The world of digital marketing is constantly changing. With new trends emerging and the landscape ever-evolving, it’s important for marketers to stay on top of their game. One such trend that has exploded in popularity over the past few years is revenue share digital marketing.
While this type of marketing seems like a no-brainer for some businesses, there are many others who have yet to take advantage of what it has to offer. Whether you’re looking for more information about how it works or just want to know if your business could benefit from revenue share digital marketing, read on!
What is Revenue Share?
Revenue share is a pricing structure that involves a company splitting its revenue with another business. It can take several forms, but usually involves the provision of resources or services in exchange for a share of profits from those resources or services.
For example, if Company A needs to buy marketing services from Company B, then they can agree on a monthly payment plan to pay 25% of all revenues generated by Company B’s marketing efforts.
What is Performance-Based Marketing?
Performance-based marketing is a form of advertising where marketers pay for ad campaigns based on the results they get. In performance-based marketing, advertisers don’t have to commit to paying for an ad campaign until it has been proven effective at delivering conversions or other specified metrics.
How is Revenue Share Structured?
There are many ways that revenue share can be structured, depending on what you’re trying to accomplish. While some companies set this up as a monthly payment plan for ongoing services or resources, others prefer it to be more transactional in nature.
One example of the latter is an affiliate program where Company A agrees to pay Company B between 15-30% of all sales generated by referrals from their website. Another popular model involves sharing ad space with another company that pays the marketer based on views/clicks or cost per action (CPA). The possibilities are truly endless!
Why Marketers Choose Revenue Sharing
Revenue sharing provides value in that it gives marketers a way of measuring their success and seeing immediate returns from their efforts without having to invest too much upfront.
One reason why revenue sharing is popular with online marketers today is that traditional forms of digital advertising are not as reliable as they once were. In addition, it can be difficult to measure the success of traditional advertising.
Revenue sharing allows the best marketers to gain a bigger slice of the pie! It means that the better they do their job, the more money they get paid. This incentivizes them to work harder and smarter.
This extra motivation also means that the business they are employed by gets a better result. Unlike traditional marketing methods, businesses don’t have to gamble their marketing bugdet on a campaign that might not work.
Is Revenue Share Right For Your Business?
Revenue share digital marketing might not make sense for every business out there. However, there’s still a good chance that you should consider it. If your company spends money on resources or services, then there’s a good chance revenue share could be the right choice for you.
It will be especially helpful to companies who want to market their product/services, but don’t currently have the funds to make it happen. Sounds like you? Then revenue share might just be the thing you need to help your business grow.
Related: 9 PPC Best Practices to Increase ROI.
What Are Some Benefits of Revenue Share?
There are several advantages to this pricing model, including:
- It can help companies manage their cash flow.
- It reduces the risk of making a bad investment since you’re not responsible for all upfront costs.
- It enables smaller companies to partner with larger ones when they might not be able to afford them otherwise.
- It provides extra motivation for your company to make sure they get results. You see, the more they help you, the more money they make themselves.
There are plenty more benefits out there, but these are just a few things worth mentioning. There’s also no harm in trying it out and seeing if revenue share digital marketing is right for you!
One great benefit of revenue sharing is that this it drives performance, you can read more on How Revenue Sharing Drives Performance-Based Marketing.
Even if everything looks good on paper, though, always do your due diligence before entering into any agreements with other businesses. If this type of marketing doesn’t make sense or isn’t practical for what you’re trying to accomplish, then at least you have another tool in your toolbox for a future business opportunity.
What Are the Negatives of Revenue Sharing?
Although there are many benefits to this strategy, it’s not right for every company. Before you move forward with revenue share digital marketing, make sure that your business can meet the following criteria.
- Although revenue share is great for cash flow, you will likely end up paying more in the long run, which is something you’ll have to consider
- Make sure you can trust your business partners. This strategy requires a high level of transparency, and the last thing you want is for someone to take advantage of the situation!
- Your success depends on the other company doing an effective job
If these things don’t describe your business, then maybe now is not the time to get into revenue share digital marketing. If you do meet these criteria, however, then there’s a good chance that it could be right for your business!
What Are the Best Practices of Revenue Sharing?
If revenue share makes sense for what you’re trying to accomplish, make sure to follow some basic rules and guidelines:
- Be clear on how much each company will pay/receive in order to avoid any misunderstandings or miscommunications down the road (i.e., 15% of monthly sales)
- In order to possess a successful revenue sharing partnership, it is important that you pick partners who share the same business standards and ethics
- Make sure both companies involved have realistic expectations!
- Keep in touch with your revenue share partner(s) on a regular basis so you can monitor progress and determine what adjustments need to be made if things aren’t working out for either side
If these tips are followed, then there’s no reason why revenue sharing digital marketing shouldn’t work. Even though it might not always result in the huge success stories that some people expect right away, at least now you know more about this type of strategy when it comes to getting new customers online!
Are There Any Downsides to Performance-Based Marketing?
Every solution has its pros and cons, so it’s important to consider the risks associated with performance-based marketing before making any final decisions.
One of the most common concerns that agencies have with revenue sharing is that sometimes they are not being compensated for their time or effort.
Another downside of performance-based advertising models is that it can often be difficult to measure individual contributions if there’s more than one marketer involved with an online campaign because revenue sharing involves splitting revenues across multiple parties.
For example, let’s say three marketers created different link ads for a publisher’s website. Even though each marketer may have spent a different amount of time creating their ad, they might all be compensated equally based on how many clicks the ads received from consumers.
So in this case, it would be difficult for marketers to measure and assess individual contributions in order to receive compensation accordingly.
The worry for businesses is that they may be giving up extra money when it’s not needed. For example, paying for a Facebook ads campaign may cost $1000, but the revenue sharing model may result in a business paying $10,000 if the campaign is mega-successful!
As such, it’s worth thinking about whether revenue sharing is correct for your business or not. Those on a budget will appreciate taking less risk and improving their cash flow, whereas businesses with a bigger budget may want to pay a one-time fee to an experienced agency.
Key Considerations for Effectiveness with Revenue Sharing
There are several key factors to consider when looking at revenue sharing as a form of marketing:
- What is your company’s advertising budget? How much can you afford to spend on ads and still make money? It’s important to note here that if you are spending more than you’re making, advertising revenue sharing will not help.
- How many online ads does your company have? You need to consider the number of ads being generated by a campaign because this affects how much money is generated through ad revenue sharing. The greater the number of conversions or users an ad receives, the larger share of profits you get from revenue sharing.
- How quickly do you need to see results? Revenue sharing can be a great way of driving performance-based marketing, but it is important that marketers and businesses alike consider how long they’re willing to wait for the money they generate through ads. If the campaign takes too long, some advertisers may lose interest or forget that they are earning money.
As you can see, it is extremely important to make sure that your advertising budget is used as effectively as possible. Make sure to check out our deep dive on Bing Ads vs. Google Ads, where we sift through the pros and cons of each platform!
How Do Marketers Use Revenue Sharing?
A number of different industries use revenue-sharing models including technology companies, eCommerce platforms, social media networks, publishers, lead generation sites, and even financial services firms
Marketing agencies use revenue sharing to invest in online advertising campaigns that they believe will help them acquire customers for their clients.
They typically pay for these ad campaigns on a per-click basis or cost-per-action (CPA), which means they pay every time an ad click has been successfully completed, such as signing up for a free trial of a product. The agency has to be careful, as they can’t afford to overspend and become unprofitable.
There are also other tactics that can be implemented with the revenue-sharing model, which includes affiliate marketing and lead generation.
Affiliate marketing is a type of performance-based marketing where affiliates promote products or services online, such as on social networks like Facebook, YouTube, etc., in exchange for commissions or revenue shares.
The Future of Marketing Is Performance Based…
…which is why revenue sharing models are becoming so widely used.
The truth is that the best way to obtain ROI on your digital marketing campaigns today, regardless of your marketing tactics, is by implementing a revenue-sharing model into your ad campaign structure.
Revenue sharing keeps marketers accountable for their efforts while giving them the freedom they need to explore new ways of reaching potential customers online without having to commit too much upfront.
In traditional marketing, the agency could simply inflate costs and give marketers inflated promises.
However, with performance-based marketing, the agency needs to deliver on their commitments or risk losing future business in addition to whatever money they’ve already been paid for services rendered.
This is one reason why revenue sharing has become so popular among digital advertisers today–it incentivizes better results by making it easier than ever before to see immediate ROI without having to overinvest in advertising.
How Can I Get Started?
If you’ve decided that revenue share might be right for your business, then there are three key places to look:
Your current suppliers and service providers – Many times these companies will have an affiliate program in place where they pay commissions on sales generated from referrals. If you don’t ask, you’ll never know!
Look online – A quick Google search under “revenue share insert niche here” brings up many companies that are willing to work with you.
Reach out to your network – If you know anyone in a similar line of work, ask them if they’ve ever done revenue share with another company or agency before. You may be surprised by how many connections are willing to do this!
Does revenue share digital marketing cost me anything?
Revenue sharing isn’t a free service, but it doesn’t require any upfront costs. You agree to pay based on the performance of services or resources provided so your only obligation is to make sure you’re getting what you were promised in return.
What kinds of companies offer this type of arrangement?
There are many businesses out there that use revenue share as part of their business model including affiliate marketers, search engines, and ad networks that sell advertising space.
If you already have an existing contract with one of these types of firms, then chances are they may be willing to try something new by adding in some additional commissions for sales generated from referrals!
Would my suppliers/customers want to partner with me on this?
Since it’s not a requirement to pay upfront costs with revenue share, your suppliers and customers are often more open to trying out something new. It gives them the opportunity to spread their risk around, which makes them feel better knowing that some of the money they’re spending is coming back in return.
Does revenue share digital marketing actually work?
Over the past decade, revenue share digital marketing has grown in popularity. It seems like every day there are new marketers who decide to give it a try and increase their sales! Since it’s proven successful for so many companies over time, you should at least consider this type of arrangement when looking to grow your business.
What should I be careful of?
While increasing revenue is amazing, it shouldn’t put your brand in jeopardy. Your partners may take some risky moves to make more money in the short term, only for your brand to be damaged forever. Remember – your customers are the number one priority.
In conclusion, revenue share is definitely something to consider if your company spends money on resources or services. It reduces the risk of making a bad investment by not having to pay for everything upfront, frees up cash to use on other operations, and provides extra motivation for the company you work with.