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Sizmek, Once an Ad Tech High Flier, Bellyflops into Chapter 11

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In a twist of that old saying, “You can’t fight City Hall,” ad tech pioneer Sizmek announced that its efforts to compete with Google’s DoubleClick platform have drained it of cash and investor support, leaving it no choice but to seek Chapter 11 bankruptcy protection.


The Austin, Texas, company said in a March 29 release that efforts to raise more funding and keep the company afloat had failed. Its primary lender, Vector Capital, and the group that owns Vector’s debts, Cerberus Capital, balked at further support and seized control of the company’s bank accounts.


“In the months preceding the filing, Sizmek has been in extended discussions with its stakeholders regarding their continued support of the company as it pursued various strategic alternatives to address its over-leveraged balance sheet,” Sizmek’s statement reads. “Despite these ongoing discussions, the company's primary lender took control of the company's bank accounts and sought to divert customer receivables, thereby cutting off access to capital.”


Sizmek's Chapter 11 case is pending in the U.S. Bankruptcy Court for the Southern District of New York. The company, which remains operational, will seek access to existing cash as it negotiates with creditors and the court in the hopes of remaining viable.


Whether that will be possible is questionable. Ad tech, once a hotly competitive corner of the digital media market, has cooled considerably in recent years as questions have emerged about the model and also whether smaller players could compete with DoubleClick. Vector Capital purchased Sizmek in 2016 for $122 million and then set in place an integration strategy, acquiring Rocket Fuel and several smaller firms in an effort to manufacture a buy-side tech platform that could compete with Google’s platform. Sizmek's share of the online ad server market was second only to Google at the new year, according to Ad Age, an industry trade publication. But that was not enough. In 2018, reports surfaced that Vector was shopping Sizmek, but failing that, apparently pulled the plug as Q1 2019 wound down.


Ad tech certainly has become a tough neighborhood for smaller companies, and it has been held out as yet another space where the FAANGs have drained competitive blood from smaller rivals with quasi-monopolistic practices. But that may not explain everything about Sizmek’s collapse. In an interview with Digiday, Ari Paparo, CEO of Beeswax, echoed remarks from other ad tech industry leaders, saying some of Sizmek’s problems were self-inflicted.


“Sizmek was incredibly slow and incompetent entering the programmatic ad space,” he said. “While their primary competitors – DoubleClick Campaign Manager and DoubleClick Bid Manager – became a powerhouse solution, Sizmek was on the back foot for years and did a number of small, crappy acquisitions buying two or three DSPs, and didn’t make it work.”


Among the acquisitions that will enter Chapter 11 along with their parent company are Sizmek DSP, Inc.; Sizmek Technologies, Inc.; Wireless Artist LLC; WirelessDeveloper, Inc.; X Plus One Solutions, Inc.; X Plus Two Solutions, LLC; and Point Roll, Inc.

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