Catena Media has informed investors that changes to Google’s algorithm have negatively impacted its second-quarter earnings.
In a recent update, the affiliate media publisher noted that “the industry-wide impact of Google’s organic search policy changes has reduced the performance of some strategic media partnerships.”
The downturn is attributed to a major Google algorithm update in March, which enforced new spam policies aimed at reducing low-quality content in search rankings. Google stated that these changes were intended “to improve the search experience by showing less content designed to attract clicks and more content that people find useful.”
Catena reported that the update led to decreased revenue and increased direct expenses from media partnerships, as Google now prioritizes traffic from organically ranked properties.
As a result, Catena has revised its financial guidance for the second quarter, now expecting revenue between €12.5 million and €13.5 million, and adjusted EBITDA between €0.5 million and €1.5 million. Despite these challenges, management remains optimistic about revenue growth returning in the second half of 2024.
Pierre Cadena, Catena Media Interim CEO, commented: “Catena Media is embedding a new product-focused operating model as part of our efforts to re-establish the company as a healthy business. We believe that this is the right action in our strategy and we still forecast a return to sustainable growth with high-margin operations from the second half of 2024.”
To mitigate the impact of Google’s policy changes, Catena is transitioning to a new operating model that prioritizes revenue-sharing deals for its media portfolio.
Additionally, Catena’s new senior management team has concluded that the previous full-year adjusted EBITDA guidance of €20 million is “no longer applicable,” and the company will not issue new guidance at this time. To improve margins and return to profitable growth, Catena will not renew some low-margin agreements beyond Q2 and Q3, reducing direct costs by more than €1.4 million per quarter and content costs by €0.7 million per year.
Cadena concluded: “We continue to see media partnerships as an important source of added value in a fast-moving marketplace. We are ready to invest in partnerships that generate profit for both parties and will explore attractive collaborations in this space while redoubling our focus on our organic products.
“As a result of these changes, combined with the proceeds from our recent divestments, our balance sheet will be much healthier. This provides us with further financial flexibility and strengthens our ability to repay our senior bond next year and to confidently manage the business debt load.”
Manu Stan will take over as CEO of Catena on July 1, leading the new senior management team alongside CFO Michael Jarrow.
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