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This week, I’m wrapping up the first mini-season of The Rebooting Show. This season was dedicated to modern B2B businesses. If you haven’t already, please check out the first four episodes of the season:
Adam White of Front Office Sports discussed the advantages of bootstrapping.
Julia Noran Johnston of Business of Home shared how she found an underserved niche in interior designers.
Angus Macaulay of Stat explained its Politico-like model for life sciences.
Industry Dive’s Sean Griffey spoke about the advantages of finding valuable but overlooked industry segments.
To cap off the season, this week’s episode is what I’m calling a Spotlight episode. This is an opportunity for the underwriter of the season to explain how they’re partnering with publishers to build sustainable media businesses. I treat these podcasts like all the others, and I only work with companies addressing real problems in the building of sustainable media businesses. This week’s Spotlight episode is a conversation with Bernard Urban, CEO of Silverblade Partners, a strategic finance partner to publishers agencies and ad tech firms. Thanks to Silverblade for being The Rebooting Show’s launch sponsor.
When I started to report on the media business, two things quickly became clear that I found odd: nobody could agree on how to measure audiences, and nobody paid each other on time. Publishers and agencies always complained bitterly about crazy payment terms. The way it usually works is those with the most leverage, ie the most money, force the smaller party to wait for long periods of time, up to 180 days.
Of course, the problem is your everyday costs as a business – salaries, rent, tech systems – are constant, creating a cashflow crunch. Stretched payment terms has created a velocity mismatch: The media business moves incredibly fast, only the financial system underpinning it slogs along like molasses. For many publishers, this means running a business with high fixed costs in terms of salaries, benefits, rent and more while the financing structure means publishers often wait a long time to get paid.
That’s why I was happy to partner with Silverblade Partners to sponsor the first season of The Rebooting Show. With access to over $1 billion in financing, Silverblade has the financial resources to solve liquidity challenges arising from outstanding accounts receivable for most media companies. Silverblade was founded by veterans of the media industry, with a deep understanding of the particular nuances of the business that your average bank simply does not have. Silverblade has built a cashflow solution that will finance accounts receivable and accounts payable on more flexible and favorable terms than an option like factoring from a bank.
Bernard and I spoke about some of the basics of trade finance, why traditional cashflow solutions like lines of credit or factoring are a mismatch for advertising media, and why finance should be a strategic function within media companies. Let me know any feedback you have on the episode: bmorrissey@gmail.com. Below are some highlights from our conversation.
Understanding cashflow realities for the media business
For much of his career, Bernard has either worked for agencies or run his own agency. That gave him the insight that there was a need for a new type of financing option for the media business that took into account the reality that payment terms are longer than for most industries.
“One of the most difficult things about owning an agency is keeping the lights on. We were always chasing receivables and doing our best to pay the freelancers, pay the staff, keep the rent paid. Clients, of course, had their own ideas about what timely payment was.”
Efficient uses of capital
A common mistake media businesses make is using growth equity to fund day-to-day operations. This is a tempting solution since money is money, but Bernard points out that’s an inefficient use of capital since that money is meant to fund expansion, not everyday expenses.
“It's an inefficient way to use that money. And it also limits the company's ability to do the things that are necessary, whether it's other acquisitions or whatever else that company has a strategic plan to scale using that capital. It results in other problems in terms of expectations of those equity partners in terms of how the company is performing.”
Revolving loans have problems
Taking out a line of credit with a bank would seem an obvious solution to bridging the gap, but that comes with its own host of issues. For one, such loans typically come with restrictive covenants that can hamstring a business.
“They're looking for, in many cases, a minimum balance in an operating checking account. So these are all things that are ultimately restrictive and not extremely well aligned to the advertising media business.”
A different approach
Silverblade offers publishers 80% of invoices upfront, with the rest held back until payment by the clients, less interest fees. That gives media businesses the operating capital they need, even if the payment isn’t made for up to half a year, which isn’t completely unheard of in the media business.
“We don't have any hidden fees. If a company is doing $250 million a year, we can pre-approve them against their existing clients for almost two times the amount of revenue that they're doing. So our credit lines against their existing clients will be higher than they're currently performing at. So the ability to scale is dramatically more flexible.”
Finance as a strategic function
The finance department might not get a lot of attention in media businesses, but it’s the heart of a sustainable media business. When Covid hit, attention turned to the balance sheets of companies, giving new focus to the importance of managing cashflow.
“The ability to move money, the ability to be liquid is a differentiator. We have some clients that are using our ability to finance their [accounts receivable] to extend extend [payment] terms. That's a mindset where suddenly finance moves to the front of the conversation and is not at the tail end of the conversation. That’s an extremely powerful, competitive advantage, not to take anything away from the importance of strategy, the importance of great creative, the importance of smart media planning. You want to ice that cake with the ability to think and be smart about how you're financing all of this trade.”
BuzzFeed’s rough road to Nasdaq is getting messier. Many companies have rocky debuts, but BuzzFeed’s is particularly harsh. First, 94% of backers of the SPAC BuzzFeed merged with pulled back their commitments, leaving BuzzFeed with far less cash than it planned. That matters because the entire logic of being public is to have currency to execute a rollup strategy. On top of that, the public market isn’t that excited, with BuzzFeed’s stock down 40% in a week. What’s more, employees haven’t been able to sell shares because of a paperwork screwup. Yikes.
Just about everyone has a career Mulligan. I’ve long been fascinated by when people, particularly far along in their careers, pull the ripcord shortly after taking big jobs. There’s clearly a mismatch of expectations on both sides, but it also takes courage to admit the mistake early rather than draw it out. Longtime Facebook exec Carolyn Everson took the Mulligan on Instacart, which has all kinds of weird stuff going on with its founder being moved aside for Facebook exec Fidji Simo after a deal to sell to DoorDash fizzled, and longtime Amazon ad exec Seth Dallaire also hitting the exits after just a year.
Gen Z might just save us all. Taylor Lorenz has another instant classic by peeling back the curtain on the Birds Don’t Exist meme, which itself is a send up of conspiracy theories and misinformation. Arguing with people tends to not work in the face of rigid beliefs, so maybe this kind of show-don’t-tell approach can help. If nothing else, it’s very clever.
Defining the elements of a sustainable media business is important. To me, the keys are: matching editorial mission to business model; loyal audiences; diverse revenue streams that often involve recurring revenue streams; and resilient systems that can withstand external shocks like algorithm changes and economic downturns. Local news org Lion Publishers has taken a crack at its features of sustainable media companies, emphasizing operational resilience, financial health and journalistic impact.
Consider supporting The Rebooting through a sponsorship package. I’m learning a lot about what works and what doesn’t, and the good news is the first crop of sponsors I’ve worked with are pleased with the impact. Check out the various sponsorship packages for both the newsletter and podcast. Get in touch: bmorrissey@gmail.com.
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