There is a big push for transparency in the digital advertising market. Media firms (mainly publishers and advertising intermediaries) are demanding more and more disclosure. We agree in the market need for it. So we’ve been piggy backing on that since May, by disclosing payment data.
Ever 3 months we release a digital media payments report. In it we release general payment trends we are noticing and payment performance data on 127 firms. The goal is to shine a light on credit and payment data. Why? So fast growing media companies can avoid the pitfall of trading with a firm that pays late or inconsistently. That one unknown can have very adverse affects on a business. For example, a 9 day shortfall requires 15% more cash on hand, roughly.
So, you want to sign up with a new demand partner (i.e advertising exchange). Ok. What are their terms? Do they pay on time? If not how often are they late? Do they offset their payments if there is a dispute? If so, by how much? How often are the offsets? Why are there offsets?
These are the questions we answer in our free payment report. All we ask for is your e-mail. We think that is a fair trade for our data.
The data is as objective as possible. However when you look at data over time, you see trends. We draw analyses and commentary at Digiday.
Here’s what we’re reporting on:
- As a part of our entire portfolio, late payments have steadily declined into Q4, 2018. Late payments as a % of our portfolio peaked in November, 2017.
- Of the late payments, they got much worse in December, 2018: average wait days jumped to 9, versus 6.5 for all of 2018. And the amount of late payments more than 15 days late doubled.
- Video platforms are some of the “most consistently late” and latest to pay (in days).
- Mobile platforms are at the extremes: like video, their pay performance is “late”, but they also pay the earliest and on time (ex-Apple, who pays 26 days early on average).
- Acquired companies tends to have a decrease in pay performance. That means after they are acquired, their payments tend to become late and or inconsistently paid (as to timing).
OAREX’s Q3 Payment Study: Ad Networks Are Paying Later Than Ever
OAREX’s latest study of ad tech payments across the digital media ecosystem reveals that ad networks are paying later than ever.
One alarming statistic is that payment delays increased by an average of 12% in Q4 2017, when media companies need money the most. The broad conclusion is that late payments (beyond stated terms) are endemic to the industry, and ad tech companies are paying later and later.
Download it here: Here are some key findings: You can download our ad tech payment report here, which includes a breakdown of the data by ad network. With Q4 upon us, it’s imperative that you have a funding solution in place to make the most of 2018 ad budgets. Having a partner like OAREX can be the difference between 400% ad revenue growth and the same old story of no growth. In fact I would argue that having a cash-flow solution in place is a necessary component to your overall growth plan. Given another solution in the marketplace is available we thought we’d provide a direct comparison of “us vs. them”. So how are we different: well the main difference is that we are who we say we are (more on this later), but here is a breakdown. Our competitor offers loans and holds themselves out as a lender, so you will be subject to the superior-inferior relationship. OAREX is a true factoring firm, meaning we take collection risk that your customers don’t pay. We do not lend money to your business, and expect repayment from your company. We expect payment from your customers, who become our “debtors” after we buy your invoices. Our funding solution mechanically works like a line of credit, but legally it does not: you are not liable if customers don’t pay, and therefore not subject to a “crackdown” on your business the way a lender would. With OAREX, you will be free of that uncomfortable lender-borrower dynamic. Our competitor limits the funds made available to you when you need them the most, hindering your growth. Since OAREX is not a lender, we do not take credit risk in your business (we only take credit risk in your customers’ businesses). You could have a 450 FICO with zero credit history on your business and we’ll still fund you. And since we don’t care about your credit, we will not limit the amount of money made available to your business. The only limit is the “advance amount”, which is the % of money you can receive for each invoice. Currently, the max advance limit is 90% of your invoice value. Our competitor requires a personal guarantee, despite having claims against your business and business assets. If things go South for you and your business, rest assured OAREX will not come after you personally*. Our competitor has a different philosophy about that. Our competitor offers recourse factoring products, so if your customers don’t pay, you are still liable. As mentioned OAREX is a true factoring firm. If you’ve been shopping for an invoice or cash-flow financing solution, you’ve probably come across the terms “recourse” and “non-recourse”. We offer a non-recourse product. What does this mean? In the funding world, recourse means “the legal right to demand compensation or payment”. Non-recourse means “no legal right to demand compensation or payment“. So if your customer does not pay us, you are not liable to make good on the payment* Many “factoring” companies hold themselves out as factoring companies. This means that they claim to buy invoices. If a company buys an invoice from another company, they should be taking all collection risk (in theory). However many don’t (see point #4 above). The fact that some factoring companies — including our competitor — offer “recourse factoring” turns the true factoring product into a loan. Think of it this way: if we claim to “buy” your invoices, then we should be stepping into your shoes in the way of risk, collection, etc. Right? That is what factors do. However, if we hold ourselves out as a factor, but we’re not willing to assume the risks that come with owning the invoices — because we can come after you in the event of non-payment — then what are we offering? We are offering a line of credit against your basket of invoices, which is a loan. This is deceptive. Many people sign up with factoring firms thinking they are receiving factoring, but they’re really becoming a borrower (oftentimes against their own knowing, for lack of legal knowledge). This is deceptive and calls into question the legal theory of “substance over form” — it doesn’t matter what you call it: if it looks like a duck, walks like a duck and talks like a duck, then it is a duck. It doesn’t matter if you call a loan factoring: if you are liable for non-payment, then you are a borrower, and all the ramifications of being a borrower follow. So to my first and most important point of how we are different: we are who we say we are. OAREX is a factoring firm, and we’re not going to disguise a loan to customers by calling it factoring. This article was written by Hanna Kassis, the Founder & CEO of OAREX Capital Markets. Hanna can be reached at hanna [at] oarex [dot] com. *OAREX clients are always liable in the event of fraud. The most important factor to success for a publisher or app is cash flow. Most have their cash cycle down to a science. The only factor to growth that many of them are missing is readily available capital. With access to capital, they know that for every dollar spent it returns a dollar + a margin (also known as return on ad spend or ROAS). Without access to capital, they know growth will be hindered or delayed. Who has time for that? So in response to the market place, OAREX now offers up to 90% of ad revenue paid weekly. During a 60 day period (the average wait time to get paid), publishers can invest every $1 one time. However with our weekly payments, they can invest the same dollar 8 times. Naturally this will lead to exponential growth, provided the margins are there. Here is how it works: Advancing ad revenue and accelerating the receipt of your revenues is almost necessary for a high potential publisher or app. Just imagine reinvesting $8 into your business for every $1 you have. No dilution of equity, no personal guarantees, no brainer. Managing cash flow in digital media can be tough. Normal payment terms vary from 30 days to 120 days, and all our internal data suggests pay terms are getting longer. Many ad networks pay with a high degree of certainty, but always a few days late. Often times it takes a simple email follow-up to an ad network’s accounts payable department to get your money. They do pay, but it’s just a pain to collect. We’ve also recently seen payment terms being extended (sometimes unilaterally), completely beyond a publishers control. If you’re seeking a new demand partner, you have to be weary of the following: Below is the best way to vet out a new demand partner. What are people in the industry saying about them? Check industry threads like the Reddit AdOps thread. Also do a quick Google search, is there any news about late payments or lawsuits? It will be tough to find this information, but you can piece together anecdotal evidence – how many employees do they have? Is their C-Suite on LinkedIn, or obscure and hard to find? How many offices do they have? Are they well capitalized (i.e. publicly traded)? Have they raised any equity to support the business? Check Crunchbase. Who are their backers? These are questions you have to ask. Use your gut, since you won’t have much direct evidence to go off of. Paying on 90+ terms is not unusual. But the question is, do you want to wait that long? Especially with seasonality, you could miss out on growth if you’re waiting to get paid. Take this into consideration. Typically, the sooner an ad network pays, the better (unless you’re willing to wait 90+ days for ridiculously high CPMs). You may not have direct data into their payment history, but you can ask for credit references. Before you sign up and monetize your audience with an ad network, ask for credit references. You need to make sure they have happy customers. But this will only take you so far, because obviously a network is never going to put down someone they owe money to as a reference. But again, this is all anecdotal. We see the uncertainty around payment in the industry as a major problem. To alleviate and engender goodwill, we’ve put together a free payment history tool. With it, you can find: If they aren’t in the database, or it says “not enough information”, that means one of 3 things – we never bought an invoice payable by that company, or they refused to disclose info to us, or they have some type of mark on their credit (i.e. a tax lien or bankruptcy) that disqualifies them from our system. It’s imperative that you go through this process prior to on boarding new demand partners. The last thing you want is to ramp up with an ad network, only to find out they can’t pay you. As always, let us know how we can help you. In a recent analysis of our clients’ growth patterns, we discovered one common thing: clients tend to grow 4-5x bigger, in a fraction of the time. To illustrate this, we developed a calculator. This requires you to enter 4 inputs: This assumes an 80% advance of your invoice value and a 2.5% fee. In this example, if you start with a $10,000 to spend on traffic/user acquisition, and you generate 20% per month, wait 60 days to get paid and use OAREX for 6 months, you will grow revenue 496% and profits 420%. With OAREX, the total campaign spend you can achieve — by reinvesting our funds into your growth channels — will be $220,567. Without OAREX however, you’ll only be able to reinvest your money 2 times in a 6 month period (day 60 and day 120), for a total spend of $36,400. The difference in profits? $37,836 with OAREX, vs. $7,280 without. Please note these results are NOT guaranteed. This is all simply illustrating that if you use OAREX to scale your growth, it will occur much faster than if you didn’t. STUDY: OAREX funds businesses that earn money from digital advertising. We fund them by purchasing their advertising invoices payable by ad partners. OAREX then deals with collecting payment — in 30, 60 or 90+ days — from the ad networks. We fund publishers, smart phone apps, supply-side platforms, demand side platforms, and advertising networks, exchanges and agencies. Established in 2013, we’ve purchased thousands of media invoices over the years, and 2 major things about getting paid have become very obvious. The first thing is that payment didn’t always occur on the expected payment date. Sometimes it paid early, sometimes it paid late. The second was that the payment wasn’t always the same amount as reported in each dashboard. As a participant in the digital media you can attest to the frustration and potential cash flow issues this can cause. So let’s break down each factor one by one, but first, a little bit about our methodology: We studied thousands of invoices purchased from our digital media clients. The invoices were payable by the top 20 desktop / mobile ad networks in our portfolio. The nature of the study was to focus on the supply side, where payments usually hit last. The invoices were purchased primarily from publishers and smart phone apps, with appx. 20% from publisher networks and SSPs. Below are our findings: Of the invoices studied, here is a breakdown of key findings: Here are some highlights: As for the amount of payment, here is the breakdown: FIND OUT WHO PAYS LATE OR UNDERPAYS BY DOWNLOADING THE FULL REPORT: No doubt cash flow management is necessary to hitting scale and growth. Without properly managing your cash flow, you will have to constantly bridge the gap with credit cards or your own capital. With OAREX, you can sell your media invoices for immediate capital up front. This will allow you to reinvest into your winning traffic or user acquisition campaigns to grow quicker, faster. Early this year, Facebook updated their branded content rules that limit the way a Facebook page owner can post content in exchange for money. This paid-promotion strategy was pivotal to the growth of companies like Render Media, Little Things and Diply. As a result of the change, Render Media and Little Things completely shut down, sending ripples through the industry. Now 3rd party advertisers like agencies, brands and publishers are scrambling for new avenues to promote products and content. We believe the reaction to this change is completely overblown with artificial media hype. Here’s why. Many publishers, most notoriously Render Media and Little things, built massive businesses promoting their content by paying Facebook page influencers. The strategy was successful because the cost of acquisition was sometimes as low as a penny, cheaper than Facebook’s floor. When the change occurred, Little Things, a business with over 50 employees, lost 75% of it’s traffic overnight. The lesson here is that many media companies put all their eggs in one basket: Facebook influencer traffic. Their strategy worked until it didn’t, and now many are reassessing where to go next. Don’t let the doom and gloom hype of big name demises freak you out. This new update reminds us of the one Facebook did in August of 2016, when they changed their algorithm to bury promoted viral content for more organic, newsworthy content. Many publishers – whom we happen to deal with on a daily basis – were quick to abandon Facebook and find new avenues of content promotion. Content discovery platforms like Taboola and Outbrain benefitted tremendously after the change, providing new opportunities for 3rd party advertisers to promote content and products. The internet is so dynamic and fluid that when one opportunity closes, another will arise. As long as there are eyeballs, there will be opportunity. Entrepreneurs are innovative and marketers will find (or create) new ways to market products and content. As many advertisers, brands, agencies and publishers “scramble” for new avenues to promote to garner visits and sales, opportunities will emerge. It may have gotten lost in all the hype, but I can’t scream this loudly enough: you can still pay Facebook page owners for sharing content. The new Branded Content guidelines don’t completely prohibit paying a Facebook page owner for sharing content; rather, the Facebook influencer must use the Branded Content Tool to tag 3rd party advertisers on both Instagram and Facebook. According to Gary Lipovetsky, CEO of Provdr.com, another publisher that build a huge business on cheap Facebook influencer traffic, 3rd party advertisers can easily satisfy Facebooks requirements by a paragraph length description or caption to each post. Lipovetsky also thinks it will bode well for publishers long-term, helping increase organic reach. We believe the sign of a good business is one that responds to its customers and demand in the marketplace. While supply side economics once had it’s place in our economy (and arguably still does with some tech stuff), gone are the days of “build it and they will come”. So in response to the marketplace, we’ve raised our advance rate from 80% to 90%. This means more money faster for our clients. The way OAREX works is that we simplify payment terms for pubs by paying ad revenue from all partners on the same day. Instead of getting paid on net 30, net 45, net 60, net 75 and net 90 from multiple ad networks, we will pay you 90% of it on net 1, weekly or monthly. We then collect payment from your ad partners. We used to cap the advance rate at 80% of the invoice value, and have since raised it to 90% for two main reasons. First is that with an 90% advance rate, pubs can reinvest more proceeds into traffic and user acquisition campaigns. This is the obvious reason for bumping the advance rate to 90%, and what we heard most from the market. With a 90% advance rate, pubs can accelerate growth way faster than if they are receiving 80%. Every dollar matters. Secondly, and perhaps not so obvious, is that with a 90% advance rate, pubs need a smaller margin to operate with net positive cash flow. At an 80% advance rate, pubs have to operate at 25%+ margins to make up for the 20% they are not receiving from OAREX. However with a 90% advance rate, pubs only have to operate at 12% margins to have net positive cash flow. At a 12% margin, pubs can deploy more of their capital and make up for the 10% they don’t receive from OAREX. To illustrate, here is an example at an 80% advance, where clients can see profit growth of 420%. This assumes the following: Compare with an example at a 90% advance. With the same assumptions, you can see the growth differential when we give the clients the extra 10%. Clients can grow 2,042% with a 90% advance from OAREX, versus 420% with an 80% advance. We’re glad we have the flexibility to provide the market with what it wants. We will continue to be flexible with clients and dynamic in our product offering, to assure the digital media ecosystem with the best product on the market. Inquire today to see if you qualify for 90%. Last month, Google pushed an update to it’s Chrome browser that automatically blocks ad that are said to harm user experience. Ads that harm user experience are ads such as pop-ups, sound-on autoplay videos, and ads that stick to the viewable window regardless of scrolling. The standards used for blocking ads by Chrome have been agreed upon and set forth by the Coalition for Better Ads (CBA), whose board is made up of giants Facebook and Google, along with the IAB and other major advertisers. Many publishers feared this would result in loss revenue, but that doesn’t appear to be the case yet. Read on to see if your revenue is at risk and what you can do about Google Chrome’s ad block. The CBA is targeting 6 types of “annoying” ads that harm user experience, and variations of those ad types. These ads harm user experience because they cover content or trigger sounds via video without opting to view the video. These are the ads Google Chrome’s ad block is targeting: Ad density higher than 30% on mobile is also prohibited. We’ve seen many clients with at least one of these types of ads within their header bidding or waterfall stack. Although we frequently see it, fortunately for most top-tier publishers these types of ads do not account for a significant amount of revenue. That said however, it is important that you understand how to comply with the CBA guidelines so as not to get banned. If a publisher is in violation, Google will get them a 30-day notice of violations, and a chance to rectify them before Chrome starts blocking their ads – and it will take multiple violations. The threshold for blocking is if 7.5% of page views have existing infringing ads for the first two months after Feb. 15th, and 5% for the following four months and 2.5% after that. For persistently bad sites, Google will block ads at the ad network level using EasyList, the same open source software used by AdBlock Plus. These are the rules set forth by the CBA and Google has promised to strictly adhere to them. According to Google, as of the date of implementation, only 1% of publishers were not compliant based on audit of more than 100,000 sites. Google also noted that 42% of sites that were in violation fixed their issues by Feb. 12. Google has made it clear that if a publisher does not comply, ALL ads will be blocked on that publishers site — including the plain vanilla display ads we’re so desensitized to seeing. That could significantly impair a publishers revenue stream given that Chrome has 62% of all mobile traffic and 59% of all desktop traffic. Fear not, as Google has also made it very clear that they will fair warning. If you’d like to test your site for any infractions, try Google’s Ad Experience Report.
OAREX vs. Them: How Our Funding Compares
How OAREX Is Different & Why We’re Better
1. We are not a lender, so you will not be subject to the lender-borrow dynamic.
2. We do not cap your credit, so OAREX will grow with you as you need it.
3. We do not require a personal guarantee, so if things go South we won’t take your personal assets.
4. If your customer doesn’t pay, you are not liable to make good with OAREX.
5. We are who we say we are.
OAREX’s Accelerated Weekly Payments: How It Works
4 Questions To Ask To Find The Best Demand Partners
1. Are they a good credit? Do your research.
2. What are their pay terms?
3. What is their pay history? Ask for credit references.
4. Are they ever late? Use Project Rank, our free payment data tool.
Scale Revenue Growth Over 400% With OAREX
Study: 53% of Ad Networks Pay Late And 33% Underpay
We Studied Thousands of Digital Media Invoices
We Found That 54% Of Invoices Paid Late
We Also Found That 33% of Ad Networks Underpaid
Managing Cash Flow In Digital Media: Grow Quicker & Faster With OAREX
4 Reasons Why Facebook’s New Branded Content Guidelines Are No Reason To Freak Out
1. If you put all your eggs in one basket, you will lose.
2. Facebook isn’t the only sheriff in town.
3. It’s the internet, don’t lose faith and never doubt it.
4. Facbeook influencer traffic is still a valid avenue!
OAREX Raises Maximum Advance Rate To 90%
Chrome’s Ad Block Update & How To Preserve Publisher Revenues
Google Chrome’s Ad Block Is Targeting Annoying Ads
The CBA Guidelines: Google Playing Nice