The mud has largely settled from MediaMath’s chapter, however the fallout nonetheless has publishers questioning SSPs’ obligations to their companions.
“There must be a retrospective on all SSPs and the way they declare to know threat administration,” stated one writer who requested to stay nameless, citing ongoing enterprise with SSPs that clawed again income. For some SSPs, “clearly, their threat administration is to move [responsibility] off to the writer, which is insane,” they added.
Publishers are adamant that SSPs are solely answerable for vetting demand companions.
However not each SSP agrees that it’s their accountability to evaluate the chance of doing enterprise with DSPs.
“We offer [self-service] instruments for publishers to resolve who buys their stock,” stated Steve Pantelick, CFO at PubMatic, an SSP that has instituted clawbacks. “The last word credit score resolution or threat resolution lies with the writer.”
Whereas some SSPs like PubMatic are standing firmly behind sequential legal responsibility protections that insulate them from accountability within the occasion DSPs can’t pay their payments, different SSPs see a chance to face out in a commoditized SSP market by eschewing sequential legal responsibility agreements. These SSPs take sole accountability for evaluating DSPs’ creditworthiness and pay publishers even when the DSP goes stomach up.
Who’s answerable for what?
Sequential legal responsibility clauses are generally – however not all the time – included in contracts between SSPs and publishers.
SSPs have each authorized proper to defend their companies from misplaced income utilizing these contractual protections.
However in addition they have a accountability to ensure they don’t need to invoke these protections, stated Adam Schenkel, EVP of world platform technique and operations at GumGum, an SSP that didn’t do clawbacks.
“We function understanding we now have an out with publishers … however our aim is rarely to enact that scenario as a result of it’s not in the very best curiosity of publishers or the ecosystem,” Schenkel stated.
As an alternative of defaulting to sequential legal responsibility, SSPs ought to guarantee they don’t seem to be extending an excessive amount of credit score to problematic DSPs, in line with Schenkel.
MediaMath stood out as problematic, which led GumGum to restrict the credit score it prolonged the corporate. Over the previous couple of years, there have been a number of cases the place MediaMath got here simply in need of failing to adjust to GumGum’s commonplace cost phrases, which might have gotten them reduce off, Schenkel stated. The corporate additionally continuously requested for longer cost phrases. The final time GumGum was paid by MediaMath was round January, he added.
If a buy-side consumer is continuously late on funds, asking for adjustments to its contracts or seeking to prolong its reimbursement phrases, as MediaMath did, GumGum considers looking for extra transparency into the accomplice’s monetary well being its accountability.
Danger administration
The 2019 Sizmek chapter ought to have been a wake-up name that SSPs wanted to take extra measures to guard publishers from clawbacks, stated Andrew Casale, CEO of Index Change, one other SSP that declined to pursue MediaMath-related clawbacks.
“My assumption was that each firm in advert tech [would take action to] clamp down their processes, their assortment procedures, their tolerance for threat, their willingness to increase outdoors credit score, in order that we might by no means once more expertise a failure like that,” he stated.
Based mostly on Index Change’s threat evaluation for MediaMath, which Casale declined to supply particular particulars on, it had MediaMath on a shorter leash than different DSPs when it got here to extending credit score for advert buys. “In consequence, our capacity to push advert spend was restricted to that line of credit score, however we consider, on this circumstance, we sized the chance appropriately,” Casale stated.
Different SSPs seem to have made the identical calculations. Most of MediaMath’s prime collectors had been owed roughly between $1 million and $2 million, which might be a manageable income hit for main SSPs to soak up with out being pressured to move the invoice to publishers.
Even Google hovered within the sub-$2 million vary, when its dominant market share means it simply might have taken on rather more MediaMath demand than that, Casale added.
In the meantime, some SSPs with giant market shares, like Magnite and PubMatic, prolonged greater than $10 million in credit score to MediaMath.
PubMatic’s Pantelick pushed again at the concept PubMatic’s comparatively bigger credit score outlay was as a consequence of a failure to evaluate threat. Fairly, it was extra a results of PubMatic’s shut partnership with MediaMath, which meant MediaMath directed extra spend by way of PubMatic’s pipes than different SSPs.
Most SSP reimbursement phrases with DSPs enable for a 30- to 90-day grace interval, however inside the previous couple of years, PubMatic had taken steps to put MediaMath on a stricter cost plan, Pantelick stated. In consequence, MediaMath was allowed the identical 90-day grace window as different DSPs, however MediaMath needed to make funds in opposition to its excellent steadiness each two weeks.
Apart from the interval surrounding the collapse of Silicon Valley Financial institution earlier this 12 months, when MediaMath couldn’t entry its account, the DSP made its funds on time up till its chapter submitting on June 30, Pantelick stated.
Nonetheless, in comparison with PubMatic’s general portfolio, MediaMath was an unlucky outlier, Pantelick stated. Over the previous a number of years, PubMatic’s DSP companions have made funds for advert buys inside 30 days 96% of the time, and for the previous three years previous to the MediaMath chapter, PubMatic had zero dangerous debt, he added.
What publishers pay for
PubMatic stands by its capacity to keep away from extending dangerous strains of credit score regardless of the MediaMath scenario and believes the selection of which DSPs to work with is solely the writer’s, Pantelick stated. PubMatic offers publishers with instruments to evaluate the monetary well being of DSPs, and it has “strengthened” to publishers the presence of these instruments within the wake of MediaMath’s chapter.
As a result of PubMatic sees itself as a tech supplier, threat administration – particularly taking over dangerous debt as a substitute of passing it to publishers – is past its scope, Pantelick stated.
“The economics don’t justify taking over the chance relative to the charges that we generate,” he stated. “That’s a unique enterprise mannequin.”
However publishers argue that taking over such threat and making certain companions are in good standing is strictly the enterprise mannequin of an SSP.
“SSPs get giant quantities of the overall spend coming from an advertiser,” stated Dave Edwards, CRO at music streaming app Audiomack. “And what are these charges for for those who’re not who’s in your bidding combine and ensuring that you simply’re on prime of their cost schedules?”
Apart from, publishers don’t have direct contacts at DSPs or contractual relationships with patrons, to allow them to’t consider these partnerships as successfully as SSPs can, Edwards added.
A writer’s final accountability is to create monetizable content material, not vet demand companions, “which is a complete completely different facet of the business and never the ability set that we’re skilled for,” stated Charlie Castell, founding father of writer consultancy PubRev+.
Some SSPs have begun providing legal responsibility insurance coverage in case a requirement accomplice fails to pay. This insurance coverage usually carries an extra rev share charge on prime of the SSP’s standard charge, which Castell described as SSPs asking publishers to “give us a bit more cash to do our jobs.”
Going ahead, Edwards stated, publishers must take a tougher line with SSPs.
For instance, Audiomack has been eradicating sequential legal responsibility from its offers with SSPs wherever doable. In conditions the place the SSP insists on sequential legal responsibility, Edwards tells them they’re welcome to invoke that clause, however Audiomack will terminate the connection because of this.
The necessity for publishers to have correct assessments of their demand companions’ monetary well being will develop in significance over the following few years because the advert tech business normalizes and consolidates following years of inflated startup valuations, he added.
“You’re going to see so many growth-stage startups implode over the following 12 months to 18 months,” he stated. “And when these corporations exit of enterprise, they don’t pay their payments.”
