Business & finance · also called gross revenue, net revenue, principal vs agent reporting
Gross vs net revenue
Gross vs net revenue is the accounting choice between reporting everything customers pay (gross) or only what a company keeps after paying partners (net), which complicates comparisons.
Suppose an advertiser spends US$100 through a platform, US$80 goes to publishers, and the platform keeps US$20. If the platform reports gross, its revenue is US$100 with US$80 as a cost; if it reports net, its revenue is US$20. The business is the same; the headline number is five times different.
Under accounting rules (ASC 606 under US GAAP and IFRS 15 internationally), the choice depends on whether the company acts as principal (it controls the service before it passes to the customer, bears inventory or pricing risk) or as agent (it arranges for another party to provide it). Many DSPs and SSPs report net revenue; some companies that buy media and resell it report gross.
That is why analysts look beyond revenue to gross spend, take rate, Revenue ex-TAC or Contribution ex-TAC measures. When one company reports net revenue of US$2 billion and another gross revenue of US$2 billion, the first may be handling several times more advertising spend. Always check the revenue recognition note in the Form 10-K.
Think of it like this
Gross vs net is like a travel agent who either says "we sold a US$1,000 holiday" or "we earned a US$100 commission": same trip, very different-sounding numbers.
An example
Company A reports US$500M gross revenue and pays US$400M to publishers. Company B reports US$150M net revenue on US$750M gross spend. B handles more spend despite lower reported revenue.
Related terms
Gross spend (gross billings)
Gross spend is the total amount of advertising money that flows through a platform, including the portion paid on to publishers and partners, rather than just the platform's own revenue.
Take rate
Take rate is the percentage of the money flowing through an ad tech platform that it keeps as its fee: platform revenue divided by the gross spend it handles.
Revenue ex-TAC
Revenue ex-TAC is revenue minus traffic acquisition costs (TAC), the amounts paid to publishers and partners for the ad space or traffic, showing what an ad company keeps.
Contribution ex-TAC
Contribution ex-TAC is a non-GAAP metric, headlined notably by Criteo, that measures revenue after subtracting traffic acquisition costs and other direct costs of delivering the service.
Form 10-K
Form 10-K is the comprehensive annual report that US public companies must file with the Securities and Exchange Commission, including audited financial statements, business description and risk factors.