MediaMath’s dramatic and drawn-out downfall: ‘Leadership really messed this up’

“MediaMath has been exploring strategic alternatives for the past several months, including securing additional financing through various potential means,” a company spokesperson told The Drum. “However, despite our best efforts and due to the uncertain economic environment and rapid increase in interest rates, we were unable to secure this necessary capital infusion.“ The spokesperson went on to say: “This decision is not a reflection of our team members’ performance, but rather a consequence of an inability to access additional capital or execute a transaction at this time.”

Employees and clients reportedly received an email on Friday morning from MediaMath explaining that the company would shut down its operations within the coming months. However, access to the MediaMath platform – which powered campaigns for top brands including PepsiCo, Adobe, Vivo and Sony – was shut off on Friday, leaving brands and media agencies scrambling to find a new demand-side platform on which they could run their campaigns. Meanwhile, much of the company’s staff, which according to its website includes more than 500 people, will be laid off.

But the story of MediaMath’s demise is not merely the consequence of failed acquisition talks; rather, it’s a slow slide into financial ruin that may have been accelerated by the January 2022 appointment of Neil Nguyen as CEO.

Nguyen took the reins after a two-and-a-half-year stint as chief digital officer at performance marketing agency Havas Edge. Prior to his time at Havas, he helmed adtech firm Sizmek for five years (previously known as MediaMind, which he also led) before departing in 2017 following a buyout by private equity firm Vector Capital.

But much of the damage had already been done; Sizmek had struggled to effectively adapt to the burgeoning programmatic space in the years leading up to its acquisition and had made a handful of what adtech industry veteran Ari Paparo called “small, crappy acquisitions” of other DSPs that didn’t aid its success. In the spring of 2019, the company filed for bankruptcy – a development that rattled the digital advertising world and one that some blamed on Nguyen’s leadership.

Though Vector Capital eventually sold Sizmek for parts, with its DSP and data management business going to Zeta Global and its ad server and creative tools snapped up by Amazon, some in the industry didn’t forget Nguyen’s role in the fiasco.

“When [Nguyen was appointed CEO of MediaMath], I thought it was crazy that a struggling adtech company would go hire a CEO from the recently bankrupt Sizmek, which is one of the biggest adtech corporate disasters of our space,” says Shiv Gupta, managing partner at U of Digital, a digital marketing education firm. “History has repeated itself — [we] should have seen it coming.”

But Gupta also points a finger at MediaMath’s leadership decisions more generally: “Seems like leadership really messed this up for their people and for their customers.” He suggests that the company may have simply fumbled the ball on a potentially lifesaving acquisition. “Financially, a deal may not have ever made sense for them – although I find that hard to believe; they were probably just overly stubborn – but clearly they waited too long to warn everyone and now folks are out of jobs without any cushion.”

There were warning signs along the way that MediaMath may be struggling to secure the financing it needed. With no M&A action in the works, the company took out a $175m line of credit from Goldman Sachs in 2017. Then, in the spring of 2022, just three months after Nguyen’s appointment following the exit of MediaMath’s original CEO Joe Zawadski, private equity firm Searchlight Capital agreed to pump $150m into the company in exchange for a controlling stake. (Searchlight had already invested $225m into MediaMath in 2018.) Many of MediaMath’s early investors, and even Zawadski, lost their equity in the company.

“MediaMath was somewhat of a bellwether for macro trends as well as some misguided but well-intentioned decisions,” says Jeromy Sonne, an ad industry veteran and the chief executive at AI ad agency Daypart.AI. Most importantly, however, “there was a mountain of debt that was really hard to get out from under,” he says.

At various points, companies including IBM, Amazon, Magnite and others were rumored to be considering acquiring the floundering firm. Most recently, MediaMath was reportedly in chats with both Viant and Verve Group, but could not reach an agreement with either company.

All the while, MediaMath was “dwindling in importance … and for most publishers had become a fairly small part of revenues,” says Paul Bannister, chief strategy officer at Raptive, the ad management company previously known as CafeMedia.

MediaMath’s unraveling is a far cry from where it began. Founded in 2007 as one of the first DSPs on the market, the company was hailed as an adtech unicorn. It won over $600m from eager investors and “laid a lot of the groundwork of how programmatic advertising works today,” according to Bannister.

Now, staffers are out of a job, early investors are left empty-handed and creditors including adtech heavyweights such as PubMatic, LiveRamp, DoubleVerify, GumGum and Google are owed major debts (and payments aren’t promised under Chapter 11 cases, so they may be out millions of dollars even after forthcoming court proceedings).

Then there are the customers, which numbered more than 5,000 – including agencies and brands – and which are now forced to migrate their business to a new DSP or team up with publishers directly to keep their media campaigns running.

Gupta expresses confidence that most advertisers will be able to shift their budgets fairly easily to other platforms, but he also acknowledges that there will be some companies “that have built entire offerings – [such as] audience extension products or trading desks” on MediaMath’s DSP and that these players will be “put in a really bad spot.”

Key MediaMath competitors such as The Trade Desk may be poised to win the lion’s share. “The Trade Desk will probably see a windfall of budgets from this news, as it is the closest competition to MediaMath, has all the same capabilities and is already lit up for a lot of big budget advertisers and agencies,” says Gupta.

It‘s a sentiment shared by Daypart.AI‘s Sonne. “The Trade Desk is sucking the air out of the room as it continues to grow,” he says.

At the end of the day, publishers may stand to lose the most. Due to rules of sequential liability – which may dictate that MediaMath is only accountable for its liabilities once it has been paid by advertisers – publishers will “bear the brunt of this issue,” Bannister says.

Still, MediaMath‘s collapse is small enough in scale that it‘s unlikely to cause widespread ecosystem disruption, Bannister says.

But there‘s a bigger lesson to learn here, in Sonne‘s estimation. “The deep truth that came out of this is that a DSP model is tough,” he says. “It’s a low-margin, high-volume business with lots of churn that is ultimately going to continue to consolidate. In general, whether it’s from advertisers saying they want consolidation of vendors for simplicity and efficiency or the adtech stack ... continuing this path of simplicity and consolidation at every level ... [it‘s an ongoing pattern]. I think they were simply poorly positioned to fight this battle.”

“It really is unfortunate that things went down the way they did,” Sonne adds, “but entropy comes from every player in this space that doesn’t move fast enough to evolve to what’s next.”

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