Glam Media, a vertical content and ad network, has told some of its publishers that, starting November 1, 2008, they’ll need to wait a little bit longer for the payments they’re due.
In letters to its publishers, Glam stated that it “anticipates a significant slow down in collection payments from advertisers.“
As part of its efforts to “better prepare for the current financial situation,” it will pay these publishers on 120 day payment terms. Currently, these publishers are paid on 60 and 90 day terms.
I am assuming that this applies only to Glam publishers who have signed agreements under which minimum payments are guaranteed since Glam’s application for the standard Glam Publisher Network contains an “Affiliate Linkage and Advertising Agreement” that provides for disbursement of payments within 30 days of their receipt from the advertiser.
Nevertheless, Glam’s move is yet another example of the fact that times are getting tougher for advertisers, ad networks and publishers.
Many advertisers are cutting back. Ad networks, both large and small, will get squeezed in the process. And, of course, the publishers who rely on them to help monetize their content are the ones who will likely feel the most pain.
I think this situation at Glam highlights a few things.
First, it shows the risks inherent for all parties in “guaranteed payment” deals. When times are good, ad networks are more willing to guarantee certain publishers revenue in an effort to acquire top properties. Publishers, of course, love these deals for obvious reasons – they lock in a predictable cashflow and eliminate much of their risk.
Of course, these guaranteed payments are anything but guaranteed. Earlier in the year, Glam changed the way it dealt with “back-fill” ads for many publishers. And now, of course, it’s increasing the time it has to pay. So while publishers had it good for a while, good things don’t last forever.
Second, this situation demonstrates for publishers that choosing the right ad network is a difficult task.
Glam is a well capitalized company (it has raised over $100mn) and therefore probably looked like a “safe bet” for many publishers.
While I have never personally dealt with Glam and would not go so far as to say that Glam is in trouble, I did live through Bubble 1.0 and will say this: the lengthening of payment terms is a red flag.
The bottom line is that it’s hard for publishers to pick the right ad network. Capitalization and “size” mean nothing. Sometimes, in fact, those things contribute to unsustainable business practices.
This is why, in my opinion, diversification is so important for publishers.
Putting all of your eggs in one basket is sometimes sensible when the economics are very favorable. Guaranteed payments above and beyond what you’d make anywhere else are hard to pass up.
For instance, if you’ve been making $5,000/month for some time and an ad network is willing to guarantee you payments of $7,500/month under an exclusive agreement, it might make sense to do the deal. Even if it doesn’t last forever, you might still come out ahead when all is said and done.
At the same time, I believe the publisher’s greatest ally is diversification. Sometimes diversification means forgoing immediate opportunities that seem too good to be true but it also means less downside exposure when the business cycle turns against you.
Case in point: I’ve spent the last three months negotiating a deal with an ad network that will be selling ads for one of the properties I’m involved with on a semi-exclusive basis. Spending so much time working out the details has not been fun but the advantages of a situation in which the ad network is given a chance to serve the bulk of or ads while we have some protection on the downside is well worth the investment in time.
At the end of the day, I’d encourage all publishers looking at ad networks to approach their decisions with prudence.
The goal with any decision should not necessarily be to increase the amount of money earned at all costs but to ensure that the terms of agreements don’t leave open the possibility that you will wake up one day to find that you’re effectively earning $0 or can’t pay your bills on time.