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Manish Vij On The Impact Of The Advertiser-Agency Payment Cycles On The Digital Ecosystem

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A key problem for the digital publisher and advertising network ecosystem in India is that of reliability in receipt of payments from advertisers, and the inordinate amount of time it takes for payments to be collected. The Internet and Mobile Association of India has, for the last three years, been trying to cobble together an agreement with the Advertising Agencies Association of India, with little success. A key part of the issue is that from the publisher site itself, some large digital publishers (and we’ve heard, Google), refuse to come on board, because they get their payments in time, and without an agreement, payment cycles do not improve.

Still, the attempt to put together an agreement for enabling faster payments continues: we’re aware of a meeting that took place on the sidelines of the IAMAI’s India Digital Summit earlier this year, involving all key stakeholders from the publisher and ad network side, but that yielded little.

To understand the impact of the long payments cycle in India on startup businesses and why payments get delayed, MediaNama spoke with (a rather diplomatic) Manish Vij on the issue. Vij understands multiple sides of this issue, since the Smile-Vun group has been involved with both the agency side with Quasar Media, the ad network side with Tyroo (now SVG Media) and DGM:

MediaNama: How are you impacted by the delay in payments?
Manish Vij: My biggest problem is not for companies like ours. We somehow manage at scale, though we also face challenges. The biggest problem is that…think about startups with a digital advertising revenue stream. You actually need a minimum of four to five months of working capital to launch a digital media business, a 120 – 150 day cashflow, because a majority do not adhere to the payment terms of 60 days.


MediaNama: How is it 150 days?
Manish Vij: A typical campaign run is about 30 days, a bill is generated sent to agency post verifications within 15 – 20 days, the agency further takes 15 – 30 days to consolidate, and then sends to the client. Post receiving an invoice, a clients internal checks, verifications and financial processes take another 30 / 45 days. Then after that the agency receives payments, and may take another 10-30 days to make payments back to publishers. So it takes anywhere between 70-125 days post running a 30 day campaign. These are approximate time-lines, and may depend on the publisher, agency or client. So almost half your year is gone, receiving the payments post a campaign beginning.

This creates a problem in terms of starting up, and also a problem in terms of scaling up. The problem with scaling up is that more one scales up, the more money he needs for working capital at such high levels. Banks don’t generally give non-collateral loans to start-up entrepreneurs, and therefore this problem is a grave. We have not factored the cost of capital here for 5-6 months which typically could range between 10 – 15%. That, many times, is practically the net profit margins in most cases.

In my opinion if all the stake holders come together in this value chain under a common code of conduct, which is under discussion through IAMAI, we can solve this problem. For large global publishers this problem is close to zero, as their money is mostly paid on time, because of their scale – with need of continuous media exposure – or strict policies.  The way it works is that the large international publishers operate on a fairly strict policy of not taking advertiser requests unless outstandings are paid within a particular time. Because of this, large global publishers payments are fast-tracked by the value chain most of the time, or the payment discipline is maintained, while the large, small, primarily, Indian publishers don’t get paid in the stipulated time.

MediaNama: So where does the problem lie?
Manish Vij: While it may not be correct to pin-point this on one of the stake holders in the value chain, in our opinion, if the agency, being closest to both publishers and advertisers, tries to fast track its administrative work on the payments, making their clients adhere to a strict payment discipline, this problem can be reduced to much lower levels. I am sure the digital media companies, who are the beneficiary, will fully support any requirements that can make this discipline happen.

MediaNama: Don’t the agencies lose out if the money doesn’t come in time?

Manish Vij: There is a bit more administrative work required in digital media, than probably other straight-line mediums, but that’s exactly what I mean. It is the discipline of the value chain that can reduce this time significantly. If digital media companies start sending their verified invoices on time, agencies start saying that as soon as the campaign ends within 15 days they will have a cut off to raise consolidated invoices to clients, and make their clients agree on a 30 day max payment cycle, this problem will drop to 45 – 60 days

MediaNama: The clients are paying TV on time. So why not for digital?

Manish Vij: They do but not to the extent of a digital media company does, because for agencies the delay is in their commission or retainer, which is typically between 5 and 20% of the total campaign value. 80-95% is the digital media’s (publisher’s) money or cash flow being used

The impact on the market is there are scale up challenges for publishers and networks, and the startup ecosystem. If these don’t scale up or are not encouraged to scale up we may restrict new innovations, and increase reliance on venture money in the domestic digital media market. This hurts the entire digital media start up ecosystem. In fact, we got an acquisition request from a digital media company who said it’s a cashflow problem as he needs money to scale up. This is the kind of impact.

MediaNama: We heard of situations where payments came in after a year and a half…
Manish Vij: Those are extreme cases. Average is between 90 and 120. I’m saying lets try and get this to 60 days. IAMAI is trying to facilitate and give this problem some collective structure.

MediaNama: But this IAMAI plan is a 3 year old plan. Nothing has happened.
Manish Vij: I know that. That is unfortunate, but I know they are trying.

MediaNama: So what’s stopping it from happening?
Manish Vij: I think it is difficult for every publisher and agency to come on a single page, and agree to strict norms of discipline for this entire process. Also this problem is majorly limited to large or small Indian publishers which only accounts for less than 40% of the total digital media market in India.

MediaNama: Why don’t the larger international publishers come on board?
Manish Vij: Probably because either this problem does not exist for them or they have their own global payment policies

MediaNama: If 60% of the market decides that it won’t participate, will that impact advertising?
Manish Vij: We don’t know. My sense is it will still do impact.

MediaNama: What stops that from happening? Nothing has happened. We saw the clauses, they seemed to be reasonable. What stops the group that agrees with the proposal from doing this separately?
Manish Vij: Even there, a critical mass is required. I think we should see it coming very soon. It is a difficult task to get everyone to agree on a common process. I also want to make it clear that there are agencies and clients that adhere to discipline, and pay on time. We just have to extend that discipline to every digital media (publisher), agency and client. My request to all players in the ecosystem, is to make this happen.

MediaNama: One thing about these rules that you were creating was that these were only applicable to IAMAI members. There’s a very large part of the ecosystem that is not a part of the IAMAI. It’s just around 200-300 companies, and not the thousands that inhabit the digtial space. You’re still creating a situation of have-and-have-not’s. (Ed: some kind of a cartel)
Manish Vij: I can’t speak on behalf of the IAMAI, but I think they have a reasonable membership structure for startups as well. If a startup benefits in a way that they get money on time, and they have to pay a very nominal fee to become a member, I think it makes commercial sense to do that. It’s an effort from all end. It’s a pain area from everyone. It just needs to get to a practical framework.

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  • Saurabh

    End Clients & Publishers — when they work direct its a lot simpler and transparent – the moment you bring aggregator/agencies in-between problem begins … its a never ending follow up. ( though not all aggregators are bad )

  • MediaWizard

    Who gives credit for online advertising? Stop living in the past. Client > Agency > Publisher equations have changed, time you did too.

    • who’s asking for credit? the problem is that even payments due do not come within the stipulated time when there’s an agency layer involved. at MediaNama, we’ve had payments delayed by 5-8 months in some cases.

      • MediaWizard

        With the web, the traditional ad setup / payment system has changed too. Every service on the web requires pre-payment, why should advertising be any different? It’s not like collating reports takes all that long with ad servers. Cut out the middleman and if you are the middle man, move to a service fee model. Let the client pre-fund the campaign. I know it’s tougher to do than to say but it saves a lot of time for publishers and media managers.

        • The reason why it’s difficult to take pre-payment for web based advertising is that in most cases, payment is taken on the basis of cost-per-impression, and impressions are not predictable.

          So invoices are generated after the 30 day period. We don’t do impression based advertising (we believe it impacts quality of content if editorial is pageviews driven), but we still invoice only after the 30 day period. We do offer clients a 10% discount for prepayment (collection is sometimes very tedious)

          The only way of collecting prepayment would be for a regular client, where money is deducted on the basis of usage. No many publishers or ad networks, apart from Google, have the muscle for that.

  • Guest

    Agencies themselves work on thin margin of 9% or less…so they have hired battery of finance guys who try to make money thru money by delaying payments to everyone except for biggies and small digital players do not matter at all.

  • Abhishek Shah

    this can be solved by a advance deposit system where client puts X amount in beginning of campaign as a credit limit and refills it as the credit limit approaches…or publisher has to pause the campaign till credit limit is topped up – like how telecom works perhaps :-)

  • Saurabh Kanwar

    When we work with agencies, we find the delay in payments is almost never due to agency delays, but because client ‘procure-to-pay’ systems aren’t built for the digital environment. Even if you take TV networks, they usually get paid by clients promptly; they have a system for paying advances to production houses, but if a digital agency asks for an advance (or prompt payment), their ‘policies’ don’t allow it.

    We have been fortunate with clients listening to us, and being proactive when the need arises. But that doesn’t always happen. So I think Manish’s point of having industry norms like TV, makes good sense.

  • Thanks to Nikhil and Manish to bring out this topic, as the discussion on this part of online advertising was seriously required. Till the time I was in Job, I faced the problem of payment delays partially but after all it was the job and the companies faced it in actual as it being their revenue stream. This year I stepped into my own venture of an online media advertising company. Being a start up with no funding at the back… I am realising how tough is to survive in this market with this type of delays. I would not name the agency but we are still in hope to get our payments for the campaigns which we ran in the month of Jan this year. We have to pay to our publishers as well for those campaigns which we are doing it from other revenue sources. Some agencies and networks compels the vendor companies to run the campaign continuously as they know once you have ran the campaign for them there you get caught and you have to run the campaign for them unless they would stop giving you the importance and recognition and ultimately you will have to just wait for their consideration and mercy for your own due money. This is very common in today’s Indian online advertising space. I don’t wether IMAI’s initiative will get Sucess and when but this is the most saddest part of this ecosystem today. I appreciate those few companies who are disciplined in regards to their payments, on whose support start ups like us are able to survive in the market somehow…. We have great business relationship with some brands and agencies but we become afraid when we think about the delays of payment and not able to take business from them….

    I appreciate Manish, to show his concern about the startups and the efforts he and IMAI is trying to fix the payment cycle for 60 days in the market. This will definitely improve the ecosystem of this space as prepayments are not possible on this space of advertising because all the campaigns running currently in the market are performance driven and to judge the performance we understand that the client, advertiser and agencies needs time.

    At last thanks again to Nikhil to bring out this topic and hope Medianama can also do some actions to help in the improvement of this ecosystem.

    Samir Anand
    AD2Click Media

  • Pratik Shah

    This issue is much bigger than it would seem at first glance – specially for non-institution funded startups. Not limited to just digital advertising space. When it comes to paying vendors, most Indian businesses – big & small – tend to milk the situation to its fullest before making payments. We need a concerted effort to make payments more time-bound with enforceable SLAs.

  • Jose Felix

    The most unfortunate thing in India is being a publisher. The culprits are agencies/networks. Publishers invest lot of cash on content , server, bandwidth , salary etc to build traffic to deliver ads. Many fail and very few tastes success in cracking this code. Now , the agency guy normally doesn’t invest serious monies on anything . They basically do the broker job. Most agencies also do not pay salaries to their employees on time . In essence , these agency/network folks take almost no risk compared to a publisher but controls the game.

    Now, Marketing departments in India are mostly run by guys who wanna save their errr by keeping an agency for everything , for which they pay a decent fee as retainer . The agency hires relatives and friends to build a team that rarely works. There is hardly any process in almost all the agencies. They rarely pressurize the client to pay on time because for them its a revenue of 15% of the invoice value that is at stake whereas publisher’s bread and butter is at stake. The publishers actually cant do much beyond making calls to agencies/network and taking media buyers to bars in lower parel to please them to get the payment put. I personally know of payments pending for more than a year purely because of the inefficiency of the agencies . Now … do we have sensible agencies?.. May be we do .. but most successful agencies are crooks .

    To make it worst , sometimes media buying agencies come in between agency/network and client to take their cut. End of the day , the one who takes the hit is that unfortunate soul called publisher . Like I said , they invest on technology , content and builds traffic to complete the cycle of the consumer internet business to runs that stupid ad . In fact , most of the reports are also generated by the publishers. End of the day, publishers need to waits for the mercy of bunch of kids in agencies who spend half of their time in whatsapp and the rest in planning weekend.

    The most unfortunate thing is that none of the publishers will speak out against this system because of the fear of being alienated . Most senior guys from the publisher side also keep their mouth shut because he assumes that his career is depended on the “network”

    This is one reason why almost all the leading publishers use google ad services which sucks the blood out of everyone but pays the peanut on time . At least publishers get some cash to pay for bandwidth fee month on month on time