What is a revenue share? If you’re looking for the right business model to start your own online membership business, then you might want to consider revenue sharing. It’s an easy way to build your brand without having to pay out huge costs upfront.
In this article, we take a look at what is revenue share, give an example of how it works, and offer insights about how to calculate revenue share so that everyone in your online membership community can share the benefits.
What Is Revenue Share?
Revenue share, for membership websites, is a business model where any income generated by the website is shared amongst any participating members or contributors. This income is shared based on pre-agreed terms and conditions.
Revenue sharing refers to the following:
- Any income which is generated from the sale of products or services and split between the associated parties. You can also refer to it as a “commission-only” business agreement where the parties share the profits or losses.
- Membership websites charge users a fee to access premium content or services. The revenue generated from these subscriptions can be shared with those providing the content or services.
- The growth of online advertising models within the e-commerce industry has led to a form of revenue sharing called “cost-per-sale”. It rewards every participant within the advertising network that contributed towards making a sale happen.
What Is An Example Of Revenue Sharing?
An example of revenue sharing within a membership community could include offering a commission for new content creation. Revenue sharing can provide a strong incentive for members to contribute high-quality content or services to your website.
This ensures a steady flow of new content or services which will bring fresh ideas and improve your members’ experiences.
For example, a member could contribute an online course or fitness program which increases traffic to your website. The contributor would then be paid a pre-agreed commission based on how many people join the course.
In addition, this new content will help to increase new memberships. This will lead to higher overall income for you and your contributors and will encourage a greater sense of community.
How Is Revenue Share Calculated?
Revenue share is calculated by applying an agreed payment percentage to the total revenue generated. In membership sites, this often involves sharing a percentage of the subscription fees, sales, or advertising revenue.
The specific terms are pre-agreed and outlined in a contract between the parties involved (such as content creators and the platform).
For example, if the agreed upon revenue share (or percentage) is 25%, and the platform earns $10,000 from an online course during any given period, the content creator would receive $2,500 (25% of $10,000) as their revenue share.
Implementing a fair and transparent revenue share agreement is crucial for maintaining trust between you and your members and contributors.
Clear terms, fair payment conditions, and regular communication about your revenue-sharing processes will all contribute to positive and collaborative relationships within your membership website.