Net revenue (ex-TAC)

Net revenue answers the question gross revenue cannot: after paying for the visitors, what did the business actually keep? It is gross revenue minus traffic acquisition cost (TAC). Analysts and listed ad companies use the label Revenue ex-TAC for the same idea.

For a search arbitrageur, net revenue is the daily scoreboard. It is the spread added up across every click: if 1,000 visits earn $270 and cost $200, net revenue is $70. Everything else the company needs, including salaries, tools, content, finance costs and tax, must be paid out of it.

Use it with care. Calculated from estimated revenue, net revenue overstates the truth until deductions are known, and because it is a small difference between two large numbers, a modest revenue adjustment produces a large swing. It is also not profit. A team that earns $40,000 of net revenue in a month and spends $45,000 on people and tools has lost money, however healthy the campaign dashboard looks.

An example

Say monthly revenue is $300,000 and ad spend $250,000: net revenue $50,000. A 5% deduction takes $15,000 off revenue, leaving $35,000. A 5% change in revenue cut net revenue by 30%.