Digital Media Creditor FastPay Says Slow Payments Are The New Normal

FastPayThree years ago, AdExchanger covered FastPay, a startup offering credit lines to digital media companies. Since then, FastPay has raised about $35 million in credit and equity itself, expanded its clientele, and is about to launch a new product.

FastPay steps in when an ad network owes money to a publisher but hasn’t yet been paid by the advertiser. It fronts money that the network (or other intermediary) can use to pay the publisher while waiting on payments from the ad agency or other buyer.

We caught up with FastPay founder Jed Simon for an update.

What has changed for FastPay since 2010?

JED SIMON: When we started, our customers were primarily publishers and some agencies and a few technology companies. Now there’s the whole RTB ad network [space], ad exchanges have become more established, and there’s a whole industry around social gaming and social advertising.

At the same time, payment terms are being extended further. Three or four years ago, we saw slow payment terms coming into play, expecting that to be a post-recessionary development, but what we’ve seen is that has transcended the past negative economic cycle. It’s become a persistent trend. Long payment terms have become the new normal, which has exacerbated the need for a product like ours to help solve that problem.

We’ve also grown a lot. When we last spoke with AdExchanger, we had about a dozen clients; now it’s over 100. We see a lot in the ads ecosystem and markets, and we’re better able to identify the early warning signals when players are in trouble. That’s when we help divert our clients away from those monetization sources and keep them out of trouble.

What are some of those early warning signals and what do you do when you see them?

This industry is very dynamic. There’s a perception sometimes that someone is doing really well, but the proof is in the pudding when they’re slowing their DSOs [days sales outstanding] and payments and other components that suggest they’re not doing well. Then we do our own research to see what we can find out from other people in the market. It’s an ongoing evaluation process.

When we see early warning signals we’ll establish an internal credit limit on those companies. If we see a certain network that we believe is having problems, we either won’t finance them, or we’ll put a limitation on them. Clients will want to know why. We’ll explain the issues we’re seeing, and very often they’ll start diverting their traffic to other places.

Can you give an example?

Here’s a real example that happened about a month ago. I was walking to the bank and a client called me on my cell. They had been running a large portion of traffic, like 75%, through a specific network, and we had always financed a small portion of it. He was pushing me to finance all of it. I said, “No, we can’t do that. You should not be putting so much money through one network.” The client said, “There’s no way they’re not going to pay.”

Three days later, he called me saying they’re not returning his phone calls. It was a 180-degree shift. There was some traffic questioning and our client turned out to be fine, but they had freaked out. One of the things we encourage clients to do is to diversify their accounts. I get so much resistance from that, but as a general practice it’s a good exercise. Problems can happen, like what happened with AdBrite, Pulse360 and others.

Among your clients, which areas are showing the most activity?

We’re seeing an incredible amount of growth in mobile, video and on the RTB side. With RTB, the numbers are smaller, but the growth is a hockey stick. You see tons of dynamic activity there.

Who is your target customer these days? 

In terms of segments, we have a diversified outlook. We target content publishers, all types of ad tech businesses from SSPs to exchanges to DSPs and trading desks. We have clients all throughout the ad tech spectrum. Facebook PMDs, YouTube channels, book publishers, app developers — we like all those businesses. We work with businesses of all sizes, from those that need $50,000 to big ones that need $10 million from us. It has to be a digital media business that’s working with brands and needs more capital.

What can you say about your revenue?

We’ve been eating our own dog food in that we’ve raised equity from some angels. We did a private equity transaction last year and we set up a relationship with Wells Fargo. We’ve got various capital sources, but we’re largely bootstrapping it ourselves. We’ve met with a lot of VCs, but we’d rather grow organically and put off having to raise too much equity.

What are you working on next?

In addition to our core service, we’re building our own platform, which we’ll be integrating into the channels ourselves. This will add a dynamic layer which will allow clients to fund their advertising buys that are owed to them by all these ad tech businesses. So if they’re owed X amount of dollars from network A, they can push a button and get the money. We’re still working on partnerships to support the platform, but we’ll be rolling this out soon.

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