The ad-tech vendor EMX, along with its parent company Big Village, filed for bankruptcy Wednesday evening in the state of Delaware, the latest chapter in a long saga of financial challenges facing the supply-side platform.

At the time of its bankruptcy filing, EMX owed at least two publishers, both ad-management platforms, roughly $750,000 for ad impressions the firm had facilitated, according to two people familiar with the matter. The companies are known to Adweek, but they requested anonymity as they are not allowed to discuss sensitive legal and financial matters.

It’s possible EMX owes money to other publishing partners as well, our sources said, a claim bolstered by a string of complaints stretching back months on an ad operations Reddit thread and interviews with industry experts.

The ad-management platform CafeMedia stopped sourcing demand from EMX roughly 18 months ago after its growing risk profile raised alarms for CafeMedia, its chief strategy officer Paul Bannister, told Adweek.

In January, EMX was also the subject of a lawsuit from media company CPX Digital, which sought $5 million in unpaid money stemming from a 2016 agreement in which EMX acquired the real-time bidding business of CPX Digital.

Neither Big Village nor EMX could be reached for comment.

The bankruptcy filing comes as the digital advertising industry continues to contract, leading publishers, ad-tech vendors and agencies to cut costs through layoffs and budget adjustments. 

The challenges facing EMX stem, in part, from a growing emphasis on supply chain optimization within the ad-tech ecosystem. The firm struggled to differentiate its value from its peers, according to a person familiar with its business.

EMX payment struggles began last summer

Two ad-management platforms Adweek spoke with each began experiencing payment issues with EMX last summer.

Both companies operate on a net-60 payment plan, which meant neither began taking serious action until the early fall. Both soon began throttling the demand they sourced through EMX.

When the companies reached out to EMX, they received boilerplate responses from communications staff, acknowledging the issue of non-payment and ensuring it would be addressed. 

As ad-management platforms, the two companies handle ad monetization for thousands of publishers. When a vendor upstream of them, such as EMX, becomes insolvent and is unable to pay out the money it owes for ad impressions served, the ad-management platforms are typically protected by a concept called sequential liability.

Sequential liability ensures that, if an upstream entity fails to pay owed money, companies downstream of that company are not obligated to pay businesses downstream of them. As a result, in these situations, publishers at the end of the ecosystem often end up uncompensated when ad-tech vendors declare bankruptcy.

However, some ad-management platforms employ tools to ensure their publishers receive payment in the event of an upstream insolvency. Mediavine, for instance, uses a tool called BidShield to protect its publishers, setting aside revenue in the course of typical transactions to create a piggy bank to pay publishers in situations like these. CafeMedia, too, promises to cover its publisher partners in the event of an upstream insolvency. 

“We are supposed to be taking away the pain and complexity of these relationships and these issues,” Bannister said. “That is what we get paid for.” 

EMX is sued by CPX Digital in January

CPX Digital filed a lawsuit against EMX in January in pursuit of $5 million in unpaid money.

In 2016, EMX bought the real-time bidding business of CPX Digital, and under the terms of the transaction, agreed to pay $40 million upfront with the possibility of two earn-out payments contingent on performance goals, according to the lawsuit.

When EMX hit the first performance goal, it paid CPX Digital $3.4 million in 2017. CPX Digital alleges that EMX failed to pay the $5 million earn-out when the company hit its second performance goal. 

CPX Digital began legal proceedings to recover the owed money in September 2020, won arbitration in December 2022 and sued in January to receive the $5 million owed, plus $1.1 in damages.

The resolution burdened the already distressed financial situation of Big Village and EMX, leading to its eventual declaration of bankruptcy Wednesday.