When music blog network and discovery platform MOG launched an advertising network last August, CEO David Hyman described it as a “Federated Media for music sites” (note: we partner with FM for TechCrunch). Dubbed MOG Music Network, it allows independent music bloggers to syndicate content to Mog.com and customize ads that appear on their websites, enabling them to generate revenues greater than what they’d get from ad networks like Google AdSense.
Now, a tipster that’s part of the program, tells us that MMN is seriously behind on payments and that they’re raising the payment terms significantly. This is the e-mail he/she received from MOG:
Greetings MMN affiliates,
MMN is now 275 strong. We’re really thrilled with the fantastic response we’re receiving from advertisers. Examples of advertisers MMN has featured in the last 60 days include SanDisk, Electronic Arts, and Sony Pictures. Our sales pipeline for 2009 is massive as a result of the enthusiastic reception to MMN among the biggest brand marketers in the world. They recognize MMN as more valuable, and with a cooler audience, than MySpace, Facebook, Imeem, and others. These marketers get that the tastemakers and influencers live on your sites.
Some of the proof is already in the pudding. MMN has averaged over $5.50 CPM in the last 60 days with 50%+ sell through rates, outpacing many other ad networks.
While demand for advertising on MMN continues to be strong, we are seeing a distinct slowdown in advertiser-issued payments. Regrettably, MOG doesn’t have the luxury of paying out affiliates before advertiser payments are collected. This means that we have to push back our payment terms to 120 days, starting with October 2008 earnings onward.
I ask that you be patient with us as we work to collect your earnings. We’re dealing with cream of the crop advertisers who, I assure you, will pay out.
Thanks for your understanding,
Andrei Marinescu
Director, Business Development | MOG
It reads like a classical corporate message announcing bad news. Start off with the good: tout your member numbers and the ‘massive sales pipeline’, say how special the network really is, boast about your impressive CPM rates, say how much better than competitors you are. Then go on with the bad news, get it over with swiftly and then get to the reassurance part, and never forget to thank the recipient for their understanding in advance.
According to the company’s FAQ, which has yet to be updated, payments were issued within 60 days of the last day of the month in which revenue was earned up until now.
It’s always possible that there is effectively nothing extraordinary going on and that the problems will be solved and affiliates paid out in full, but we wouldn’t be surprised that there’s more to the story here, and that MOG is feeling the sting of the recession like so many other ad networks and publishers are.
MOG is venture-backed: after raising $3.2 million in angel funding, they raised Series A funding to the tune of $2.8 million in April 2008 from Universal Music Group, Sony BMG and The Angels’ Forum. Their total funding is thus $6 million. The company also has legendary music producer and co-head of Columbia Records Rick Rubin on its board.
Rick Rubin… that is impressive, I guess.
You seen Bernie Madoff’s client list?
Mog Number One
__________________________
http://tinyurl.com/4rdhmc
MOG Rules , the world has changed.
Stop with the negative spin on sites
You should watch the Blackadder series some day. A quote from the show to respond to your comment: “That’s the spirit. If nothing else works, then a total pig-headed unwillingness to look facts in the face will see us through.”
nice post robin….however it is just a cash flow issue and it makes complete sense. The CFO and accounting folks recognized that MOG should not pay its supliers until they are paid by their customers. Its really just an issue of cash flow and timing. Not sure why the bus dev head delivered the message and not the CFO and you may still be correct that they are low on cash and will not survive. however the reasons they give for switching payment terms are entirely plausible. most big customers like sony will always pay 90 to 120 days out because its not like you can threaten collections on then and risk making them upset. The big companies can always push around the little ones when it comes to the timing of invoice payments.
Hey all, David the founder and CEO here. The letter speaks for itself. Were doing great. We just don’t want to be a bank. If large advertisers have taken it upon themselves to pay out net 120, it must trickle down, unfortunately.
Thanks for responding. What happens if these advertisers don’t pay, or extend it to say, 180 days ‘because of the recession’?
This is Alex Brough, head of sales for MOG. We are doing great this year and already have strong business in 2009.
Our advertisers are paying net 120 and we feel it’s reasonable that our partners also accept the net 120 day payment terms.
curious – is the $5.50 an eCPM for average of 2 ads/page or is that an average rate per ad?
Pretty standard stuff for advertisers to hold onto their cash as long as possible. This is also what drives most successful ad networks (they actually pay on time) and is what pushes most publishers to be loyal to a handful of ad networks. But MOG should have known this would be a problem when they started their network so its definitely their fault. David is a really good guy however and I am sure he’ll make good. MOG is a thought leader and will be around for some time to come.
eCPM’s on MOG are way better than AdSense or other niche blog ad networks and there are few options to get quality ad inventory.
Several of us music bloggers are comparing MOG to MTV’s Tribe Ad Network which seems to be on par from an inventory and CPM standpoint.
These premier music ad networks are still being evaluated by publishers, so while it may seem reasonable from MOG’s POV to change payment terms from 60 days to 120 days, it’s now a far cry from MTV’s 45 day terms.
Rick Rubin is about to be fired at Sony, so maybe he’ll have more time to devote. Also, advertisers are taking a long time to pay everybody. Mog will be fine.
I guess I don’t quite “get” ad sales in general. It seems a bit crazy. “We don’t want to be a bank”. Fine statement, but you’re then asking all your affiliates to be banks instead. They have to perform a service or provide content to you, then not get paid for 4 months or more. What’ll likely end up happening is that some of these “big boys” that everyone likes to have on their books will end up only paying a portion because of some financial scandal in the next few months, and people will then get 30 cents on the dollar for services rendered 6 months earlier.
If you don’t want to be a bank, collect money up front when the “sale” is actually made. Having “sales” where money doesn’t change hands for six months sounds pretty lame. I don’t get why people would invest money in such a precarious business model. “Hey, we’ll do a whole lot of work, then hope that people will eventually pay us for it!” Cause it really is hoping at that point – especially in today’s economy. If you have to sue to collect, then you’re just adding in extra layers of people who will take a portion of whatever’s collected.
I don’t particularly care if “that’s how the industry does it”, because it’s not how everyone does it. For me to run ads on Google or Yahoo’s networks, I have to give them a credit card, and they either charge me up front (yahoo) or pay as I go (Google). That model seems pretty successful.
If your content/service/audience is compelling enough, you’ll have people willing to pay money before or while the ads run, not 4+ months later.
Read the contract. Depending on the contract term, you pay according to those terms.
they claim delay in getting payment from their advertisers, but yet claim they have some of the best brands on board- SanDisk, Electronic Arts, and Sony Pictures. so these three aren’t paying on time ??? !!!
yes that’s true. sonypictures, converse (owned by nike), and more have all been LATE on their net 60 terms. not just mog but everywhere. and it’s way way way way more than just these guys across the web.
unfortunately we cannot collect up front. they don’t go for it. not on mog. not anywhere.
You don’t know how to run a business, Hyman!
Shut it down! You’ll never become stereogum!
@David:
I understand they don’t pay up front. Without sounding like a back-seat driver here (sorry!) these aren’t good customers. You’ve got something valuable, and I bet there’s more people that would like to target your network, but perhaps don’t have a Sony budget. Targetting them might make more sense.
I say this as someone who’s run small businesses with too many eggs in one (or a few) baskets before, and have also dealt with late paying clients (sometimes successfully, sometimes not).
BTW, that fact that you’ve been doing this for three years means you’re doing *something* right. Don’t take this as a blanket shot against mog specifically. In general though, extending credit to clients who feel it’s fine to take 4-6 months (or more) to pay isn’t a great position to be in for yourself – it’s worth when you’ve got other people to pay as well (affiliates or employees). Companies that take 4 months to pay now are likely only ever going to stretch that out to longer terms – 5 months and more.
Best of luck in getting this all sorted out long term.
Well can’t really fault a business for trying to be conservative. One can’t simply assume that they’ll be able to raise capital in this environment thus you have to protect the assets on your balance sheet. It may just be the last man standing that wins it all.
i have run ad sales teams at major media organizations for the past 10 years. most of the big brand advertisers and ALL of the agencies pay out between 90 and 120 days. this is the norm. cash in advance is extremely rare especially for the kind of advertisers on mog.
MOG IS A SHAM
They are just a gimmick to promote their own sites, including dada.net, for $1 CPM.
It is smart of MOG to exploit naive music bloggers who wouldn’t get accepted by any other ad network. MOG gets to run its house ads and widgets all over these bloggers’ sites and then not pay for 4+ months if at all.
All the MMN affiliates I spoke with only get around $1 CPM, btw, and are less than 30% sold.
“Were doing great.” Typo or Freudian slip? Time will tell. Btw, Hyman ain’t used to threads where his butt’s not bein’ covered in lip prints (how else would a guy grow the cojonas to call himself “The Mogfather”?)…but even so… AngryMogger69 (aka MogBlogger), I read your mog page and it sucked the fat one. You da sham, Sham!
Actually, we MOGgers are the ones who call him that. He just recently started to acknowledge it.
Personally, 120 days is unacceptable. Tribal Fusion, Burst and others will do 90 days and remain consistent.
MOG should decide to not pay their employees first if it’s that big of an issue.
Remember, the sites in your network are paying YOUR bills and payroll, why should they suffer first?
P.S. It’s ironic to see Google syndicated ads on MOG.com….Seems like you would have your own ads there if you were doing so well.
We don’t use google syndicated ads or any other networks on MOG.com or across the MOG Music Network.
We focus on selling out our network before out own site to ensure that we deliver for our partners. Our blog partners can choose which campaigns they accept and which they reject to ensure they are maximizing their own revenue.
We’ve got strong demand already in Q1 and that will grow significantly after the new year. We look forward to working with the sites who understand and stay on board.
90% of the Mog networks ads are dada.net banners. WTF is that garbage? Good luck getting paid.
seems almost irresponsible to make such claims when most industries including online advertising is shrinking to the point of freezing 401 k contributions and laying off employees left and right
There are ads associated with Mog and MMN? I’ve never seen them
(adblock rulz, FF 4eva!)
“if you get confused just listen to the music play”
dada is owned by sony and others. i’ll stand by the letter we sent out.
Somebody callin’ you a liar Mogfadda? Cause if they is I’ll break out the cement overshoes and put a contract out on their arse, teach ‘em that you don’t mess with the “family”….of course it might cost you an ad or two, preferably paid up front if you know what I mean
Only 120 days? You ought to try some of the big UK companies. They spin their 90 days payments out over 6 months.
Ingham, push the loyal users out even further? Are you crazy? That’s the sort of behavior that has led the UK back to the economy that created the Sex Pistols.
David, as long as people are sticking their nose in your business, I’ll add my unsolicited advice. We’ve been through downturns before and we both know that some of these customers will be gone and leave you high and dry. Your announcement is fine for now, but going forward, maybe become a bit more nuanced. Take care of your users as best you can. Running scared from the advertisers doesn’t work. They just abuse you more roundly. Reward the customers who treat you well, and punish those who don’t, swiftly and brutally. This will not only be good for business, but will garner respect. Then you’ll have earned your moniker, Mogfather.
Mog is like the mid ’90s AOL for people who dont know how to start their own blog.
I took this message lightly, not being in any serious economic situation myself, I didn’t mind that they were pushing things back an extra 120 days. I thought they might be running into some trouble, but from the way I saw things– it’s a contract, we are rightfully due the money, we’ll get it.
Anyway, now I’m starting to think something’s up. I woke up this morning to the site of sell through rates severely down, slashed eCPM and everything in the shitter for 2009 as of January 1st on my MOG account on adify. I emailed them to see what was up, no response yet, but I sure as hell hope it’s just a glitch, because the rates they’re currently giving me are sickening.
hmm, they responded to my email and said they are dealing with it– i’ll keep you guys posted on what happens. Let me know if anyone else is having this problem though.
my account from adify disappeared out of nowhere all of a sudden there is no more site in the drop down box, but they are happen to continue to display their ads on my highly targeted site