November 10, 2006 |
How does a business grow its revenues? The two most common routes are either charging more per customer or growing the number of customers. Typically, charging more works better when the market reaches saturation – there are not many more new customers who can be enticed profitably. For a startup, growing the number of users becomes a no-brainer.
That makes all the more sense for a web 2.0 startup. Except, replace the “customer” with “user” – any member in a social network can be both provider and customer for the transaction. Plus, the users are also the prime marketers for the service; if they are happy, chances are they’ll spread information about the service to their social circle, getting more people in.
Especially in early stages, or when there’s significant competition, how do you get the “word of mouth” going? Revenue sharing is one tactic that seems to be gaining ground, especially in the video market. With YouTube being the 800 pound Gorilla in the business, other video networks need to provide alternative carrots to bring content providers to the table.
Revver’s revenue sharing program seems to be the best known so far, probably because it rewards not just the publishers but also affiliates who promote these videos on their own sites. The split goes 40% to the publisher, 20% to the promoter / marketer, and the remaining 40% to Revver. Revenues come from advertising – attaching a small ad to the end of the video, and paying for clickthroughs.
Brightcove and Metacafe have different approaches – both pay publishers only, but the basis varies. Brightcove has a syndication model where the publisher gets paid based on the syndication; as expected, this primarily focuses on publishers who create a lot of content. Metacafe goes the other way, with the payout being based on viewing of the content; you could have just one, or many submissions; each earns independent of the other.
Even Google Video has tried revenue sharing earlier with Google sponsored videos. And Google through the Adsense / Adwords program, has a great deal of experience in revenue sharing led growth.
I’m betting on a revenue sharing model coming up at YouTube. It’s just a matter of time.