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Financial details and costs in proposals

Learn about rates, discounts, and adjustments in proposals and proposal line items

This article helps you understand how DFP calculates rates, discounts, and adjustments in proposals and proposal line items.

Every proposal is comprised of two parts:

  • Proposal settings: under this tab, you'll see a "Financial details" section that sums up the cost of each proposal line item in your proposal along with some proposal level discounts that can be applied.
  • Line items: under this tab, you'll see a lists of all the proposal line items in the proposal. You can click in to each proposal line item to see its cost breakdown.

Some changes to the financial details under proposal setting affect every proposal line item in the proposal. For example, under proposal settings, you can add a percentage-based advertiser discount. This discount does not directly affect any calculations under proposal settings. Instead, it applies to the cost calculations of each proposal line item.

Other details of the financial details under proposals are derived from each proposal line item. For instance, the "total net cost" listed under proposal settings is actually just the sum of the "net cost" of each proposal line item in the proposal.

In this article, we'll cover topics that correspond to these two sections of the user interface:

Under each of these sections, you'll also find an instructional video covering that topic.

Cost — proposal line item details

Under the Cost section of a proposal line item, you'll notice a set of cost-related items:

  • Product rate
  • Premiums
  • Advertiser discount
  • Product adjustment
  • Proposal discount
  • Net rate
  • Net cost
  • Cost adjustment

If a gross pricing model has been set (under the "Settings" tab of a proposal), the two additional cost-related items are shown in proposal line items belonging to the proposal:

  • Gross rate
  • Gross cost

A gross pricing model allows you to add an agency commission for your proposal. The gross pricing model and agency commission are covered throughout this article.

Learn more about proposal line item settings, including cost settings, in this video:

Proposal line item settings (8:45)

Product rate

The product rate is the starting point of what the cost will be to the advertiser or agency for the proposal line item. For example, a product rate could be specified as $3.00 CPM.

This value of the product rate derived from the rate card and product you selected when you created your proposal line item. The value itself is uneditable and set by an administrator, but you have options to add discounts or other adjustments which affect the cost for the proposal line item. In a proposal line item, you can change the product adjustment by editing either the net rate field or the gross rate field (for proposals set to the Gross pricing model). The other adjustments and discounts (advertiser discount and proposal discount) are input in proposal settings and affect each proposal line item belonging to the proposal.

The product rate always remains the same even if an administrator later updates this value in the rate card. Once you've created a proposal line item based on the product and rate card, that price is set for the life of the proposal line item.

Premiums

Premiums are additional charges for modifying any of the following as defined in the original product:

  • Targeting
  • Frequency cap settings
  • Day and time settings

Modification could include adding additional targeting values or removing targeting values from your proposal line item. Doing either will trigger a premiums charge for the customization if the rate card has specified a charge for customization. You could also trigger premium charges for modifying frequency cap or day and time settings if the rate card has specified a charge for modification to these settings.

You can add or remove targeting values via the Customizable targeting section of your proposal line item. If the product you selected allows it, you'll also be able to change or frequency cap or day and time settings under the Delivery section.

Additional charges for the adding or removing targeting, or for modifying frequency cap or day and time settings in any way, is derived from the rate card selected when creating a proposal line item. The targeting that is customizable is based on the product selected to create the proposal line item, as are the frequency cap or day and time settings. Some targeting, frequency cap, or day and time settings might be customizable without additional charges if the product allows it to be customized and the rate card has not specified an additional charge for its modification.

Good to know about premium charges

Premiums charges occur for changing customizable targeting in a proposal line item, not for the use of targeting as defined in the original product. If the product had targeting included, but you don't add or remove any values, a premium charge will not be triggered.

Premium charges are triggered for any targeting values that are left over after you've modified targeting. For example, if you there was geotargeting defined in the original product that targeted the metropolitan areas of New York City, Toronto, and Shanghai, and you removed Toronto as a targeting value, a premium charge is triggered for the use of New York City and Shanghai if that targeting had premium charges associated in the rate card.

Note that even though premium charges are automatically triggered when you modify targeting or frequency cap settings, you can remove these premium charges. In the Cost section of a proposal line item, you'll see each premium listed with its associated charge. Next to these premiums is a checkbox. You can deselect the the checkbox next to the premium which will remove the charge while still applying your customization.

Advertiser discount

Advertiser discount is a percentage-based value entered under proposal settings but applying to each proposal line item. The percentage value is calculated against the sum of the product rate and premium charges in each proposal line item included in a proposal. For each proposal line item:

advertiser discount = advertiser discount % × (product rate + premiums)

Your organization might have a default advertiser discount for some advertisers. This discount will be automatically added when you add an advertiser to your proposal and can be modified if needed.

Product adjustment

Product adjustment is calculated based on changes to the Net rate field or modified directly.

Adjusting the net rate (either as an increase to or a decrease from the original net rate) updates the product adjustment:

product adjustment = [net rate/(1 + proposal discount %)] - [(product rate + premiums) × (1 + advertiser discount %)]

The formula produces the actual numeric value of the product adjustment. The percentage of adjustment is calculated as follows:

product adjustment % = product adjustment / [(product rate + premiums) × (1 - advertiser discount %)] × 100

Changing the product adjustment percentage (either plus or minus) updates the net rate:

net rate = (product rate + premiums) × (1 + advertiser discount %) × (1 + product adjustment %) × (1 + proposal discount %)
By definition, all discounts are negative percentage values and subtracted. However, product adjustment can be either a positive or negative percentage value.

Percentage values carry to two places and monetary values to four places. Values are otherwise rounded using the standard "rounding half-up rule" (or "round half towards positive infinity" rule). The means that values that are halfway round up and otherwise round down.

The percentage value for product adjustment persists unless you change the net rate again. What this means is if you make changes to the advertiser discount or add premiums, the original percentage calculated for product adjustment is a constant—it doesn't change even though, technically speaking, "product adjustment" and its resulting percentage are calculated based on these values according to the formula above. The product adjustment percentage instead is applied to the product rate, plus new premiums, and minus the new advertiser discount.

Proposal discount

Like the advertiser discount, a proposal discount is a percentage-based value entered under proposal settings and applying to each proposal line item. The percentage value is calculated after both the the advertiser discount and product adjustment have been calculated. Thus, for each proposal line item:

proposal discount = [(product rate + premium charges) × (1 - advertiser discount %) + product adjustment)] × proposal discount %

Net rate

The net rate reflects the desired rate for a proposal line item.

The Net rate field can be modified at the proposal line item level. The net rate is what you'll charge the advertiser and can be more or less than the original product rate. This value is affected by the discounts and adjustments that precede it and has a direct affect on the product adjustment.

Adjusting the net rate (either plus or minus) updates the product adjustment based on the product rate minus the advertiser discount. The product adjustment reflects as a percentage discount (or increase) based on the amount you enter in the Net rate field.

For example, assume that there is no advertiser discount and that your product rate is $100 from the rate card. If you changed the Net rate field to $90, this would result in a -10% discount: $90 is 10% less than the original product rate of $100. The actual value of the product adjustment would be a -$10 discount.

Both the advertiser discount and product adjustment are set in proposal settings.

Best practices using net rate: product adjustment percentage stays the same

This percentage value persists for product adjustment unless you change the net rate again.

Let's use the example above, where you changed the net rate to $90 against an original $100 product value, and got a -10% discount. If you later added an advertiser discount and premiums, the value on which the -10% would apply would be different. The new value on which this percentage is being applied would be the product rate, plus premiums, minus advertiser discount.

Best practice suggests, therefore, that the net rate be modified at the end or toward the end of building your proposal. Premiums, advertiser discount, and proposal discount should be defined prior to making adjustments to net rate. Once these other values are set, an adjustment to the net rate allows to represent the rate you want an advertiser to see for a given proposal line item.

You'll see an example of how adding an advertiser discount in proposal settings affects product adjustment in the example calculations below.

Net cost

Net cost is net rate multiplied by contracted quantity.

net rate × contracted quantity = net cost

The net cost of each proposal line item in a proposal is summed and shown in proposal settings as a total net cost.

Gross rate (gross pricing model only)

The "Gross rate" field appears in proposal line items if you have set "Gross" as your pricing model in the proposal to which the proposal line item belongs. The pricing model allows you to include an agency commission as part of the cost of a proposal line item.

There are two possible kinds of rate cards from which you can select when in the catalog, which correspond to different business models in relation to agency commission:

  • Net: means you, as the publisher, want to initially pay agency commission and then later pass on this cost to the advertiser during billing.

  • Gross: means you, as the publisher, want to absorb the cost for agency commission.

Most DFP networks exclusively subscribe to one business model or the other and, therefore, you will only find one or the other kind of rate card in your network. However, a network with mixed rate cards is possible.

If you have selected a "Gross" based rate card, then your proposal defaults to a "Gross" pricing model. You can still change the pricing model in your proposal to "Net" if there happens to be no agency commission involved with in your transaction with the advertiser.

Agency commission is expressed as a percentage and calculated differently depending on the kind of rate card used. For specific formulas on how DFP calculates agency commission, see Pricing model.

Good to know about gross rate

The Gross rate field can be modified at the proposal line item level and will proportionately change the net rate accordingly. Adjustments to the gross rate are reflected as a product adjustment in the proposal line item.

Gross cost (gross pricing model only)

The "Gross cost" field, like the "Gross rate" field, appears in proposal line items if you have set "Gross" as your pricing model in the proposal to which the proposal line item belongs.

For more details and specific formulas on how DFP calculates agency commission in relation to gross cost, see Pricing model.

Cost adjustment

In the Cost section of each proposal line item, you can also configure a cost adjustment. There are three reasons for a cost adjustment:

  • Make good
  • Barter
  • Added value

Each work functionally the same way by zeroing out the total net cost for the proposal line item and, therefore, deducted from the proposal's overall budget. However, the original cost and reason for the cost adjustment are stored for reporting purposes. This later allows you the opportunity to get a view of cost adjustments throughout your organization or for a single advertiser.

Order of calculations and example calculation

DFP makes calculations at the proposal line item level in the following order:

  • product rate + premiums ⇒ advertiser discount ⇒ product adjustment ⇒ proposal discount

Applying this sequence of calculations results in net rate.

Example calculations for a proposal line item

This example illustrates what happens when you adjust the net rate prior to adding an advertiser. As recommended, however, adjusting the net rate should occur at or toward the end of building your proposal.

Suppose that the following cost calculations were for proposal line item booking 10,000 impressions. The original product rate was $100, and you adjusted the net rate to $90 when you first created the proposal. The means that your product adjustment was -10%. This -10% will still be applied, even when you add an advertiser discount, which means that the original value against which the -10% was applied changes. For the example below, also assume that a 2% agency commission was added in proposal settings.

Calculations always occur in the order represented in proposal line item.

Shown in the user interface                      Not shown in the user interface
Field Value % Calculation Result
         
Product rate $100      
         
Premiums $0      
         
Advertiser discount -$10 -10% $100 × (1-.1) = $90
         
Product adjustment -$9 - 10% $90 × (1 - .1) = $81
         
Proposal discount - $4.05 - 5% $81 × (1 - .05) = $76.95
 

    ↓
Net rate $76.95 CPM  
         
  10,000 imps $76.95 × (10,000 / 1000) = $769.50
 

    ↓
Net cost $769.50    
         
Gross rate $78.52   $76.95 / (1 - .2) = $78.52
         
Gross cost $785.20   $769.50 / (1 - .2) = $785.20

If you made another adjustment to net rate now, it would be based on the product rate minus the advertiser discount. In the example above, that value would be $90. If you now changed the net rate to $75, the result would be a product adjustment of - $15.

The exact adjustment would be -16.666666666666664%. However, the product adjustment percentage is rounded to display -17%.

Financial details — proposal settings

There are two pricing models available under the Financial details of proposal settings. These are net and gross.

A net pricing model assumes that there is no agency fee or that your advertiser handles this fee separately on its own. The gross pricing model allows you to account for agency commission. By selecting the "Gross" pricing model, you can enter a percentage-based value for agency commission.

Good to know about rate cards

There are two possible types of rate cards in your network. One type allows you to pass the agency fee to the publisher during billing, while the other allows you to absorb the cost of this fee. The percentage you enter for agency commission therefore is either added to the net cost of a proposal or subtracted from subtracted from the net cost of a proposal, depending on the type of rate cared used.

Most DFP networks exclusively subscribe to one model or the other. However, a network with mixed rate cards is possible. If you're unsure, talk to your DFP administrator.

Learn more about how DFP calculates costs under these types of rate cards, and how DFP administrators configure them, in Gross versus net based rate cards.

Proposals with a net pricing model include the following financial details:

  • Pricing model
  • Advertiser discount
  • Proposal discount
  • Budget
  • Total net cost
  • Agency commission
  • Remaining budget
  • Value added tax (VAT)
  • Total net cost with VAT

A gross pricing model includes additional gross financial details:

  • Total gross cost
  • Percentage for agency commission

In addition, there's a scorecard at the top of proposals. Most of the values in the scorecard also appear in the proposal detail page. 

Learn more about financial details and other proposal settings in this video:

Configure proposal settings (8:23)

Scorecard

The scorecard resides at the top of proposals and provides a summary of financial details. Some values in the scorecard aren't represented on the details page. We'll cover these below.

You can scroll through metrics on the scorecard by clicking left () or right ().

Total impressions

Total impressions for all CPM-based proposal line items in this proposal. For Standard CPM proposal line items, DFP uses contracted impressions and not scheduled impressions.

eCPM

The effective CPM (eCPM) for CPM-based proposal line items in this proposal. Calculated by dividing total cost by total number of impressions of all CPM-based proposal line items.

(cost / impressions) x 1000 = eCPM

where:

cost = cost (net or gross) of CPM proposal line items where no cost adjustment exists
impressions = impressions of CPM proposal line items where no cost adjustment exists

Viewable CPM and standard video proposal line items that use audience targeting with GRP metrics are not included in the calculation of eCPM.

Pricing model

Agencies often collect a fee or commission for services they provide to an advertiser. In some cases, the advertiser works directly with the agency and pays that fee on its own. In other cases, you must account for the agency commission in your proposal. The pricing model in a proposal allows you to account for this agency commission. Here is how you should set the pricing model in your proposal:

  • Set the proposal to a "Gross" pricing model if an agency is involved in your transaction with the advertiser.
  • If there is no agency fee (or your advertiser handles this fee separately on its own), select the "Net" pricing model.

Setting a proposal to "Gross" causes some additional fields to appear in the "Financial details" section of a proposal:

  • Total gross cost
  • Agency commission (with an field for percentage)

In the proposal line items that belong to the proposal, you'll also see these fields:

  • Gross rate
  • Gross cost

Gross rate is calculated differently depending on what kind of rate card you used when browsing the catalog. There are two kinds of rate cards possible: a net based rate card or a gross based rate card. Most networks use one or the other exclusively, depending on the business model of your organization, but a DFP network with both kinds of rate cards is possible.

A net based rate card allows you to pass the cost of agency commission to the advertiser, while a gross based rate card allows you, as the publisher, to absorb the cost of agency commission.

Here is how each kind of rate card works in detail.

  • Net rate card: means you want to initially pay agency commission and then later pass on this cost to the advertiser during billing.

    When you use products from the catalog with a "net" rate card to create proposal line items, the product rate (the starting price) is duplicated to the proposal line item as the net rate: for example, a $10 CPM. In turn, the net rate is used to calculate the net cost for the proposal by multiplying the net rate against the contracted quantity. For example, a net rate of $10 CPM and a contracted quantity of 10,000 impressions results in a net cost of $100 for the proposal line item.

    If you select "Gross" as the pricing model in your proposal and enter an agency commission, this cost of this is added on top of the net cost and results in gross cost. Then net cost of the proposal line item is not impacted by agency commission, and the additional up-charge for the agency is passed on to the advertiser.

    See formulas and an example of agency commission with a net rate card

    The net rate here is the starting point to derive the gross rate:

    net rate / (1 - agency commission %) = gross rate

    Gross cost is similarly calculated based on the net cost of the proposal line item and the percentage of agency commission entered in proposal settings:

    net cost / (1 - agency commission %) = gross cost

    The actual value of agency commission per proposal line item can be calculated by subtracting net cost from gross cost:

    gross cost - net cost = agency commission of a proposal line item

    Example:

    Suppose that the net cost of a proposal line item is $3,750 and that the agency commission percentage is 10%. The net cost is a known value upon which we can calculate gross cost:

    3,750 / (1 - .1) = 4,166.67

    Gross cost is $4,166.67. We can now calculate what the agency commission is for this proposal line item:

    4,166.67 - 3,750 = 416.67

    Agency commission in this example is $416.67.

  • Gross rate card: means you want to absorb the cost for agency commission.

    In the case of a "gross" rate card, product rate is duplicated to the proposal line item as the gross rate. Your proposal defaults to "Gross" for its pricing model, but you can set this to "Net" if your proposal does not include an agency commission. The significance here is that, if you enter agency commission, the agency cost is subtracted from the net cost. Under a gross rate card, the net rate (and consequently the net cost) is reduced to accommodate the agency commission. You, as the publisher, are absorbing this cost as a result.

    See formulas and an example of agency commission with a gross rate card

    Under a gross rate card, the gross rate is the starting point to derive the net rate:

    gross rate × (1 - agency commission %) = net rate

    Net cost is similarly derived based on the gross cost of the proposal line item and the percentage of agency commission entered in proposal settings:

    gross cost × (1 - agency commission %) = net cost

    The actual value of agency commission per proposal line item can be calculated by subtracting net cost from gross cost:

    gross cost - net cost = agency commission of a proposal line item

    Example:

    Suppose that the gross cost of a proposal line item is $3,750 and that the agency commission percentage is 10%. The gross cost is a known value upon which we can calculate net cost:

    3,750 × (1 - .1) = 3,375.00

    Net cost is $3,375.00. We can now calculate what the agency commission is for this proposal line item:

    3,750 - 3,375.00 = 375.00

    Agency commission in this example is $375.00.

Advertiser discount proposal setting

Advertiser discount affects every proposal line item included in a proposal. This discount is not directly applied to any values that appear in proposal settings but only to values in each proposal line item.

Proposal discount proposal setting

A proposal discount, like an advertiser discount, affects every proposal line item included in a proposal but does not directly applied to any values that appear in proposal settings and only to values in each proposal line item.

Budget and remaining budget

This is the budget for the entire proposal. This value is used to calculate remaining budget by subtracting total net cost.

remaining budget = budget - total net cost

Total net cost

The net costs of each proposal line item are summed and reflected as the total net cost for the proposal:

total net cost = p1 + p2 + ... + on

where:

p = net cost of a proposal line item

Total gross cost

The gross cost of each proposal line item are summed and reflected as the total gross cost for the proposal:

total gross cost = p1 + p2 + ... + on

where:

p = gross cost of a proposal line item

Agency commission

The Gross pricing model allows you to enter a percentage-based agency commission. This percentage value is applied to each proposal line item and the results are summed and reflected in proposal settings:

agency commission = a1 + a2 + ... + an

where:

a = agency commission of a proposal line item

See also Pricing model.

Total listing cost

Total listing cost is the sum cost of all proposal line items (based on the product rate) included in the proposal before any discounts or adjustments have been made (either to individual proposal line items or at the proposal level), with all premium charges included, even if the the charge for a premium was removed.

Total discount

The sum of all discounts applied either at the proposal either to individual proposal line items or at the proposal level, subtracting any premium charges that were removed.

Total discount

The sum of all discounts applied either at the proposal either to individual proposal line items or at the proposal level, subtracting any premium charges that were removed.

Remaining budget

The amount of budget remaining based on cost calculations for this proposal.

Value added tax (VAT) and total net cost with VAT

Value added tax is a percentage value calculated against total net cost, whose result is added to total net cost and results in the total net cost with VAT.

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