MediaMath's financial collapse is creating ripples across the digital advertising industry as supply-side platforms (SSP) such as PubMatic, Magnite, and Wunderkind are taking steps to recover revenue owed to them from deals conducted on MediaMath's demand-side platform (DSP).
SSPs usually withhold or adjust their payments to publishers are if payments have not been received from the purchasing DSP for inventory.
However, some SSPs, including GumGum and Index Exchange, avoid attempting clawbacks, citing potential negative impacts on publishers of digital ads.
During programmatic ad transactions, impressions are served before payment, resulting in SSPs laying out money upfront and later seeking reimbursement from DSPs.
SSPs typically have sequential liability clauses in their contracts, shifting the responsibility for payments to DSPs or other upstream partners. So, when MediaMath went bankrupt, several SSPs grappled with unpaid dues.
According to the bankruptcy documents, Magnite and PubMatic emerged as the primary creditors of MediaMath's outstanding debt. Magnite finds itself owed $12.6 million, while PubMatic stands to recover $10.5 million.
While MediaMath has found a new owner in Infillion, the new owners have so far declined to share how it intends to clear debts owed to SSPs.
Campaign reached out to PubMatic and OpenX, which declined to comment. Magnite and Wunderkind had not yet responded at the time of publication. Two other SSP creditors, GumGum and Index Exchange, are not pursuing clawbacks and did speak to Campaign about their approach.
Index Exchange's stance
For the adtech industry, the MediaMath situation underscored the importance of fiscal responsibility and maintaining effective risk mitigation systems and controls on behalf of supply partners. Index Exchange says both principles are at the core of its operations and should be for all SSPs.
Adele Wieser, regional managing director for Asia Pacific at Index Exchange, tells Campaign the platform views it as a privilege to be good financial stewards to their publishers and wants to ensure that it maintains responsible credit lines to protect them.
If it were to pursue clawbacks, Index Exchange would risk losing faith from their publishers, or worst, making these publishers bankrupt as some cannot afford to absorb losses.
"We urge media owners and buyers to ask all of their technology vendors about the risk mitigation practices they have in place to further future-proof themselves from similar future events," says Wieser.
"Index Exchange's focus remains to ensure publishers can monetise their inventory via digital advertising effectively. Our decision to absorb any publisher costs due to MediaMath's demise is a testament to our commitment to publisher relationships and our responsibility to protect them."
Wieser says the platform understands that the last 12 months have been difficult for publishers worldwide. It does not want to punish its partners based on industry disruption but instead supports them through such uncertainty.
This decision carries substantial financial responsibility and may not be possible for companies facing external economic pressures. If media owners were forced to shut their doors due to heavy debts, Index Exchange's efforts to create a robust, transparent, and efficient digital marketing ecosystem would cease.
Despite being owed a significant amount following the MediaMath bankruptcy ($1.4 million), GumGum was the first exchange to come out and let publishers know it would not be clawing anything back from them.
Adam Schenkel, executive vice president at GumGum, tells Campaign that the SSP felt the right thing to do was not pass unpaid dues on to its publisher partners.
"We continuously monitor the market and evaluate the financials of our partnerships: who is paying on time; who is requesting to change payment terms and why; what we hear in the industry; and most importantly, what we are learning by connecting our finance teams," explains Schenkel.
"We are cautious not to take on risks that might jeopardise our publishers and hit them in the pocket. We deeply value our relationship with the publisher ecosystem. These relationships are integral to our business. Publishers face significant challenges, particularly with fierce competition from the walled gardens."
Schenkel continues: "That is why we believe it is essential to shield publishers as much as possible from the aftereffects of DSP bankruptcies like MediaMath. Our example puts pressure on other ad tech companies to follow us. Unfortunately, the majority still decided to claw back money from publishers."
Like Index Exchange, GumGum is aware that taking the approach of clawbacks puts too high a financial burden on publishers, especially smaller publishers that provide valuable voices and stories worldwide.
"The consequence of these clawbacks is that publishers may look to move away from that SSP as their primary path or move away from that SSP altogether," explains Schenkel.
"Regardless, this situation will make more publishers push their SSPs for increased financial transparency about their upstream DSP partners."
Can SSPs avoid a similar issue in the future?
In the aftermath of MediaMath's bankruptcy, the issue of sequential liability clauses in SSP contracts has come to the forefront. Calls for SSPs to evaluate DSPs more rigorously have also become prominent.
Not surprisingly, publishers are also reevaluating their contractual relationships with SSPs.
Wieser asserts that Index Exchange employs a 'rigorous due diligence process' and utilises all available efforts to protect their partners on both the buy and sell sides of the ecosystem.
She says the SSP believes that having sequential liability clauses in its contracts is a privilege and should be applied responsibly.
"By the design of our company, we have strong vetting processes by our legal and financial teams. DSP partners undergo a rigorous process where we identify any financial risk or its future potential," explains Wieser.
"We're focused on driving ad spend to our publishers and take this responsibility very seriously. We do this by ensuring we vet our partners and by adding safeguards to minimise shortfalls should a situation like MediaMath's bankruptcy arise. Every scenario is different, and we are committed to having strategic and educational conversations with our media owner partners to ensure they are protected and can continue to contribute to the success of the digital industry at large."
While GumGum would not reveal how its agreements with publishers are structured, Schenkel says the industry generally comprises deals with sequential liability.
He claims that GumGum always aims to pay publishers regardless if it, as an SSP, is owed because 'it is right'.
"When a publisher chooses a monetisation vendor, they invest in the vendor to maximise their yield and trust that they'll be supported and protected from upstream lousy debt," explains Schenkel.
"Knowing the industry can be volatile, GumGum works hard to have financial foresight to support our partners," he adds.
The future of SSPs
Things have not been ideal for SSPs even before MediaMath's bankruptcy. SSPs like Yahoo and TripleLift must grapple with layoffs and challenges in meeting new industry expectations, especially in the face of third-party cookie deprecation.
The proliferation of SSPs has also led to inefficiencies and duplicated bid requests. Publishers now seek smarter pipe SSPs offering superior technology and cookie deprecation adaptation.
A spokesperson for Yahoo tells Campaign the platform is undergoing a significant transformation' in its adtech division, shifting its focus away from a unified stack strategy that included DSP, SSP, and native platforms due to profitability challenges.
Instead, the company will concentrate on its flagship DSP business under the new name "Yahoo Advertising." This change prioritises global customer support, particularly on Yahoo-owned properties, and discontinues its SSP.
"Yahoo will also transition its native efforts to its 30-year partnership with Taboola. However, these changes will result in a workforce reduction of nearly 50% by the end of 2023, with around 1,000 employees impacted," explains the spokesperson.
"The goal is to simplify and strengthen Yahoo's advertising business for better value delivery to customers and partners in the long term."
Index Exchange says it has been helping its customers prepare for and navigate the future of addressability for several years. Although the goalpost for third-party cookie deprecation keeps changing, Wieser says the action that the industry needs to take today does not.
"Brands, buyers, and media owners have access to different types of data and understand their customers differently. We believe that success will come via a portfolio approach and in working with companies that help customers find solutions that best match their data capabilities and goals," explains Wieser.
"We are also actively participating in the Privacy Sandbox initiative; we have spent extensive time with the Chrome team and industry organisations and partners discussing the proposed APIs. We have also tested and continue to support various addressability partners and solutions, including UID 2.0 and LiveRamp's RampID. We will continue to work with other data partners that operate with a privacy-first mindset."
Aside from navigating the industry's economic challenges and preparing for a post-cookie world, Index Exchange and GumGum are also focusing on sustainability and attention metrics.
For example, Index Exchange is working to integrate ad podding. This OpenRTB 2.6 feature enhances bid requests for TV-style ad breaks, leading to varied ads, competitive separation, and efficient viewer experiences while significantly reducing carbon emissions in ad selections.
"We continue to prioritise quality, recently revamping our supply policies to eliminate duplicative supply and further minimise waste and costs in the supply chain," says Wieser.
GumGum points to its Media Rating Council's content-level accreditation for contextual analysis, brand safety and suitability. After acquiring the attention platform Playground XYZ, the SSP can also now measure its ads based on consumer attention.
"We have achieved this because our data scientists and technologists continuously work to enhance and optimise our platform and because we are passionate about delivering the best results for advertisers," explains Schenkel.
"We can also continuously enhance our ads in real-time based on the content environments, ad format and creative messaging that garner the highest attention rates, helping us deliver the best brand outcomes."