# Contracted

A contracted billing source is based either on contracted volume or on contracted revenue of a proposal line item. This billing source never takes into account what actually served, either as reported by Ad Manager or a third party.

**Setting contracted revenue as the billing source**

From "Billing source", select **Contracted**.

Select **Contracted** to indicate you want Ad Manager to prorate based on contracted volume. Select the **Flat fee** check box next to the **Contracted** setting to indicate you want Ad Manager to prorate based on contracted revenue.

The selection of contracted volume versus contracted revenue affects which value Ad Manager uses to prorate advertiser payments over multiple billing cycles. Contracted volume means Ad Manager will prorate based on the impressions, clicks, or days entered for the proposal line item. Contracted revenue means that Ad Manager will prorate based on the net cost of the proposal line item.

In addition to specifying either contracted volume or contracted revenue (flat fee), you will need to set the billing schedule.

## Billing schedules

### End of campaign and Prepaid

Selecting *End of campaign* as the billing schedule means that your advertiser doesn't make any payments during the run of the campaign and pays the full amount once the campaign has completed. The *Prepaid* billing schedule means that your advertiser pays the full amount for the campaign when they are first billed at the end of the first billing cycle after its campaign has started.

### Prorated

Set the billing source to **contracted volume** with a billing schedule of **prorated** to bill your advertiser based on the duration of each billing cycle.

Campaigns are prorated based on the *amount of time *(not just the number of days) in a given billing cycle. For example, if your campaign starts at 12 noon on the last day of a billing cycle, and ends on the first day of the next billing cycle at 11:59 pm, proration would be weighted toward the first day of the next billing cycle as it ran for more hours within that day than in the last day of the initial billing cycle. Thus, proration would not equally divide values based on the fact that the campaign ran for two consecutive days across two billing cycles.

**Why would I use a contracted billing source with a prorated billing schedule?**

You might use this billing source if your advertiser asks to pay an amount per billing cycle depending on the amount of time that has lapsed in each cycle.

When the billing source of contracted volume is paired with a billing schedule of prorated, your advertiser will be billed based on the total number of days in each month, regardless of the number of impressions that actually served.

### Example

Consider the following proposal line item:

- Length: 4 months
- Contracted quantity: 4 million impressions
- Net rate: $1.00 CPM
- Net cost (contracted revenue): $4000.00
- Billing source: Contracted volume

The amount your advertiser is billed in a billing cycle for this proposal line item is prorated based on the total time the proposal line item runs, how much of that time falls in a given billing cycle, and the total net cost of the proposal line item. This means that the billable amount each month is likely to differ from billing cycle to cycle.

In this example, we're looking at a campaign that ran only full days (no partial days) for four entire months, based on a monthly billing cycle. Thus, to simplify our calculation, we can count total number of days the proposal line item ran, how many of those days fell in a given month, and use the total net cost of the proposal line item to calculate billable amount.

Month 1 | Month 2 | Month 3 | Month 4 | Total | |
---|---|---|---|---|---|

Number of days | 31 days | 28 days | 31 days | 30 days | |

Impressions delivered | 1M | 1.2M | 900K | 900K | 4M |

Billable amount | $1033.33 | $933.33 | $1033.33 | $1000.01 | $4000.00 |

To calculate the advertiser's monthly billable amount, first determine the daily billable amount using the following calculation:

So, for this example, the daily billable amount would be ~$33.3333 ($4000 net cost / 120 days). Once you have the daily billable amount, multiply the daily billable amount by the number of days in each month to calculate the monthly billable amount:

### Straightline

Set the billing source to **contracted volume** with a billing schedule of **straightline** to bill your advertiser the same amount each month, regardless of the number of days in each month.

**Why would I use a contracted billing source with a straightline billing schedule?**

You might use this billing source if your advertiser wants to pay the same amount each month for the life of the campaign, based on the contracted revenue, regardless of the number of impressions that actually served.

### Example 1: Start on the first day of the first month, end on the last day of the final month

Consider the following proposal line item:

- Length: 4 months
- Contracted quantity: 4 million impressions
- Net rate: $1.00 CPM
- Net cost (contracted revenue): $4000.00
- Billing source: Contracted volume

Month 1 | Month 2 | Month 3 | Month 4 | Total | |
---|---|---|---|---|---|

Number of days | 30 days | 31 days | 30 days | 31 days | |

Impressions delivered | 1.1M | 900K | 1.2M | 800K | 4M |

Billable amount | $1000.00 | $1000.00 | $1000.00 | $1000.00 | $4000.00 |

The advertiser's monthly billable amount is calculated by taking the net cost ($4000.00) and dividing it by the total number of months in the lifetime of the proposal line item.

In this example, your advertiser would be billed $1000.00 each month for four months.

### Example 2: Start on the last day of the first month, end on the first day of the final month

Consider the following proposal line item:

- Length: 4 months
- Contracted quantity: 4 million impressions
- Net rate: $1.00 CPM
- Net cost (contracted revenue): $4000.00
- Billing source: Contracted volume

Month 1 | Month 2 | Month 3 | Month 4 | Total | |
---|---|---|---|---|---|

Number of days | 1 day | 31 days | 30 days | 1 day | |

Impressions delivered | 200K | 1.8M | 1.8M | 200K | 4M |

Billable amount | $1000.00 | $1000.00 | $1000.00 | $1000.00 | $4000.00 |

As in example 1, the advertiser's monthly billable amount is calculated by taking the net cost ($4000.00) and dividing it by the total number of months in the lifetime of the proposal line item. In this example, your advertiser would be billed $1000.00 each month for four months, even in months where the line item ran for only a single day (month 1 and month 4).