A combination of economic factors has helped spur the uptick in delayed payments, according to Ankit Oberoi, CEO of the ad management service Zelto.
According to Oarex, which created an index of 30 mid-tier digital media companies, the fourth quarter of 2022 was the worst Q4 in the last five years in terms of revenue growth. It was also the third-worst quarter, in general, over the same time period, trailing only the pandemic quarter (Q1 2020) and Q3 2022.
Dismal results like these, combined with the rising cost of inflation, have left digital media companies in a pinch. In the first quarter of this year, Zelto saw an average additional delay of two to three days—a delay that comes on top of its usual grace period, according to Oberoi.
“A payment that used to take two days can now take up to six,” Oberoi said.
At NoBid, between 15% and 20% of its demand partners have paid late this year, according to Ropelato. In March, one company paid 13 days late, while another in December passed its payment deadline by almost three weeks.
Companies like NoBid and Zelto take ample steps to protect their downstream partners from experiencing any knock-on effects. NoBid recently opened a $500,000 line of credit to ensure it has cash on hand in case its upstream vendors fail to pay, and it has previously worked with Oarex to provide similar insulation.
Zelto, which classifies its demand partners into tiers based on their financial health, says it has no concern about tier-one partners like Google. For tier two clients, it ensures their accounts guarantee their funds, and it maintains a cash reserve to account for the volatility of its tier three clients.
Despite these precautions, delayed payments still act as a drag on business efficiency in the form of opportunity cost. A cash shortfall could prevent a publisher from, for example, buying paid social to amplify a piece of content performing particularly well, according to Carrabbia.
And the volatility created by the delays can threaten the balance sheet of even the most fiscally responsible companies.
“We want to be the company that always pays on time,” Ropelato said. “We will eat the cost in order to pay the publishers, but nobody likes to be owed money.”
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