Most publishers know exactly what net revenue they receive each month from their ad tech vendors, but how many know the gross revenue? Adnimation’s Yakir Biton explains why this distinction is so crucial and how publishers can rectify the situation…
According to GroupM’s yearly roundup, global advertising spend is predicted to increase by 5.9% in 2023 despite the widespread economic uncertainty. While this is positive news for publishers, most of whom rely on advertising for a significant portion of their revenue, it’s still unnerving that many publishers don’t know exactly how much ad revenue they actually generate.
Hear me out. Yes, many publishers know their net revenue – the amount of money that enters their bank account on a monthly basis – but how many know their gross ad revenue?
This lack of clarity does not stem from any oversight on the publisher’s side, but instead reflects the need for improved transparency across the entire ad tech ecosystem.
Lack of Transparency – An Industry Standard
Today, the vast majority of monetization companies don’t show publishers their gross ad revenue. Instead, they only show them their net ad revenue, which is comprised of the gross revenue minus the monetization company’s revenue share fee.
Let’s take Publisher X, for example. Publisher X generates $10,000 in gross monthly ad revenue and pays a 25% revenue share fee to the monetization company.
When Publisher X logs into its personalized dashboard provided by the monetization company, it sees a total of $7,500 in monthly ad revenue. That is also the sum it receives in the bank.
It is possible for Publisher X to perform a simple calculation and deduce that its gross ad revenue is $10,000; however, this calculation relies on the assumption that the monetization company is adhering to the 25% revenue share agreement.
There are many reputable monetization companies, and the point of this article is not to cast aspersions on any of them, but experience dictates that there is a need for caution in situations involving financial gain.
The Classic Example
We are all too familiar with this scenario: a publisher is dissatisfied with its ad revenue and decides to terminate its relationship with its monetization company.
In response, the monetization company requests additional time to improve the results. Then, almost miraculously, the publisher’s revenue and RPM experience significant increases. As is often the case in financial matters, things that seem too good to be true often are.
The unfortunate reality is that non-transparent monetization companies can alter publishers’ revenues with a click of a button. Thus, if a monetization company takes more than the agreed-upon revenue share, it can simply revert back to the original revenue share agreement and give the appearance of increased revenue to the publisher.
In such instances, there’s no way for the publisher to know what’s unfolding behind the scenes.
Lack of Transparency Doesn’t Stem from Deceit, But It’s a Slippery Slope
The industry standard of non-transparency does not stem from a deliberate attempt to mislead or deceive. In fact, I believe that most monetization companies are comprised of honest and hardworking individuals who do their best to help publishers thrive.
The reason that many monetization companies opt for non-transparency is simply that it’s perceived as a better business strategy.
Let’s revisit Publisher X.
Publisher X can only see its net revenue of $7,500, but it is still pleased with the results because it’s earning more than it was previously.
However, if Publisher X observes a gross revenue of $10,000 in its dashboard and a net revenue of $7,500 in its bank account, it may lead to discontent that such a high percentage of its revenue is going to the monetization company – even though it isn’t capable of generating such high revenues alone.
Ignorance is bliss.
While it may be advantageous for monetization companies to only display net revenue to publishers from a business perspective, this lack of transparency makes it easier for companies to manipulate the numbers. It is human nature to be tempted by opportunities for gain, especially when they are easily accessible, and this is particularly true in the context of the ad industry.
Transparency Is Better for the Industry and Publishers Need to Start Demanding It
The absence of transparency can foster mistrust between publishers and ad monetization companies and prevent publishers from obtaining important financial information that could be critical for their business.
It is therefore important for publishers to demand complete transparency from their monetization companies and ad tech partners.
Publishers deserve better and it is time for all monetization companies to disclose the gross revenue to publishers.
Sales Director, Adnimation
Adnimation is a technology-driven monetization company that helps online publishers maximize their ad revenue. Founded in 2013, Adnimation provides monetization services to websites, CTV apps, and mobile apps using a blend of innovative technology and hands-on professionalism. The company’s headquarters are located in Israel.