Revenue Top Stories

New financial services to help publishers thrive

In the publishing industry you often hear discussions around the impact of the Facebook/Google Duopoly on publisher business models, or the competition for shrinking audiences among well-established brands. Yet while publishers grapple with those huge, attention-grabbing existential threats, the smaller day-to-day challenges faced by publishers are often forgotten.

Something as simple as a delayed payment can have knock-on effects that interfere with a publisher’s ability to produce the content that is its lifeblood: the administrative work that comes with chasing a payment, the time spent updating a budget, the anxiety that comes with ensuring funds are available to cover payroll, and countless other hassles create serious drag on the momentum of a publisher’s business and opportunities to grow.

Margaret Farmakis, Vice President of Services at Sovrn, believes that part of the issue is that publishers often simply aren’t aware of all the options:

“I don’t know that most publishers are aware of what their financing options are – what’s out there for them to try to get access to capital; they might be more aware that they need to go to a bank and get a loan, but there are a variety of other options available to them.”

Sovrn has, for the past few years, been engaged in the process of diversifying from a proprietary ad exchange into a provider of business-focused tools and services for publishers. Those services range from the overarching ability to help publishers understand their audiences through data tools to the practical and necessary ability to keep on top of cash flow.

As an example, it recently invested in a discounting program designed specifically to alleviate the issue of long payment periods for its publisher and network partners. The central idea is that, rather than having to wait and chase multiple companies for payment, Sovrn can effectively take on that responsibility for a portion of a publisher’s AR, and will also process its own payments to publishers in a matter of days for a small discount. Effectively, when most publishers typically have to wait 60, 90 or even 120 days for payment, Sovrn’s service would see them paid in a few days for a small discount.

That, Farmakis points out, frees up cash for the publisher to invest in growth and double down on its core purpose of producing great content, particularly at a time of instability in the digital advertising industry. She says:

“You can often have huge swings in revenue due to seasonality, you’ve got Google and Facebook just dominating the space and representing something like 85-90 percent of all advertising spend and you’ve got a lot of consolidation happening in the space, which I think leads to that instability. So you’ve got a variety of companies in the ad tech ecosystem struggling with their cash flows and that’s trickling down.”

Another financing provider, Factoring Helpline, also points out that since factoring is based around the value of the invoice itself rather than the creditworthiness of the publisher, it allows startups and recently-launched sites access to credit that would otherwise be beyond their reach or without the pressures that come from loans.

However, challenges around financing are endemic for most publishers that are heavily reliant upon advertising revenue, particularly as they begin to explore the viability of other revenue channels, like subscriptions, to balance their business models. Recent research from Axios has demonstrated that ad spend on traditional mediums is only set to shrink over the coming years, and the competition for ad spend in the growing markets of digital and social spend is either already controlled or especially competitive, which further undermines publishers’ likelihood of receiving regular cash injections from digital advertising:

The Journalism, Media and Technology Trends and Predictions 2018 report from the Reuters Institute for the Study of Journalism, for instance, points out that 62 percent of publications surveyed believed that digital advertising would be less important to their businesses this year than last – but also that small publishers in particular are still reliant on it as they are not necessarily well-placed to launch subscriptions.

Whether it is ad-based, subscription-based or (most likely) a combination of both, the viability of any publisher is absolutely determined by their ability to produce quality, non-replicable content. Everyone from the ecommerce-based sites like Refinery29 to the traditional newspaper publishers pushing into live events recognise that their content is now their primary product, since their position as middleman between audience and brands has been steadily eroded. Farmakis believes Sovrn’s mission is, in part, to allow publishers the freedom to do that:

“First and foremost publishers need to create interesting and relevant content that will bring users to their sites, and that requires paying for the content itself and then paying to promote that content and market it so that people actually read it, have access to it, and continue to visit the publisher’s site, which in turn drives sustainable advertising revenue.”

As with many of its other core services, then, Sovrn is attempting to create stability for its publishers by reducing the amount of risk to which they are exposed. That’s vital as traditional sources of revenue look less secure than ever and publishers are in desperate need of alternative sources of cash with which to fund experimentation.

Balancing the need for quick payments to fund diversification with the need to maintain positive relationships with clients is another potential source of stress for publishers. Most companies that provide invoice discounting schemes recognise this, and either seek to minimise that risk through chasing payments on the company’s behalf explicitly or anonymously depending on the publisher’s preference. Touch Financial, for instance, explicitly states that:

Publishing company factoring allows you to advance the cash you would usually be waiting months for from your clients, without affecting your client relationships.”

Sovrn’s Business Services Manager, David Weber, who has an extensive history in finance and lending, notes that reducing risk is at the heart of its discounting scheme:

 “That’s precisely it. It also fits well with our ‘let the publishers create content and do other things to drive traffic and increase their revenues’. We want to help them in other ways to make it easier for them.”

Beyond that, Sovrn’s focus of creating stability and long-term success for its publishers extends to effective advocacy on their behalf: Last year Sovrn joined the IAB UK’s Gold Standard initiative, which is designed in part to help clean up the often opaque digital advertising space, the issues with which have either caused or contributed to the straits many publishers find themselves in. It’s further evidence that all players in the digital ad space are recognizing that they are in all this together, and that the digital publishing economy isn’t a zero-sum game.

Ultimately the future of the publishing industry relies upon both publishers and the companies they choose to partner with having a deep understanding of the challenges faced by the entire industry. While it’s dramatic and exciting to discuss existential threats like the Duopoly, business-minded publishers and networks are focused on getting the day-to-day management of things like cashflow absolutely sorted, giving them the freedom to experiment and thrive in the new publishing ecosystem.

 

 

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