Revenue Sharing

Revenue sharing

Has multiple, related meanings depending on context: In business, revenue sharing refers to the distribution of profits and losses between stakeholders, who could be general partners (and limited partners in a limited partnership), a company’s employees, or between companies in a business alliance.

In business

Revenue sharing in Internet marketing is also known as cost per sale, in which the cost of advertising is determined by the revenue generated as a result of the advertisement itself. This scheme accounts for about 80% of affiliate marketing programs.

Web-based companies including HubPages, Squidoo, Helium and Infobarrel also practice a form of revenue sharing, in which a company invites writers to create content for a website in exchange for a share of its advertising revenue, giving the authors the possibility of ongoing income from a single piece of work, and guaranteeing to the commissioning company that it will never pay more for content than it generates in advertising revenue. Pay rates vary dramatically from site to site, depending on the success of the site and the popularity of individual articles.

In professional sports league, “revenue sharing” commonly refers to the distribution of proceeds generated by ticket sales to a given event, the amount of money distributed to a visiting team can significant impact a team’s total revenue, which in turn affects the team’s ability to attract (and pay for) talent and resources. In 1981, for example, the Scottish Premier League changed its policy from splitting a match’s receipts evenly between its two competing football teams over to a system in which the hosting team could keep all of the proceeds from matches hosted at its facilities.

The move is generally believed to have negatively affected the league’s parity and enhanced the dominance of Celtic F.C. and Rangers F.C.

In taxation

The United States government implemented revenue sharing between 1972 and 1986, in the form of congressional appropriation of federal tax revenue to states, cities, counties and townships. Revenue sharing was extremely popular with state officials but lost federal support during the Reagan administration. In 1987, it was replaced with block grants in smaller amounts to reduce federal revenues given to states.

In Canada, “revenue sharing” refers to the practice in which one level of government shares its revenues with a sub-jurisdictional government. For example, the Canadian federal government has an agreement to share gasoline tax revenue with its provinces and territories.

Cost per Action


Cost per action (CPA)

Also known as pay per action (PPA) and cost per conversion, is an online advertising pricing model where the advertiser pays for each specified action – for example, an impression, click, form submit (e.g., contact request, newsletter sign up, registration etc.), double opt-in or sale.

Direct response advertisers consider CPA the optimal way to buy online advertising, as an advertiser only pays for the ad when the desired action has occurred. The desired action to be performed is determined by the advertiser. Radio and TV stations also sometimes offer unsold inventory on a cost per action basis, but this form of advertising is most often referred to as “per inquiry”. Although less common, print media will also sometimes be sold on a CPA basis.

Pay per lead

Pay per lead (PPL) is a form of cost per action, with the “action” in this case being the delivery of a lead. Online and Offline advertising payment model in which fees are charged based solely on the delivery of leads.

In a pay per lead agreement, the advertiser only pays for leads delivered under the terms of the agreement. No payment is made for leads that don’t meet the agreed upon criteria.

Leads may be delivered by phone under the pay per call model. Conversely, leads may be delivered electronically, such as by email, SMS or a ping/post of the data directly to a database. The information delivered may consist of as little as an email address, or it may involve a detailed profile including multiple contact points and the answers to qualification questions.

There are numerous risks associated with any Pay Per Lead campaign, including the potential for fraudulent activity by incentivized marketing partners. Some fraudulent leads are easy to spot. Nonetheless, it is advisable to make a regular audit of the results.

Differences between CPA and CPL advertising

In cost per lead campaigns, advertisers pay for an interested lead (hence, cost per lead) — i.e. the contact information of a person interested in the advertiser’s product or service. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touch points — by building a newsletter list, community site, reward program or member acquisition program.

In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction.

There are other important differentiators:

  • CPA and affiliate marketing campaigns are publisher-centric. Advertisers cede control over where their brand will appear, as publishers browse offers and pick which to run on their websites. Advertisers generally do not know where their offer is running.
  • CPL campaigns are usually high volume and light-weight. In CPL campaigns, consumers submit only basic contact information. The transaction can be as simple as an email address. On the other hand, CPA campaigns are usually low volume and complex. Typically, a consumer has to submit a credit card and other detailed information.

PPC or CPC campaigns

Pay per click (PPC) and cost per click (CPC) are both forms of CPA (cost per action) with the action being a click. PPC is generally used to refer to paid search marketing such asGoogle’s AdSense.

Cost per click on the other hand is generally used for everything else including, email marketing, display, contextual and more.

Also, pay per download (PPD) is another form of CPA, where the user completes an action to download a specified file.

Tracking CPA campaigns

With payment of CPA campaigns being on an “action” being delivered, accurate tracking is of prime importance to media owners.

This is a complex subject in itself, however if usually performed in three main ways:

  1. Cookie tracking – when a media owner drives a click a cookie is dropped on the prospects computer which is linked back to the media owner when the “action” is performed.
  2. Telephone tracking – unique telephone numbers are used per instance of a campaign. So media owner XYZ would have their own unique phone number for an offer and when this number is called any resulting “actions” are allocated to media owner XYZ. Often payouts are based on a length of call (commonly 90 seconds) – if a call goes over 90 seconds it is viewed that there is a genuine interest and a “lead” is paid for.
  3. Promotional codes – promotional or voucher codes are commonly used for tracking retail campaigns. The prospect is asked to use a code at the checkout to qualify for an offer. The code can then be matched back to the media owner who drove the sale.

Effective cost per action

A related term, effective cost per action (eCPA), is used to measure the effectiveness of advertising inventory purchased (by the advertiser) via a cost per click, cost per impression, or cost per thousand basis.

In other words, the eCPA tells the advertiser what they would have paid if they had purchased the advertising inventory on a cost per action basis (instead of a cost per click, cost per impression, or cost per mille/thousand basis).