When the novel coronavirus pandemic hit in March and marketers stopped spending on ad, publishers feared the sudden decline would leave ad tech companies with no money to make up for their payments.
Now the ad tech industry is recovering from the 2020 financial slump, and these intermediaries have to pay.
Supply-side platforms OpenX and TripleLift said they are seeing better revenue now than they did at this point last year as marketers invest more in programmatic channels because of their flexibility in times of uncertainty. As a result, demand-side platforms appear to be revitalized.
TripleLift co-founder and chief strategy officer Ari Lewine said the company started paying publishers as a token of faith three days early when the pandemic broke out. In general, he said that DSPs also start paying early.
“Everyone thought that it would be this domino effect of payment delays that would permeate the entire ecosystem from the brand to the agency to DSP to SSP to the publisher,” said Lewine. “And what we have observed is exactly the opposite. As far as I can tell, everyone is paid earlier. “
Financing firm Oarex’s payment dates in the third quarter seem to support this, but with some caveats. The number of late payments decreased by 26% overall and the number of early payments increased by 31% compared to the second quarter.
The underpayment percentage was only 5% in September, an all-time low. The number of payments made more than 30 days earlier has also increased 200% since the second quarter, while the number of overpayments increased by 13.3%.
However, payments that are more than 30 days late are two to four times more likely than payments that are less than 30 days late. This is true even after many companies extended their payment terms and changed guarantees earlier in the year. Taboola dropped its revenue guarantees, GumGum moved its payment terms from 60 days to 90 days, and Teads cited force majeure when it failed to meet its revenue obligations.
“The longer payment terms implemented in Q1 and Q2 seem to remain here. While some partners try to restore the original terms, many ask for higher revenue shares in order to be able to pay on faster terms. There is growing concern about what impact these payroll term extensions have had on our Q3 data … and what impact this will have on future margins, ”the report said.
Ad tech companies are getting their finances in order ahead of a busy fourth quarter as presidential election and holiday advertising spending pour into the system. That could all collapse in the first quarter of 2021, which is a historically quiet neighborhood.
Bernard Urban, CEO of Silverblade Partners, described this as a “tightrope walk” as the Paycheck Protection Program, which provided companies with much-needed liquidity, ended in August. Companies that recover will have to meet fourth quarter demand and hope these payments will come in in the new year.
“Your company is making more money on paper, but you won’t see that money until the first quarter. You won’t be doing a lot of business in the first quarter, but in the fourth quarter you are damn busy but you don’t have the money, ”said Urban.
Danny Spears, COO at The Ozone Project and former head of Ad Tech at The Guardian, told Adweek that many companies have used this time as an opportunity to fundamentally change their approach to the supply chain. This includes “long overdue” changes in working with intermediaries, compliance with data protection regulations and transparency.