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Strip TAC to find true margin on a deal

Strip TAC from the deal's gross revenue to isolate the margin the desk actually keeps on that supply. The stripped figure feeds the decision to renew, renegotiate, or drop the deal at its current markup.

What you need first

  • Delivered impression volume for the period, from the ad server delivery report.
  • Gross CPM billed to the advertiser, from the ad server or the insertion order.
  • TAC CPM (or TAC %) paid to the upstream supply source, from the SSP's supply cost report or the publisher payout ledger.
  • SSP/exchange take rate, from the SSP rate card, to confirm it sits outside TAC and isn't double-counted.
  • FX rate for the invoice period, from finance, if TAC is invoiced in a different currency than revenue.
  • The desk's minimum margin floor for this deal type, from the trading desk's pricing policy.

The procedure

  1. Pull delivered impressions and gross CPM from the ad server report to produce gross revenue for the period.
  2. Pull the TAC CPM from the SSP's supply cost report to produce total TAC cost for the same period.
  3. Convert TAC to the revenue currency at the invoice-period FX rate to produce a comparable cost figure.
  4. Subtract TAC cost from gross revenue to produce the gross margin in currency.
  5. Divide gross margin by gross revenue to produce the margin percentage.
  6. Check the margin percentage against the desk's minimum floor for the deal type to produce a pass or fail flag.
  7. Record the stripped revenue, TAC, and margin percentage against the invoice line to produce an auditable margin trail.

Worked through with numbers

Poland display PMP deal, one month. Delivered impressions: 2,000,000. Gross CPM billed to advertiser: 18.00 PLN, so gross revenue = 2,000,000 / 1000 * 18.00 = 36,000 PLN. TAC CPM paid to the upstream publisher, pulled from the SSP's supply cost report: 11.50 PLN, so TAC cost = 2,000 * 11.50 = 23,000 PLN. Gross margin = 36,000 - 23,000 = 13,000 PLN. Margin percentage = 13,000 / 36,000 = 36.1%. The desk's floor for PMP deals is 30%, so this deal clears it and is worth renewing at the current markup.

Where it goes wrong

  • Pull TAC as its own line from the supply cost report rather than backing it out of the SSP take rate, since netting the two double-counts the SSP's fee.
  • Use the delivered CPM from the ad server, not the rate-card CPM, since under-delivery and make-goods leave the planned CPM overstating revenue.
  • Convert TAC and revenue to one currency at the invoice-period FX rate before subtracting, matching the rate finance reconciles on rather than a spot rate.
  • Strip TAC placement by placement instead of averaging it across the bundle, since a blended figure hides thin-margin lines inside an otherwise healthy deal.

How to know it is right

Recompute margin percentage as (revenue minus TAC) divided by revenue from the finance-reconciled figures, and confirm it matches your working number within the invoice's rounding before sending it on.

Terms used

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