This week’s Media Briefing looks at how publishers’ cash flow is turning into a trickle, thanks to elongated payment windows that are reaching upwards of 180 days.
The lack of advertising dollars being spent in the market is already taking its toll on media businesses this year, but now publishers are saying that the average payment terms for the deals they are able to close are getting longer and the time it takes to actually receive a payout is extending well beyond the contracted timeline.
The media industry has been built on “easy access to cash,” said Sylvain Le Borgne, chief partnerships officer and head of data and analytics at MediaMath, in which the supply chain of advertiser to consumer involves middlemen floating payments on an endless cycle as new deals are closed.
But now that the macroeconomic climate has advertisers tightening their purse strings and the collapse of financial institutions like Silicon Valley Bank has removed the amount of liquid funds that’s available, that flow of cash has turned into a trickle of nickels and dimes.
“Brands and agencies are paying slower than [the time frames] that the companies further down the supply chain have to pay the publisher. So you cannot collect money at 90 days or 120 days and then pay the supplier at [day] 45. It was possible in the past because money was easy to access and the cost of borrowing was lower,” said Le Borgne.
Publishers, at that end of that supply chain, are bearing the brunt of the burden, having been given little say in the matter though are ultimately still relying on any and all ad dollars that they can get in the door. But with fewer dollars coming in when they’re expected, operational costs become harder to cover and cost cutting measures like layoffs are considered.
“Cash is king and advertisers are taking a really long time to pay us. It sucks,” said a media executive at a midsize digital publication who spoke to Digiday on the condition of anonymity. It’s not just smaller brands or first-time partners either. They added that “major Fortune 100 companies” are taking upwards of 150 to 180 days before paying up for a completed ad campaign, making it “hard to manage cash flow” right now.
“Why does a massive top 10 advertiser in the world think it’s OK to take a year to pay a little publisher?” the first exec added. “It makes it very difficult to operate when you’re down as much as you’re down in Q1 to begin with, on top of [the] compounding issues with cash flow — it’s a stressful thing.”
In some cases, the media exec said, it’s a cash flow issue in which an agency waits to get paid and needs the money to cover their own expenses before writing any other checks. Eventually that money makes its way to the publisher, but being at the end of the chain, they’re at the mercy of the timelines from the advertiser, the agency and any other ad tech intermediaries.
“Payment terms for the agency have become negotiable and so you have [clients] moving agencies and they’re asking for 120-[day] payment to the agency. And so that has to be passed in sequentially down to the publishers,” said David Spiegel, CRO of Betches Media. He added that one client who switched agencies midway through a campaign ended up not paying up for nearly a year between all of the changeover and the new agency having a net-120 payment policy.
A second media exec who spoke recently under Chatham House Rules during the Digiday Publishing Summit’s town hall said that even if agencies weren’t strapped for cash, they’re “so paralyzed by the fear of getting fired” by their clients, who are already pulling back their budgets during the economic downturn, that they’re afraid to push them on paying the bills when they’re due. As a result, payouts are getting processed later than ever, on average 60 days beyond the agreed upon payment window.
“What we’re finding a lot [is] you get to day net-80, and then honestly an agency is like, ‘You put the wrong, one-digit-off number on your invoice. Please revise.’ And then we start over,” said another publisher during the town hall. “But I think that they’re pushing it off, not wanting to ask for their payment, and then it’s trickling down. I’ve seen a lot more technicalities like that to draw out the process that just makes our [one] yard line look very huge when we’re tracking who’s paying when and how often.”
Other publishers in the town hall said that at a minimum, they will not see payments for 60 days, regardless of what the contracts say.
“Net-30 never worked because it was net-30 to the agency, and the agency has to get paid. So it was always going to be [net-]60 regardless. It’s painful,” said a third exec in the town hall.
Another added that most clients are asking up front for net-90 and negotiating for net-60 has become part of publishers’ dance.
But at the end of the day, there is no penalty for late payments and publishers are simply at the liberty of how quickly cash exchanges hands higher up the chain.
Most of Betches’ payments come in around the 90-day mark, despite the fact that net-30 is often the terms set by Spiegel’s team when invoicing clients, he said. “I’m a little cynical about it. Net-30, net-45, net-90, net-120 — I don’t fucking care, you’re still not going to pay the bill on time.”
Knowing that’s the case, however, he said he balances P&L on a 90-day average on the balance sheet to ensure that cash flow doesn’t dip into the red. Even still — there are no penalties for late payments in the form of late fees or added interest that’s upheld as an industry standard, he said.
“That’s sort of the problem. The industry has not embraced that [but] the banks aren’t giving 0% interest loans. So why do media partners?” said Spiegel.
Not all publishers are running into this issue, however. Blair Tapper, svp of The Independent U.S. said that her sales team has been able to maintain the typically asked for 30- to 60-day payment terms for the most part and in the odd cases where a client is late, the Independent’s U.K. office handles it.
A lot of the regularity in payments comes down to the credit checks performed up front for new clients. “We’re cognizant right now of companies’ financial history and working together, because the truth is, if they’re not in good financial standing, a lot of times it’s a non-starter,” said Tapper.
Even with her mission of growing the U.K.-based publication’s business in the U.S. — and especially at a time when ad dollars are a hot commodity and news publishers are often the least likely to win deals — signing a new client on laxed financial terms or in good faith that they’ll follow through is a “risky business,” Tapper said.
“You could sell something and never get paid. And then is that actually revenue? Arguably not,” she said.
Seb Joseph contributed reporting to this story.
What we’ve heard
“I’m on this Snapchat mid-roll [ad] program, which I’ve been part of since last May. I’ve made over a million dollars from Snapchat mid-roll. Snapchat changed my life entirely.”
— Alyssa McKay during the second episode of the Digiday Podcast’s four-part Creator Series on short-form vertical video creators
3 questions with Saveur’s Kat Craddock
Earlier this month, Saveur’s executive editor Kat Craddock announced she was acquiring the food and travel title from private-equity backed Recurrent Ventures, following in the footsteps of other editors (like Quartz’s management) who acquired the publications they oversaw to run them independently.
Craddock declined to share how much she paid for the publication, but said she approached Recurrent first about the deal. The acquisition was backed by one other independent investor, she added. Craddock declined to share in detail which business functions she now has to handle on her own but she said that three new hires will join the team soon, including two director-level managers who will work with her to manage the business. Craddock has not had a role on the business side of Saveur until now, but working across departments as part of a small team of now just seven people made Craddock feel she was “in a unique position” to lead the company, she said.
Craddock said she wants Saveur’s editors to be “more involved” in the business decisions behind Saveur, which currently earns its revenue from licensing and programmatic and affiliate advertising. – Sara Guaglione
This conversation has been edited and condensed.
Why did you want to acquire Saveur from Recurrent Ventures?
We really got a lot out of being owned by them for a while. They put us [on] a really solid footing. They built us a brand new, beautiful website… That said, it was kind of a weird fit for everything else that Recurrent is doing. It wasn’t quite [in the home category], even though it was in this home vertical. It’s more of a lifestyle, global publication, and food is a big part of that.
Being in a position to spin a few plates — whether it’s focusing on blowing out a travel vertical or on recipes, or working a little bit more closely with our licensing partners and cookbook projects — I think that there’s a lot we can do if we’re fielding that ourselves, rather than relying on shared services that are working on very different types of brands.
What previously shared resources will you now have to build out on your own?
We’re a small business now, so a lot of the things that were supported by corporate, we don’t have… We’re sorting it out as we go. We’re getting a lot of support from Recurrent in figuring out what we need — whether [we need to hire] a full-time position, or we can replace [the role] with an app, like payroll — and [other] systems we need to implement to operate as a business.
The company that supports our CMS and our ad platform is [called] Organic [and] we have a separate relationship with them [now]. That will continue… [But] we’re gradually off-boarding from a lot of the different systems. We’ve been integrated into every single little piece of software along the way that we use every day. They’re not just turning the lights off overnight.
Quartz’s editor Zach Seward did something similar to this and then ended up selling the publication to G/O Media last year. Were you looking at prior examples of editors buying their publications when you made this decision?
I’m such a lifer with this brand. That’s not to say decades down the line — I’m not going to speculate on what might happen. But that’s not part of my plan. I haven’t seen a sale like this happen with a legacy publication. I know other editors have done it in other fields and areas. And that was certainly inspiring and impetus to think that it could be possible. But I think each business is so wildly different. I’m not really relying on somebody else’s playbook, necessarily.
Numbers to know
250+: The number of Insider employees who walked out on Monday in protest of the company’s plan to lay off 10% of its staff, 60% of whom were union members.
23%: The number of publishers pros in a survey of 200-plus brand, agency and publisher professionals who said they are “very prepared” to move beyond the third-party cookie, per Digiday+ Research.
515 million: The number of Spotify’s monthly active global users in the first quarter of 2023, a 22% increase year over year.
2.5%: The new pricing model of Amazon Publisher Services’ Transparent Ad Marketplace, which will replace the current $0.01 CPM fee on paid impressions with the 2.5% fee on net revenue delivered to publishers.
What we’ve covered
How SPO is driving ad tech’s decarbonization push:
- “Sustainability” is one of the latest buzzwords in ad tech as marketers attempt to define themselves as purpose-driven.
- And yet, Brian O’Kelley, CEO of carbon emission measurement firm Scope3 said that programmatic advertising has “a huge environmental impact.”
Learn more about the role of sustainability in the programmatic market here.
How the social traffic that gave life to BuzzFeed News ultimately led to its demise:
- BuzzFeed News was “a social media ecosystem company, and the ecosystem went away,” said a former BuzzFeed exec who spoke on the condition of anonymity.
- A news brand built for — and dependent on — a social media audience, could be facing the same algorithm-induced issues that occurred in 2016.
Read more about the downfall of BuzzFeed News here.
Time, The FT, Vox and other publishers see ad dollars flow to sustainability content after increasing climate coverage:
- Publishers that have grown their teams covering climate change and sustainability are starting to see those strategies pay off with an increase in ad dollars.
- Time, The Financial Times, BBC, The Economist, Vox Media and The Washington Post told Digiday anecdotally that they’ve seen ad growth around their sustainability content – and not just on Earth Day.
Learn more about the growth of sustainability-oriented ad dollars here.
Large publishers hedge their bets on subscriptions while small publishers back away:
- Subscriptions are a longstanding revenue stream in the publishing industry — but they’ve also become a tricky business in the digital era.
- And while the bigger players still rely heavily on subscription revenue, small publishers are less enthusiastic about subscriptions.
Read Digiday+ Research’s latest deep dive here.
The Guardian will be paid for permitting the collection of contextual data on its site:
- This is a publisher-ad tech story with that rarest of things: a happy ending.
- And it starts with The Guardian being frustrated over the amount of money it’s losing to ad tech vendors — specifically ad verification companies – and ends with a contextual ad firm agreeing to pay the publisher to collect and subsequently sell its data for targeting.
Learn more about the partnership between The Guardian and Illuma here.
What we’re reading
How digital news publishers are practicing retention strategies:
Canceling digital newspaper subscriptions can be notoriously difficult, but after The Lenfest Institute canceled 22 subscriptions, it reported that about two-thirds of them took five minutes or less to cancel.
FiveThirtyEight gets slashed during Disney layoffs:
More than half of the 35-person staff at data-driven news site FiveThirtyEight were laid off during the Disney layoffs this week, and founder Nate Silver is reportedly expected to depart the company as a result, according to The New York Times.
The future of Fox News without Tucker Carlson:
After parting ways with Carlson and following the $787 million settlement with Dominion Voting Systems, Fox stands to win back some of the advertisers who blocklisted Carlson’s show, The Wall Street Journal reported.
Ben Smith’s new book reveals the beginning of BuzzFeed’s end:
BuzzFeed CEO Jonah Peretti was reportedly offered more than half a billion dollars from Disney CEO Bob Iger for the viral digital media company back in 2013, according to former BuzzFeed employee Ben Smith in an excerpt from his upcoming book that was published in Vanity Fair.
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