- May 6, 2020
- Posted by: Hanna Kassis
- Category: Digital Media, Industry News, Media Buying
With the onset of Coronavirus, lots of digital media firms have had to shift the way they do business. But ad budgets, channels and creative aren’t the only thing affected by the crisis: RTB programmatic pay terms have been extended, and we anticipate more firms to announce new longer terms and delayed payments. Before we dive into that, let’s first look at two recent studies from the IAB.
The Buy Side Impact
The IAB reported in their 2 part Coronavirus Ad Spend Impact: Brands, Agencies and Other Buyers Report, that the sudden drop in economic demand has thrown the proverbial wrench at ad budgets. In Phase 2, the IAB surveyed 294 applicants on the demand side of the digital media ecosystem – agencies, media buyers and planners.
Here are some notable but not surprising findings:
- 45% of buyers budgeted to spend on sports advertising, and that avenue represented 25% of their total 2020 ad spend.
- 60% of respondents said they have updated their creative to reflect the new crisis, running ads with a “we’re all in this together tone” or other similar message.
- 56% anticipate to spend ad dollars lost in Q2 in Q3 and Q4, so not all hope is lost as some dollars will return this year.
The Sell Side Impact
In the sell-side survey, 205 supply side publishers and media platforms (69%) and programmatic firms (31%) were surveyed. This study was also 2 phased. Also unsurprisingly, here were the findings from the Sell Side report
- 98% of respondents expect a decrease in ad sales revenue.
- 82% of sell siders have been asked to pause advertising from demand partners.
- 77% of sell siders reported being asked to completely cancel campaigns on behalf of demand partners
The impact of the Coronavirus is real, but one aspect we’ve focused on are the extended RTB programmatic pay terms.
The RTB Programmatic Payment Impact
In late March, AdWeek reported that Teads curbed revenue guarantees and GumGum is extending pay terms. Similarly PulsePoint flirted with later payments. The reason these firms are delaying payment is to hedge risk due to offsets from sequential liability.
Sequential liability is defined as
an official rule that a person or company does not pay money that they owe until they receive money that is owed to them for the same work, project, etc
This means that many firms anticipate not being paid due to the drop off in ad dollars (i.e from sports advertisers), so they are extending pay terms to encompass potential offsets so they don’t get left holding the back.
The Future of RTB Programmatic Pay Terms
As Q2 rolls on and the drop off in ad budgets and CPMs cuts to the bone, we anticipate two things to happen. First is that more firms will follow suit with GumGum in extending their pay terms. From a credit perspective this is, on the surface, a non-issue especially if the company is clear about communicating it. Another thing we anticipate is delayed payments without any prior communication of extending pay terms. This is a major red flag.
Be on the lookout for delayed payments, and be sure to reach out to us with any credit inquiries you might have. Before you sign up with a new demand partner, check our payment study to view their payment performance history with OAREX.