Revenue sharing represents the distribution of the total amount of income generated by the sale of your services and goods. It takes many different forms, and it usually involves sharing operating profits and losses among associated financial actors. As you may already know, it’s a vital tool within corporate governance for promoting partnerships, sales increasing, and cost-sharing. There are many people worldwide using this model, and we are here to say why.
What Is Revenue Sharing and How It Works?
Every type of revenue sharing is different, but its primary purpose is to enable separate actors to innovate mutually beneficial. As we said, it is used for promoting partnerships and cost-sharing. The first association to this model is private businesses, but we reassure you that they are not the only ones.
Let us clarify the revenue sharing model with a straightforward example. Imagine that you and your friend are working on a partnership. As your revenue is $100, you and your partner will make a deal on how to share it. If it’s decided that you get 75% and your friend 25%, you’ll get $75, and your friend $25. For example, if your partner is taking care of all investments, he invests $60 for the article and earns only $25 in return. This clearly will not work out. It may work for 25-75 split revenue. In case of loss, this model is not functioning. Investing partner purchased an item for $60 and sold it for -$50, so there is a $10 loss. Using the 75-25 model, the investing partner will get 75% of $50( $37.5) and lose $22.5. On the other side, another partner will enjoy an income of $12.5.
Revenue Sharing Model in E-commerce
In the past decade, eCommerce has reached new heights, so as the revenue models that people always use to develop monetization strategies. Some of them are:
- Advertising Model
This is one of the classical revenue models, also called the Online advertising revenue model. With this model, your clients buy advertising space on your website to promote themselves. Using the text or graphic format on that space, companies will pay you for promoting their advertisements, pay-per-click(PPC), or pay-per-view. Some of the great examples are magazines and newspapers, or even some social networks like Facebook, Instagram, and Twitter.
- One-off Sale
This model is maybe less attractive than the first one. It’s also a win-lose approach, and building a relationship with the customer is not essential. The main reason for its low popularity is that companies have to invest in every sale. If you have any experience with eBay, you probably know that you have to pay the amount for listing the product if you want to sell it there.
- Subscription Model
Using this model, companies can run various subscription offers, like three, six, or twelve months subscription plans. Sellers promote their services and products by availing subscription offers. Many famous companies use revenue models, and some of them are Netflix and Microsoft. Shortly said, this model requires users to pay a subscription fee every time they use the software.
Nowadays, the revenue sharing model is definitely widespread in eCommerce. Safex marketplace is one of the platforms that enable using this model. You can open your account and sell products and services and use the revenue sharing. The possibilities of this model application are endless.