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While the advertising downturn of the last year has had a highly visible impact on digital publishers, leading to layoffs, fire sales and closures, new data suggests that a similarly concerning economic crunch could be lurking beneath the surface of the ad-tech ecosystem.
In the first quarter of this year, 53% of programmatic payments were late, up from 35% during the same quarter last year and 38% overall in 2022, according to the digital media financing service Oarex. Likewise, 54% of direct payments were late in the first quarter, up from 48% in the year prior.
Rather than an isolated issue, payment delays can have a ripple effect on the digital media supply chain, affecting interconnected ad-tech vendors, publishers and other downstream parties because of sequential liability.
Late payments are a common occurrence in the world of digital media, according to Marc Ropelato, the co-founder and chief executive officer of the ad management service NoBid. Supply-side platforms routinely delay payments up to five days, an irritating, if standard, practice in the industry.
But a combination of adverse economic factors, including a depressed advertising climate and fallout from the closures of Silicon Valley Bank and EMX, have exacerbated the issue, according to Nick Carrabbia, the executive vice president of Oarex.
As a result, rates of delayed payment have reached their highest since March 2020, signaling a discrete but nonetheless alarming lack of liquidity in the market.
“The data is clear: late payments continue to rise,” Carrabbia said. “These companies are not coming out and adjusting their payment terms—they are just paying late, and you never know how a $100,000 shortfall could affect a business.”
These delays disrupt companies’ cash flows, making it challenging for them to pay their downstream vendors on time, and they lead to opportunity costs by preventing businesses from operating as efficiently as possible.
Most frustratingly, they can tilt an otherwise healthy business into a financial crisis through little fault of its own, creating a volatile environment in which one insolvent company can jeopardize the broader ecosystem.
As the economy stalls, delayed payments and pay discrepancies rise
