Gross Vs. Net Costs in Advertising

by Helen Fitzgerald; Updated September 26, 2017
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Costs of advertising or the rates for advertising are generally calculated in two formats – net media and gross media. Net media forms 85 percent of gross media. Accordingly, an advertisement that has a gross media rate or cost of $10,000 will have a net media rate or cost of $8,500.

Gross Costs

The gross rate is the full cost of advertising and is the amount that advertisers pay for their ads to be aired (in radio advertising) or viewed (in television advertising). This includes a commission that is typically 15 percent of the cost of the total advertisement costs. In the case of radio stations, stations allow advertising agencies to take an agency commission for the payment, which recognizes the agency’s working role in bringing an advertiser onto the airwaves. The gross rate can be calculated by dividing the net rate of advertising by .85. For examples, $10 net costs can be divided by .85 to become $11.76 gross costs.

Net Costs

The net cost is the cost of an advertisement when there is no advertising agency involved, or the amount that an advertiser expects to be paid after a 15 percent payment has been made to an advertising agency. In order to calculate the net rate of advertising costs, multiply the gross rate by .85. For example, $10 gross rate multiplied by .85 becomes $8.50 net rate.

Advertising Agencies

The money that forms the difference between these two rates is the standard agency commission for services such as media buying, planning and trafficking, which are carried out by credited advertising agencies. Selecting an advertising agency will mean you have to pay more for advertisements, but advertising agencies can ensure your advertisements are placed where you will gain maximum exposure and agencies will make decisions about the elements of design and content of your advertisement.

Areas of Advertisement

Today, you can choose to advertise across a range of media, including the radio, newspapers, billboards, on television and online. Advertising agencies can assist in promoting your product or services over a range of media. If advertising online, an advertising agency can make use of various types of online marketing methods. While you will pay a 15 percent difference when you use an advertising agency, it can be beneficial to work with an advertising agency who specializes in marketing and promotion.

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