"There’s a perfect storm brewing,” according to Dave Morgan, CEO and founder of Simulmedia.
“In the next 12 to 15 months, we're going to see more dominos fall,” he told Axios. “Eventually we will have maximized the elasticity of the market to sustain this and you’ll see other companies go down.”
Sizmek’s bankruptcy filing highlighted the scale of its liabilities and the shaky grounding on which ad tech firms’ financial positions are built as they front the cost of inventory before they themselves receive payment from marketers.
Axios noted how publishers on the supply-side of the digital ad ecosystem float the debts of demand-side vendors like Sizmek on a monthly basis, with the risk that a default could leave them out of pocket to the tune of millions of dollars.
The Sizmek situation is “the tip of the iceberg”, Dan Wilson, CEO of London Media Exchange, told Digiday. “A dozen other supply-side companies must have exposure to other DSPs that themselves have significant exposure. It’s that kind of domino effect.”
And as parties at each stage of the supply chain seek to protect themselves from what they fear is coming, one publishing executive anticipated “legal fallings out between agencies and their DSPs and SSPs and publishers”.
Up to now, many ad tech companies have been bolstered by private equity investment, but as the demands for greater transparency mount, it becomes harder to disguise unsustainable levels of debt and the possibility of wider systemic failure looms.
“The common thread between much of this movement is that ad tech and marketing tech are beginning to collide, which plays into experts’ predictions that more consolidation within the industry is on the way,” Axios concludes.
Sourced from Axios, Digiday; additional content by WARC staff