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‘Companies are in freeze mode’: Coronavirus crisis strains ad tech licensing model

Digiday 03 Apr 2020 04:02

Like so many other industries, the coronavirus crisis is rapidly separating the distance between the haves and the have nots in the software-as-a-service sector.

In ad tech in particular, there was a rush in the middle of the last decade for companies to switch their models from charging clients a percentage of the media they were spending to instead adopting a flat monthly fee for the use of their platforms. The latter model usually generates more predictable monthly recurring revenue — versus the ebbs and flows of advertiser spend — and SaaS businesses tend to fetch higher valuations than those relying on media-based income.

But predictability isn’t a trait of this current crisis. As the pandemic escalated in March this year, CFOs started forensically scrutinizing their companies’ monthly outgoings and began trimming discretionary spending in a bid to preserve as much cash as possible. Nonessential software fees are a logical first cut as a downturn looms. Take WPP, which said in a statement last month it had “identified savings in excess of £100 million ($124 million) in property and IT capital expenditure against an initial 2020 budget of around £400 million ($495 million).”

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Ryan KangisserMediaSenseKangisserCledaraWPP
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