For those who don’t know, revenue sharing businesses fully or partially share their revenues with their membership. At first glance, this is a winning concept for their members. The problem is that most of these sites start with a failing concept, and passing time only brings them closer to the hole.
This fact is depicted fairly accurate in the picture above.
Most revenue sharing sites work like this:
- at (pre)launch there’s a huge infusion of new money capital.
- as time goes by, there are less and less new money coming in, and more existing funds sharing into the company’s revenues. At some point, the ratio between new money and existing funds becomes highly balanced towards the existing funds that are continuously rolled over. They are used to buy into more revenue sharing positions, buying advertising, and pretty much everything that can (and should) be obtained by new money infusions.
- the worse part is most sites of this type share into future revenues, promising (or at least creating the expectation) of profit from revenue sharing. And when withdrawals start to exceed new money coming in, they are on the verge of collapse. And this happens almost invariably with most revenue sharing sites.
- it isn’t enough for a revenue sharing site to bring in plenty new members (even buyers). Because if the business model allows one to buy multiple positions with existing funds, eventually these will become overwhelming compared to those bought with new money.
- after the negative income stream, usually follows makeover, re-launches and such tactics, which only prolong the agony.
- the only way a revenue sharing site can stay alive on the long term is if there are more new money coming in than withdrawals, and the business model doesn’t allow the reversal of this ratio.
The scenario above doesn’t exclude profit for some members, sometimes quickly and in huge amounts. There are always higher risks involved when you use this type of site, and these only grow with passing time, mostly due to a flawed business model.
I have used revenue sharing sites and will continue to use them punctually. But I understand the risks and any quick profits I get this way I invest in my business or businesses with a long-term perspective.
Revenue sharing in itself isn’t bad. You can share part of the site’s revenues with members and they will appreciate it. As long as you keep a positive income stream for your site.