advertising campaigns in the first and second quarters than they do in other quarters, while our Travel clients typically increase their travel campaigns in the first and third quarters and conduct fewer advertising campaigns in the second quarter. As a result, our revenue tends to be seasonal in nature. If the seasonal fluctuations become more pronounced, our operating cash flows could fluctuate materially from period to period. Employees and Human Capital Management As of December 31, 2020, we had 2,594 employees. Our employees employed by French entities (1,006 employees) are represented by a labor union and employee representative bodies (works' council, employee delegates and a health and safety committee) and covered by collective bargaining agreements. We consider labor relations to be good and have not experienced any work stoppages, slowdowns or other serious labor problems that have materially impeded our business operations. We have a demonstrated history of commitment to the well-being and success of our workforce, and our company is driven by our core values of “open, together and impactful”. Attracting and retaining top talent is a key objective at Criteo, and we invest significantly in talent acquisition. Employee health and safety is a priority for Criteo. We devote time and efforts across all of our locations to provide positive working conditions, work-life balance and the healthiest office environment for our employees. We value diversity in the workforce. For example, as of December 31, 2020, 41% of our 2,594 employees were female. Further, we have a global roadmap for gender equality and have internal dashboards dedicated to that purpose. We also have a diversity and inclusion roadmap, focused on areas such as social diversity, disability and ethnic diversity. We also have seven Employees Resource Groups who carry out awareness projects around diversity & inclusion and environmental topics. Additionally, we strive to provide exceptional training opportunities and development programs for our employees. In 2020, over 30,000 training hours were delivered to our employees. To assess and improve employee retention and engagement, we periodically survey employees, and take action to address areas of employee concern. In 2020, we carried out two employee surveys specific to COVID-19 concerns, soliciting feedback on a wide range of topics from well-being to productivity to social links with other employees. Financial Information about Segments and Regions We manage our operations as a single reportable segment. For information about revenues, net income and total assets of our reporting segment, please see our audited consolidated financial statements included elsewhere in this Form 10-K. For a breakdown of our revenue and non-current assets by region, please see Note 25 to our audited consolidated financial statements included elsewhere in this Form 10-K. For information regarding risks associated with our international operations, please refer to the section entitled "Risk Factors" in Item 1A of Part I in this Form 10-K. Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available, free of charge on our website, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission (the "SEC"). These documents may be accessed through our website at www.criteo.com under "Investors." Information contained on, or that can be accessed through, our website does not constitute a part of this Form 10-K. We have included our website address in this Form 10-K solely as an inactive textual reference. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as Criteo, that file electronically with the SEC. With respect to references made in this Form 10-K to any contract or other document of Criteo, such references are not necessarily complete and you should refer to the exhibits attached or incorporated by reference to this Form 10-K for copies of the actual contract or document. 20