Search feeds · also called traffic acquisition costs
TAC (traffic acquisition cost)
TAC is the money a company pays to others to obtain traffic, whether a search engine paying its partners or an arbitrageur paying for ads.
TAC stands for traffic acquisition cost. It is an accounting term for what a business spends to get the visitors it earns from, and it appears at two levels of the search chain.
For a search engine, TAC is what it pays out to others for traffic. That includes the revenue share paid to syndication partners and the sums paid to browsers and device makers to be the default search engine (default search deal). Alphabet reports TAC as a line in its financial results.
For an arbitrage company or feed provider, TAC is what it spends on paid traffic plus what it pays out to its own publishers. Listed companies in this sector therefore report Revenue ex-TAC or net revenue alongside headline revenue, because most headline revenue passes straight through to someone else.
This matters when reading company numbers. A business reporting $100 million in revenue with $80 million of TAC really runs on $20 million. In arbitrage, where TAC commonly consumes most of revenue, a small change in the TAC ratio swings profit dramatically.
An example
For example, an operator earns $10,000 from its feed in a day and spent $8,200 on ads to get that traffic. TAC is $8,200, or 82% of revenue, leaving $1,800 ex-TAC to cover everything else.
Related terms
Revenue share (rev share)
Revenue share is the percentage of advertiser spending that a search engine or feed provider passes on to the publisher whose page produced the click.
Revenue ex-TAC
Revenue ex-TAC is revenue after subtracting traffic acquisition cost: what the business keeps once the traffic that produced the revenue has been paid for.
Net revenue (ex-TAC)
Net revenue is revenue left after subtracting the cost of buying the traffic that produced it, also called revenue ex-TAC.
Ad spend
Ad spend is the money paid to advertising platforms to buy traffic; in search arbitrage it is the main cost of the business.
Default search deal
A default search deal is an agreement in which a search engine pays a browser, phone maker or app to be its pre-set search engine.
Gross revenue
Gross revenue is total revenue before the costs of earning it are subtracted; where in the chain it is measured changes what the number means.