Bank Collapse Causes Ripple Effects Across the Digital Advertising Industry

Bank Collapse Causes Ripple Effects Across the Digital Advertising Industry
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Silicon Valley Bank’s collapse has destabilized the publishers, ad-tech firms and advertisers intertwined with the tech-focused bank.

In the days since, unaffected companies have been serving as ballasts, offering relief payments to publishers and paying out existing publisher clients early. Other industry-wide tremors include publishers and tech firms moving money elsewhere and potentially needing to more due diligence on prospective partners.

Supply-side tech companies Kargo and Adagio are offering to pay their publishers early to help mitigate dislocations, CEOs from both firms told Adweek.

Oarex Capital Markets, a company that provides quick liquidity to digital advertising companies by buying accounts receivable, has received new prospective clients, said EVP Nick Carrabbia. Oarex has replaced funding facilities, with most inbound requests coming from publishers with credit facilities from regional banks.

“Their primary concern was avoiding potential cash flow gaps in the event that their bank shut down,” Carrabbia said.

French-based Adagio has offered to pay its U.S. and U.K. publishers quicker than what is mandated by its terms. One publisher has taken them up on the offer, previously worried about potential contagion spreading to Western Alliance, another regional bank, which could affect the publisher’s ability to be paid on time by its own partners, said Adagio CEO Anh-Tuan Gai.

Kargo is expediting publisher payments, according to CEO Harry Kargman. Payments that were due in three to four months were shortened to a week. In some cases, Kargo is advancing funds for inventory that will be run in the future, based on existing data on variables like content quality and audience match rates, said Kargman.

Despite bailouts, there are longer-term tremors still being felt across the industry.

Cash flow concerns

Concerns about a lack of cash flow were warranted. Around 17% of Oarex’s debtors, mostly demand-side partners, where the money that powers the programmatic supply chain ultimately flows from, were related to Silicon Valley Bank over the past three years. However, the industry’s worst fears were allayed when the Federal Deposit Insurance Corporation announced on Monday it would protect all deposits.