MOG Music Network Pushes Back Affiliate Payments, Are They In Trouble?

When music blog network and discovery platform MOG launched an advertising network last August, CEO David Hyman described it as a “Federated Media for music sites” (note: we partner with FM for TechCrunch). Dubbed MOG Music Network, it allows independent music bloggers to syndicate content to and customize ads that appear on their websites, enabling them to generate revenues greater than what they’d get from ad networks like Google AdSense.

Now, a tipster that’s part of the program, tells us that MMN is seriously behind on payments and that they’re raising the payment terms significantly. This is the e-mail he/she received from MOG:

Greetings MMN affiliates,

MMN is now 275 strong. We’re really thrilled with the fantastic response we’re receiving from advertisers. Examples of advertisers MMN has featured in the last 60 days include SanDisk, Electronic Arts, and Sony Pictures. Our sales pipeline for 2009 is massive as a result of the enthusiastic reception to MMN among the biggest brand marketers in the world. They recognize MMN as more valuable, and with a cooler audience, than MySpace, Facebook, Imeem, and others. These marketers get that the tastemakers and influencers live on your sites.

Some of the proof is already in the pudding. MMN has averaged over $5.50 CPM in the last 60 days with 50%+ sell through rates, outpacing many other ad networks.

While demand for advertising on MMN continues to be strong, we are seeing a distinct slowdown in advertiser-issued payments. Regrettably, MOG doesn’t have the luxury of paying out affiliates before advertiser payments are collected. This means that we have to push back our payment terms to 120 days, starting with October 2008 earnings onward.

I ask that you be patient with us as we work to collect your earnings. We’re dealing with cream of the crop advertisers who, I assure you, will pay out.

Thanks for your understanding,

Andrei Marinescu
Director, Business Development | MOG

It reads like a classical corporate message announcing bad news. Start off with the good: tout your member numbers and the ‘massive sales pipeline’, say how special the network really is, boast about your impressive CPM rates, say how much better than competitors you are. Then go on with the bad news, get it over with swiftly and then get to the reassurance part, and never forget to thank the recipient for their understanding in advance.

According to the company’s FAQ, which has yet to be updated, payments were issued within 60 days of the last day of the month in which revenue was earned up until now.

It’s always possible that there is effectively nothing extraordinary going on and that the problems will be solved and affiliates paid out in full, but we wouldn’t be surprised that there’s more to the story here, and that MOG is feeling the sting of the recession like so many other ad networks and publishers are.

MOG is venture-backed: after raising $3.2 million in angel funding, they raised Series A funding to the tune of $2.8 million in April 2008 from Universal Music Group, Sony BMG and The Angels’ Forum. Their total funding is thus $6 million. The company also has legendary music producer and co-head of Columbia Records Rick Rubin on its board.