Will Sizmek’s Employees And Partners Get Paid?

Story has been edited to include Sizmek’s response.

While Sizmek’s future will play out over the next couple of months, there are more pressing concerns about the company’s payroll and whether it will be able to resume normal business operations.

Chapter 11 bankruptcy isn’t necessarily the end for Sizmek’s business – it’s the kind of bankruptcy when assets are reorganized, not liquidated.

There also haven’t been widespread layoffs at Sizmek, at least not yet. Sizmek reduced headcount when it was acquired by Vector in 2016 and consolidated teams further after it bought Rocket Fuel a year later. Employees said its customer service and technology teams were trimmed last year as the company moved from specialists at each subsidiary to having a team of generalists working across the business.

But Sizmek’s office in New York City will close next month, according to sources. Though they said other offices in the US and the European headquarters in London are expected to remain open. The company also missed payroll last week and is yet to cover salaries and benefits, according to current and former employees in the United States.

Sizmek said it has no plans to shutter its New York City office.

Employee debts are considered priority repayments in Chapter 11 bankruptcy cases, so once Sizmek has access to cash, its employees can expect salaries and contractual benefits to be covered. That isn’t the case for Sizmek’s “unsecured payments.”

Sizmek owes a combined $31 million to Index Exchange, PubMatic, OpenX, AppNexus and Rubicon Project, its largest independent online media suppliers. It also owes money to third-party measurement companies like Integral Ad Science, DoubleVerify and Nielsen.

A brand often takes weeks or months to actually pay for paid media, giving it time to review campaign reports and make sure there aren’t hidden costs, misrepresented results or bad brand placements that it disputes. So it’s common for ad tech companies to operate on credit with exchange partners to bridge those late payments, since SSPs pay publishers upfront for inventory.

That system works, as long as DSPs don’t unexpectedly declare bankruptcy. But it’s messy when a DSP reneges on campaigns that are already served.

Sizmek’s supply chain partners may see partial refunds, but will likely lose most or all of what they’re credited, according to executives from four ad tech companies that are each owed hundreds of thousands or millions of dollars by Sizmek.

More than its bankruptcy proceeding or challenges finding a suitor, Sizmek’s lost compact with fellow ad tech companies will be the biggest wrench in the gears for Sizmek as it tries to resume normal business operations.

At least a dozen large inventory suppliers or critical third-party campaign vendors are no longer accepting Sizmek demand, since the company isn’t paying for media and services it’s already ‘purchased.’

Clients have also told AdExchanger that campaigns aren’t serving, though it’s unclear if that’s because Sizmek has shut down products or because inventory sources have closed off Sizmek.

According to a company spokesperson: “Sizmek is open for business and actively engaged in exploring value-maximizing alternatives, including a sale of the business. We are in productive discussions with a number of interested parties, which we expect to continue in the coming days. To be clear: there are currently no plans to close offices. In particular, not our flagship office in New York City as your story claims. Not only are our campaigns serving, but we have been experiencing significant, high volumes on our ad server over the past few days. We are also in active discussions with our vendors to ensure we have supply to meet client demands.”

This post was syndicated from Ad Exchanger.