OAREX: Ad Payments Have Stabilized, But Payment Gap Remains An Issue

Digital media payment issues have settled down from a year ago, when Sizmek went bankrupt with tens of millions of dollars owed to ad tech companies and publishers, but there are still troubling trends in the market, according to the OAREX Q4 2019 online advertising payments report released on Tuesday.

The data for the report is itself a testament to how ad tech companies and publishers are burdened by the programmatic payment gap – the debt that occurs when publishers fill ads, while it takes brands and agencies weeks or months to pay.

OAREX buys media invoices from publishers at about 90% the CPM rate and provides them with cash on hand. Its Q4 report is based on data from the previous year on 211 debtors (i.e. ad tech companies who owe publishers for campaigns).

The rate that vendors paid on time increased from 2018 to 2019, he said. And the percent of payments within 1% of the paid differential rose from 72% to 78%. This means vendors are closer to paying the billed amount for campaigns.

It’s hard to identify specific red flags or signs of a broad industry problem, said OAREX founder and CEO Hanna Kassis. Typically, identifiable problems manifest when there’s sudden spikes or declines. For a period following Sizmek’s bankruptcy, for instance, the paid differential dropped as vendors and publishers scrutinized their supply chain partners.

It’s also hard to identify clear red flags from campaign payment data. Xandr paid late on 97% of campaign invoices last year, according to OAREX data. But Verizon paid late at a similarly high rate after it acquired a handful of ad tech companies, Kassis said, since the duplication of teams and internal changes lead to late payments.

Before a company goes under, its late-payment rate will go to 100%, he said. Similar companies will have a 100% because they have sophisticated financing practices in place and choose to carry the debt.

“It’s hard to say with certainty that any particular data point is an indicator of real trouble,” he said. “For us, we understand that if you’re Xandr or MediaMath and always pay late, but always pay, that we’re comfortable owning the debt for the invoice.”

The most troubling data is that, although overall late payment rates are down, the number of payments late by 30 or more days is up to 14% of all invoices. In other words, payments have mostly stabilized, but part of the market is extremely volatile, Kassis said.

OAREX relies on less orthodox data when it decides to blacklist certain vendors as credit risks.

News of corporate leadership exits or shaky financials in the trade press are one alarm, Kassis said. Even seemingly well-founded rumors of payment defaults on Reddit programmatic boards can be enough for OAREX to back off a vendor.

“We’ve built Glassdoor data [an employer review site for former and current workers] into our own algorithm for evaluating vendors,” he said. “That’s a theory we have internally, and there’s data that it’s more than just a rule of thumb from a credit perspective.”

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