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Revenue Sharing Explained
The modern business world face tremendous obstacles and not only because of the financial crisis around the globe. Investing programs come to life every single day to attract potential wanna be entrepreneurs by promising luxurious ROIs that are far away from reality. The end results are disappointing leaving the vast majority of participants with loss and the “anonymous” in most cast cases owners/admins escaping ready for their next project.
Although revenue sharing as a business form is legal defining the distribution of profits/losses between shareholders in a company/group of companies, the modern revenue sharing programs do not offer real products.
How Can Companies Generate Profits Without Products?
All they need is an income plan attached to a website membership. The membership can either be free or paid, usually charged per month. Modern revenue sharing companies are in majority advertising platforms offering traffic products sold only to members who invested in the system. They invest because they expect to receive a return after a certain or not period of time.
What happens is that money deposited from members are being transferred to the revenue sharing pools in order to be distributed among active participants. This is the only income source for that kind of companies. There are no products sold to retail/external customers. Every member buys ad packages bundled with ad credits that can be used to advertise their own offers/affiliate promotions.
The Traffic Products found are various forms of ads: fixed, login, text, banner, business directory, cash links and many others.
Every member advertise their offers to other members of the program, making it extremely hard for anyone to sell. A traffic exchange system where most of the advertisers selling money making opportunities and promoting other revenue sharing or HYIP companies.
So, advertising revenue sharing companies sell ad packages and/or memberships to affiliates/investors who become eligible for the profit distribution.
What Happens Next
That business model is extremely unsustainable as you can already imagine and is called Ponzi, but let me break it down a little bit…
The companies starting to collect funds from affiliates who expect to be compensated with the final ROIs. New deposits are being used to pay off the promised ROIs to earlier investors. During those first stages most of participants believe that the companies are legitimate because the withdrawal requests are processed successfully (but a paying company is not necessarily legitimate).
Affiliates as expected, advertise the programs to their financial cycles and a hard recruiting game brings more people into the system.
But when a company is promising 150% ROI in a month or two, soon the problems will arise. Not only earlier investors want to get paid, but new recruited members as well. Everyone expect to get 1.5 X the money they invested. How can that be accomplished?…Simply, it can’t. Those companies need a steady flow of recruited members in order to pay off those that got in before them. As more and more people entering now the system more ROIs have to be delivered…
A mathematically proved formula leading to chaos. As it is inevitable all late participants will lose their deposits because recruitment can not last long. The funds are not enough to deliver 150% ROIs for everyone. A logical and undeniable result. A historically repeated scenario driving those companies to self destruction.
The only case where companies could deliver that kind of ROIs is where real products exist and shareholders/members share revenue based on external sales.
In this model affiliates become the “Products” being sold. They invest, promote the companies to others, click on ads daily and they do not get paid at the end. They are the only power of these pseudo companies and those who will lose money making the owners richer.
Final Words – How Can this Situation Change?
The “Trend” is a response to the high demand of people that are looking for ways to make money online without having to work. They just want to invest and recruit others like maniacs. But even if someone makes money it is on the expense of other investors who at the end will lose their deposits.
In order that situation to be changed we need to act as a whole, as a community. Unless you want to see fraudulent admins escape with people’s money. There are many bloggers, entrepreneurs and affiliates promoting these programs as legit, just to make a profit out of their recruited downline members. They probably believe in the short term of things, or they just don’t care what happens to newbies.
It is in your hand to change it. You can start today by promoting and working only for legitimate companies that provide valuable and real products (physical or digital). It is the minority but you can make a living out of it.
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That’s it, another article has finished, here on Web Market Support. I am waiting for your comments and thoughts. Till next time.
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Tasos Perte Tzortzis
Business Organisation & Administration, Marketing Consultant, Creator of the "7 Ideals" Methodology
Although doing traditional business offline since 1992, I fell in love with online marketing in late 2014 and have helped hundreds of brands sell more of their products and services. Founder of WebMarketSupport, Muvimag, Summer Dream.
Reading, arts, science, chess, coffee, tea, swimming, Audi, and family comes first.
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