Television manufacturer Vizio, which operates the smart TV advertising data unit Inscape, is suing ad tech company MediaMath over what it alleges is at least $900,000 in unpaid bills.
In the suit, filed by Vizio Services LLC on Oct. 1 in the U.S. District Court for the Southern District of New York, Vizio claims MediaMath Inc. breached the contractual agreement made between the two companies.
Vizio is also seeking to perform an audit of MediaMath’s gross revenue to determine the total amount now due, a sum it hopes to be determined at trial, “but in no event less than” $900,000.
In a statement, a MediaMath spokeswoman said: “Our framework for digital advertising built on modernized connections between brands and publishers relies on strategic partners who share in our vision of delivering accountable, addressable and aligned media.”
The spokeswoman continued: “The Vizio assets in question weren’t being used by our clients to warrant the minimum [guaranteed payment] and we believed we were negotiating in good faith to make those assets valuable to the marketplace while working out a go-forward commercial arrangement that didn’t have us paying for data that our clients weren’t buying.”
MediaMath’s spokeswoman said it is confident it “will find a mutually beneficial solution with Vizio in a short time.”
Vizio’s lawsuit claims MediaMath stated in an August letter that it would not make any further financial commitments to Vizio.
Vizio did not respond to requests for comment, which were made both directly to the company and via its attorney.
Founded in 2009, Inscape was initially named TV Interactive Systems. The company, which was later known as Cognitive Media Networks, was acquired by Vizio in 2015 and renamed to Inscape the following year. Inscape’s core product is its automatic content recognition technology, which offers advertisers, broadcasters and smart TV manufacturers viewing data from devices including cable boxes, set-top boxes and gaming consoles. Inscape said in June it had an opted-in consumer footprint of more than 15 million smart TVs in the U.S.
According to the suit, MediaMath first struck up a conversation about purchasing data from Vizio services in the first quarter of 2018. MediaMath “tested the waters,” the suit says, by entering into a series of nine short-term agreements with Vizio between June 2018 and December 2019. MediaMath fully paid for Vizio’s services over that period, according to the suit.
In September 2019, the pair entered a longer, 15-month contract. MediaMath was required to make a minimum guaranteed payment and provide reporting back to Vizio. The suit alleges that “notwithstanding its contractual obligations, MediaMath has failed and refused to pay anything” under the contract, which included a disclaimer stating that Vizio makes “no express or implied warranties” regarding the data — including whether it will meet its customers’ requirements.
In May this year, MediaMath sought to renegotiate the terms of the deal at “drastically reduced rates” — an attempt, Vizio alleges in the suit, to draw out payments over a longer period of time.
In June, Digiday reported that MediaMath had appointed investment bank Centerview Partners to explore its strategic options, which could include a debt restructuring or a possible sale. MediaMath declined to comment on the report at the time, but a spokeswoman said on Wednesday (Oct. 7) the company is not actively exploring a sale of the company or a similar transaction.
Vizio claims in its suit that MediaMath’s potential asset sale “may result in the insolvency or dissolution of the company.”
“Upon information and belief, a protracted payment schedule under the contract permits MediaMath to dishonestly ameliorate its balance sheet, translating into a higher purchase price of MediaMath assets,” the suit alleges.
A MediaMath spokeswoman said the company had retained advisors “to manage the process for ordinary course financing.”
However, “The connection established in the lawsuit is factually incorrect. The dissent with Vizio is purely related to the use of their data asset and its relevance to clients and partners,” the spokeswoman said.
The ad tech sector has undergone a prolonged period of turbulence and consolidation in recent years — though mergers and acquisitions in the space largely ground to a halt as the coronavirus pandemic first hit. Ad tech vendors were hit particularly hard as advertisers pared back their marketing expenses.
Like other companies in the sector, MediaMath, which is a demand-side platform, responded in April by reducing its headcount and rolling out paycuts. In June, the company was approved for a $5 million to $10 million loan as part of the U.S. Small Business Administration’s Paycheck Protection Program.
Founded in 2007, MediaMath has raised more than $500 million in funding to date and has around 385 employees. Much of MediaMath’s recent strategy has revolved around its “Source” framework, which aims to give advertisers and publishers more visibility about the costs and mechanics of their digital advertising supply chains.
By May of this year, digital ad dollars began trickling back into the market again. M&A activity has also begun to resume — though there were just eight ad tech deals in the U.S. in the third quarter of this year, down from 13 transactions in the year-ago quarter, according to investment bank LUMA Partners. EMarketer predicted earlier this month that digital ad spending will grow 7.5% this year, a revision from its estimate this summer of just 1.7% growth.
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