This is one of the options for payment terms that can be attached to different monetization methods. This concept is particularly relevant for sites that monetize through display advertising or affiliate marketing, as it will impact the timing of cash inflows.
Under a net 30 contract, the advertiser would be required to submit payment to the publisher within 30 days of receipt of the invoice. For example, if an invoice for advertising during April was sent on May 1, payment would be due by May 31 (i.e., 30 days after May 1).
Other similarly-named payment terms simply reflect a different amount of time between the end of the period and the due date; for example, under a net 60 contract any balances would be due 60 days after the invoice was received. In the example above, that would be June 30.
As noted above, the payment “clock” starts ticking when the invoice is received. However, many accounting systems will calculate the timeliness of an invoice relative to the final date of the relevant period. For example, QuickBooks invoices for a period ended March 31 with net 30 payment terms would be due on April 30 (even if the invoice was not sent until a few days later).
This may cause a discrepancy of a few days between reports pulled from accounting systems and the actual due date. In practice, there should be minimal concern over these differences (more on this in the Premium section below).
When comparing display ad networks, publishers should consider the frequency of payments. Most major ad networks, such as Google AdSense or Media.net, pay publisher partners within 30 days (i.e., net 30 or faster). Obviously, the faster accrued revenue can turn into cash the better for publishers–especially small businesses. While it probably isn’t wise to make a decision over ad networks based solely on payment terms (the amount of revenue they generate should be the major concern), it is one of the factors that should be considered.
There are some significant advantages to selling directly to advertisers, including higher CPMs and additional control over the ads appearing. One drawback, however, is the general extension of payment terms. As mentioned above, most ad networks pay publisher partners within 30 days after the end of each month (i.e., revenue earned in March would be paid by April 30 at the latest).
The standard terms and conditions for advertising campaigns set forth by the Interactive Advertising Bureau (IAB) stipulate net 30 payment by advertisers (the full terms are linked in the resources below). Thus, in theory, all outstanding balances should be paid within 30 days of submitting an invoice.
However, many advertisers regularly disregard the suggestion of a net 30 payment term, especially if there is a large agency involved. In reality, publisher recourse against late payment terms are minimal. There is, of course, an opportunity to push the client to accelerate payment, but these requests can often go unanswered or unaddressed. Publishers also have the option to refuse delivery of additional ad impressions until payment is received, though this approach risks jeopardizing a potentially profitable relationship with advertisers.
If you are transitioning from ad networks to direct ad sales, you should expect your receivables to gradually increase over the next several months. Despite the presence of net 30 payment terms in your contracts, you’ll likely experience an effective days in accounts receivable that is significantly higher.
Any discussion of payment terms generally does not take place until an insertion order (IO) is prepared. If the advertiser or agency is preparing the IO, you’ll want to examine any terms and conditions to note the specified terms (even though they may not be honored). If no terms are specified, the IAB standard terms can be expected to govern the contract (these are linked below).
If you’re building your own IO template as a publisher, it is wise to include the payment terms as an item. Net 30 is considered to be standard, so unless there are extenuating circumstances this option makes sense.