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Pattern description
Pattern description
Revenue sharing refers to firms’ practice of sharing revenues with their stakeholders, such as complementors or even rivals. Thus, in this business model, advantageous properties are merged to create symbiotic effects in which additional profits are shared with partners participating in the extended value creation. One party is able to obtain a share of revenue from another that benefits from increased value for its customer base.
Inventive problems
Inventive problems
It is necessary to get payment for the company's product separately.
It is necessary to get payment for for the complex product.
It is necessary to perform all operations of the value-added chain to produce and sale products.
It is necessary to perform a minimum number of operations of the value-added chain in order to reduce the investment and spending needs.
The company should be large and have a complex structure to perform a large number of diverse operations for the development, production, and delivery of a complex product to the customers.
The company should be small and have a simple structure in order to:
- reduce the variety and complexity of the company activities;
- focus on a small number of core operations;
- have a small stuff;
- minimize the cost of development, production, sale, and delivery of products to customers.
Application examples
Application examples
American consumer electronics manufacturer and online service provider Apple also applies Revenue Sharing in both its App Store and its iTunes Store. Developers program their own applications and upload them to the App Store free of charge or at prices set by them. Once reviewed and approved, these apps are published on the App Store, with Apple receiving a third of the revenue. A similar principle is applied in the iTunes Store: bands, artists or labels can upload their music and the incoming revenue from every track downloaded is shared among Apple and the band or label in a 2:1 ratio. Apple’s platforms provide ample room for synergies: the company increases the number and variety of applications in its App Store and benefits by generating revenue through commissions for each app sale as well as attracting more people to buy Apple’s smartphone. Customers are not only drawn by the phone itself but also by the broad range of apps available. This arrangement is beneficial to both Apple and developers looking to distribute and sell their apps.
Founded in 2006 in San Francisco, HubPages is a user-generated content, Revenue Sharing website. It acts as a social platform on which writers, the ‘Hubbers’, can share content in the form of magazine-style articles. The site offers a variety of categories in the fashion, music, arts, technology and business worlds, where contributors are encouraged to provide articles and associated content such as videos and photos. HubPages has become one of the 50 most visited websites in the US, and generates its income via the Revenue Sharing model. Clickable advertisements are placed on users’ webpages and the resulting revenue is shared with HubPages.
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