How to Write a Contract or Agreement for Advertising on Websites and Similar Platforms
With the increase in internet users, there has been a surge in businesses placing advertisements on websites, replacing traditional advertising mediums such as newspapers, magazines, and television commercials. In fact, according to a survey conducted by Yano Research Institute released in 2019, the market size for web advertising transactions in the fiscal year 2018 (2018 in the Gregorian calendar) was approaching a massive 17 trillion yen, and it is predicted to expand to around 28 trillion yen by the fiscal year 2023 (2023 in the Gregorian calendar).
Therefore, we will explain the format and key points of contracts for entrusting or undertaking advertising operations on websites and the like.
Types of Advertisements on Websites
There are several types of advertisements that can be posted on websites. The following are some of the typical advertisements that are commonly used by businesses:
- Listing Ads (Search-Linked Ads)
- Pure Ads
- Ad Networks (DSP)
Listing ads are advertisements that are displayed at the top or bottom of the search results on search engines like Google, marked as advertisements. To rank high in search engine results, SEO measures are necessary, and it is extremely difficult to rank high for competitive keywords. By using listing ads, you can appear at the top just by paying for the advertisement, which is effective when aiming to attract customers from your website.
Pure ads refer to banner advertisements within a specific website. If you can place a banner ad on a website with a high number of accesses, such as Yahoo! JAPAN, you can expect to get access to your own site through that site.
Similar to pure ads, there is a system of advertising called ad networks. With ad networks, you can automatically post advertisements on multiple websites and blogs, not just on specific websites.
Google AdSense is a well-known ad network. Unlike pure ads, the website and the advertiser do not directly contract with each other. Also, advertisers cannot choose the websites where their ads will be posted.
Website Advertising Contract
When entrusting the placement of advertisements on websites or accepting such tasks as an advertiser, it is necessary to create a contract regarding the entrusted tasks.
In the following, we will explain the key points of the basic contract for advertising placement. In each clause example, “Party A” refers to the advertiser who is the client, and “Party B” refers to the advertiser who is the contractor.
Clause on Individual Contracts
1. Individual contracts associated with this contract (hereinafter simply referred to as “individual contracts”) constitute part of this contract and, unless otherwise specifically agreed, the contents of each clause of this contract apply.
2. If the clauses of this contract and the individual contract differ, unless it is explicitly stated that the clauses of this contract take precedence over the clauses of the individual contract, the clauses of the individual contract have priority and effect.
Advertising placement tasks are typically requested to be carried out continuously over a certain period. In such continuous contracts, a method is adopted where a basic contract is concluded for clauses that apply to all tasks, and then individual contracts are concluded separately for each task.
Individual contracts can be established not by creating a contract document, but by the client specifying the task content by email, etc., and the contractor accepting it. Since there is a possibility of modifying the content of the basic contract in the individual contract, it would be good to define the priority relationship between the basic contract and the individual contract as in the first clause example.
Clause on Task Content
When Party A orders Party B to place an advertisement in this advertising space, it shall do so in accordance with the following procedure.
(1) Party B, regarding the advertisement submitted by Party A, will decide at its sole discretion whether the advertisement can be placed and notify Party A of the result and reason for the decision.
(2) If the advertisement can be placed, the advertisement will be placed in the advertising space in accordance with the conditions agreed upon by Party A and Party B.
In an advertising placement contract, the specific content actually requested is stipulated in the individual contract. Therefore, only general clauses are stipulated in the basic contract. In advertising placement tasks, the problem is that the advertisement requested by the client is not placed in the expected advertising media.
In the above clause example (1) and (2), the content is such that the contractor can decide whether or not to place the advertisement requested by the client. As a contractor, if the content of the advertisement violates laws and regulations, it is necessary to refuse to place the advertisement. Therefore, for the contractor, (1) and (2) can be said to be essential clauses.
On the other hand, as a client, if the desired advertising space cannot be placed, the purpose of the contract cannot be achieved, so if the placement is refused, at least as stated in clause example (1), it is desirable to be able to request disclosure of the reason.
Clause on Performance-Based Remuneration
1. Party A shall pay Party B a performance-based remuneration calculated according to the following formula.
Performance-based remuneration unit price (including tax) × Number of results = Performance-based remuneration
2. The “results” referred to in the preceding paragraph mean the actual results of the placement of performance-based advertisements, such as application installation, membership registration, user product purchase, document request application, etc., from this advertising space, and shall be recorded on the XX advertising system.
3. The performance-based remuneration unit price shall be determined in the individual contract based on discussions between Party A and Party B.
The remuneration for advertising placement tasks can be a fixed amount, such as “monthly XX yen”, or it can be performance-based, as in the clause example, where it is calculated based on results. In the case of performance-based remuneration, it is important to clearly define the calculation method of the remuneration so as not to cause any doubt. Remuneration is the most likely to cause trouble between the contracting parties, so it is important for both the client and the contractor to properly incorporate this point into the contract clauses.
What is particularly important is the definition of “results” stipulated in clause example 2. Also, although the measurement of results is often done by the contractor, even in such cases, it is necessary to be able to explain to the client with objective materials by providing the results of the measurement system regularly.
Clause on Exemption
1. Party B does not guarantee to Party A any effects, results, sales, or profits, etc., that Party A expects from using this service.
2. Party A acknowledges that Party B or Party B’s partner’s server or system, etc., related to this advertising space may stop due to failure or maintenance, etc., or misdelivery may occur, and that Party B is not responsible for any damage caused to Party A by such stoppage or misdelivery.
3. Party A acknowledges that if Party B stops or suspends the sale of advertising space or the placement of this advertisement without notice due to the termination of the contract between Party B and Party B’s partner, etc., Party B is not responsible for any damage suffered by Party A. In such a case, Party A and Party B shall consider alternative measures.
The clause on exemption is primarily a clause to protect the contractor. Clause example 1 is a clause stating that the contractor does not guarantee results. The content of the advertising placement task is to place advertisements that conform to the content of the advertisement. Therefore, especially if there is no provision in the contract that guarantees the results, it is natural to say that the contractor does not guarantee the results of the advertisement placement. Clause 1 is a provision that stipulates this point as a precaution.
Clause example 2 anticipates a situation where the intended advertisement cannot be placed due to a malfunction of the server or system, which is inevitable in advertising placement tasks. This kind of trouble is inherent in web services, but if there is no provision, there is a risk of being accused of breach of contract by the client. Therefore, clause example 2 can be said to be essential for the contractor.
Clause example 3 anticipates a situation where the website where the advertisement was once placed is closed, etc., and the placement is stopped. As a contractor, it is not possible to control the operation of the website where the advertisement is placed, so it is reasonable to make such a case exempt from the contractor’s liability.
However, from the client’s point of view, if the advertisement placement is stopped, the purpose of the contract cannot be achieved because it is due to the circumstances of the contractor, so it is not rational that the contractor is always exempted if it cannot fulfill its contractual obligations due to this. Therefore, as a client, it is desirable to have a clause that allows for alternative measures to be prepared as in the second sentence of clause example 3. Also, depending on the power relationship with the contractor, it is naturally more advantageous to have a clause that allows for damages to be claimed as a client.
Other General Clauses
In addition to the above, general clauses that are stipulated in contracts in general are also stipulated in the basic contract. For example, termination, effective period, confidentiality obligation, and clauses related to intellectual property rights such as copyright are typical examples.
In addition, recently, clauses related to antisocial forces are also important. This is also known as a violent exclusion clause, which allows for immediate contract termination if it is later discovered that the other party to the contract is a gang or other antisocial force.
Summary: Types of Web Advertising and their Agreement Contracts
The practice of entrusting advertising operations or acting as an advertising agent is expected to increase in the future. However, posting advertisements on websites can be difficult to understand accurately if you are not familiar with the system, unlike print media or TV commercials.
Regardless of whether you are the client or the contractor, when entering into an advertising contract, it is important to thoroughly check in advance what kind of system the advertisement will be posted on and what potential risks there may be.
Introduction to Contract Creation and Review Services by Our Firm
At Monolith Law Office, as a law firm with strengths in IT, Internet, and business, we offer services such as the creation and review of various contracts, not limited to contracts related to advertising operations, to our advisory and client companies.