OpenX Adds Insurance Line For DSP Payment Defaults

The sell-side ad tech company OpenX said in a note sent to clients Thursday it has added an insurance line to cover potential DSP payment defaults and warned publishers against working with supply chain intermediaries that won’t insure campaign spend.

“Our strong advice to you is to only work with exchanges that can indemnify you from clawbacks due to a DSP’s non-payment, otherwise, you risk losing your earned revenue,” the note said, signed by Chief Customer Officer Tish Whitcraft. “Simply looking more closely at a DSP’s creditworthiness is not an insurance policy.”

The new insurance coverage isn’t related to the COVID-19 pandemic. OpenX began the process about six months, CEO John Gentry told AdExchanger. Though the public health and economic crisis elevates the possibility of defaults.

“We don’t know if any DSPs might have financial issues this year but given the macro economic climate it would not be surprising if some of the smaller players do have trouble,” Gentry said.

OpenX has already covered 87% of the DSPs it works with, aside from Google and Amazon (which are low risk for sudden bankruptcy). To gain coverage, DSPs deal directly with the insurance company, Euler Hermes, so OpenX never sees any of its partners’ finances, Gentry said.

This isn’t the first insurance package created for potential DSP defaults. TripleLift also insures some of its campaign accounts. But there are concerns about whether the costs of the insurance to the SSP are worth the potential payback.

PubMatic CEO Rajeev Goel told AdExchanger last month that the company decided against adding campaign insurance because insurers don’t cover the riskiest buyers that are most likely to default.

Adding an insurance partner is also a meaningful cost right now, considering ad tech companies and the ad world in general are in a cash crunch. Gentry said OpenX’s new insurance line is a “significant investment.”

The full text of OpenX’s note to clients is reproduced below:

Dear Partner,

With the current market trends, we know you’re concerned with getting paid for your earned revenue and not being subject to clawbacks for unpaid amounts from DSPs/buyers.

OpenX wants to ensure you feel a sense of security doing business with us. To that end, we’ve contracted with Euler Hermes to provide us with credit insurance for our DSP accounts receivable (A/R). Euler Hermes operates in more than 50 countries and insures over $1 trillion in exposure and is rated AA by S&P.

There are a few DSPs that are a low-enough risk, such as Google and Amazon, that were not included. However, we currently have approximately 87% of the balance of partners covered and are still working to the remainder covered, including international DSPs as well.

Our strong advice to you is to only work with exchanges that can indemnify you from clawbacks due to a DSP’s non-payment, otherwise, you risk losing your earned revenue. Simply looking more closely at a DSP’s creditworthiness is not an insurance policy. This is why we’ve contracted with Euler Hermes to insure 90% of our receivables.

  • Ask and require your partners to have A/R insurance
  • If they don’t, require something in writing from them to indemnify you from clawbacks
  • If they’re unwilling to indemnify you, consider moving your inventory to exchanges that do insure your earned revenue

We encourage you to reach out to your Revenue Manager or Business Development contact here at OpenX to learn more. We’re also able to pause specific DSPs with your approval, so feel free to discuss this option with your Revenue Manager. If you're not sure who your Revenue Manager is, please create an account management case in the OpenX Community.

We’re all in this together, so don’t hesitate to reach out with any questions.

Best Regards,

Tish Whitcraft
Chief Customer Officer, OpenX

 

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