The world of advertising and media has been turned on its head by the digital revolution, and among all of the challenges that’s brought to the supply chain, cash flow bottlenecks and inconsistencies are among the biggest.
FastPay provides working capital solutions to one side of this industry, focusing its services on digital media suppliers that are often plagued by delayed and late payments.
Recently, though, FastPay has begun to turn its attention to the other end of the industry’s supply chain. It’s biggest push in this regard has been the acquisition of AnchorOps, a deal announced Wednesday (Oct. 11) that strengthens FastPay’s present on the buy-side of media and advertising. AnchorOps provides electronic payments and reconciliation solution for advertising agencies.
According to Secil Baysal, COO and President of FastPay, and David Frogel, President of AnchorOps, payment terms in this industry regularly leak into the 120-day mark.
“One pain point in this industry is payment terms, which are regularly over 90, 120 days,” Baysal said in a recent discussion with PYMNTS. “Especially for fast-growing companies in this space, that creates a working capital problem.”
“People outside of this industry look at these payment terms, and they’re horrified,” added Frogel. “But it’s not unusual to see. There’s this issue of sequential liability: agencies only pay suppliers once they’ve been paid by the advertisers. It’s a chain effect.”
AnchorOps operates a solution called ePay, powered by corporate payments company WEX, which aims to support agencies’ use of electronic payments to pay suppliers. But this isn’t as simple as asking a company how they want to be paid, Frogel said.
“The industry is constantly changing. You have holding companies that are buying and selling properties, almost like playing cards,” the executive explained. “The FCC has relaxed regulations on owning TV stations. You have new digital suppliers coming online constantly.”
Indeed, according to Reuters, earlier this year the Federal Communications Commission said it plans to reverse earlier rules set by the Obama Administration that limits the number of television stations that a single company can purchase.
This constant flux makes it difficult to discern which suppliers need to be paid in the first place, let alone understand how they want to be paid, Frogel added.
“You need some sort of index that captures who these entities are, the ownership of them, how they accept payments, and where those payments go,” he stated. “Even the credit card networks don’t have that.”
The complex structure of this industry also makes payment data a critical component of reconciliation, another massive pain point for this industry, the executives said.
“The major delays in media are reconciliation and payment workflow – in getting payments out in a streamlined manner, and to the right place,” said Frogel. “You need of have a lot of market intelligence and data around the destination of the payment.”
With this in mind, Frogel said, even ACH payments can fall short.
“The big limitation of ACH is the limited data set that can flow with payments,” he stated. “If you are an agency paying 20 invoices, and you need to let the supplier know which invoices you’re paying, and which are short-paid because there are discrepancies, you can’t really solve for that in an ACH communication.”
These factors – late and slow supplier payments, coupled with a demand for more robust data to travel along with the payments that are made – mean traditional B2B payment solutions can’t adequately address the needs of the digital media and advertising industry, both Frogel and Baysal said.
“For data-rich and complex verticals like media, we believe in vertical-specific payment and lending solutions that are custom-built,” Baysal noted. “Plain vanilla solutions may be able to replace paper checks with ACH, and that’s good, but it’s not going to be good enough for companies in this space. They have much more complex data and reconciliation needs.”
“Expertise in the industry and tailoring custom-built products from scratch for this industry is a requirement,” added Frogel. “You don’t see a lot of off-the-shelf software that are successfully adapted to the industry, because there is so much intricacy, and because the industry is constantly changing.”