LOS ANGELES: Smaller digital agencies are having to accept that they will not be paid for an average of 66 days after submitting their invoices, new research has shown.
FastPay, which provides specialised credit lines to small and mid-sized digital media companies, analysed more than 2,500 invoices over a three-year period from January 2010 to December 2012. It discovered that only 6% of invoices were paid in under 30 days while 62% went beyond the 60-day mark.
Within the digital media industry, direct advertising businesses came off best with an average payment time of 62 days, while ad tech firms sat on the average of 66 days. Digital agencies fared worst however, with an average payment time of 78 days; over half of invoices issued by this group, by far the smallest sample in the survey, took more than 90 days to get paid.
The report, Real-Time Ads, Delayed Payments, noted that the findings differed significantly from recent research from the Association of American Advertising Agencies (4A's) which said most clients were paying bills within 30 days.
This indicated, said FastPay, "a possible class division in payment terms", as large advertisers paid the big agencies and holding companies within that time but smaller agencies and downstream vendors were forced to accept elongated payment terms.
Other sectors face a similar delay before payment – including aerospace, biotechnology, construction, electrical equipment, electronic components, energy, healthcare, IT services, life sciences, and professional services – and the report concluded that "the digital advertising industry will have to adapt to handle these extended payments as well".
That, in turn, meant that they would have to become "more financially sophisticated in using flexible debt solutions to support their operating capital and help them power their growth".
Patrick Dolan, chief operating officer at the Interactive Advertising Bureau, told Advertising Age that the trade body was "looking to benchmark the current state of the industry to help inform our members where they stack up against the industry".
A major issue, he added, was the time taken to resolve discrepancies in agencies' and publishers' ad delivery measurement systems.
Data sourced from FastPay, Advertising Age; additional content by Warc staff