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Being in the last stages of completing the development of a video based social network, my partners and I have interviewed a few internet marketing specialists for promoting us. After receiving several price offers, we eventually decided to offer a low equity of the business to the contractor for a long term job.

However, we are still concerned about sharing out business profits "forever", without guranteeing somehow that that person will provide significant benefit to us (we thought about conditioning the equity share on something). I know that we can use various statistics tools to count the leads of users to our site, but I'm not sure of which percentage of users should I expect to have from internet marketing? Is there another effective way to measure the effectiveness of online marketing?

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I'd suggest you (meaning together with the marketeer) define a set of Key Performance Indicators (e.g. sales leads, conversion ratio, etc) and use this as the basis for a commission plan for the marketeer.

Once the ball gets rolling, have frequent site performance reviews, adding or tweaking the KPI's, thereby installing a cycle of continuous optimization. If your marketeer is any good, he'll find plenty of ways to improve on the online performance.

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Sounds like a good plan. I will talk to him about it, thanks – user11829 Jul 8 '11 at 15:13
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I typically arrange % profit share with my clients based on Conversion rates. The conversion rate that we agree on will vary from time to time, depending on site metrics that needs improving.

Let's say for the next x number of site visits, the goal is to get traffic to subscribe to the newsletter. We set a target for that particular metric, then agree on the % profit share and when possible, a bonus when target is exceeded beyond expectation.

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Equity is precious and should be conserved whenever possible. Once granted in any way, it's gone forever. I'd suggest that either (i) you pay this vendor cash if you can at all afford it; or (ii) structure a cash-based incentive program based on the result she delivers (which may be a multiple of the base fee.)

I recently had this choice (pay a vendor in equity for ongoing work or in cash) and I choose cash. It was painful. It was much cheaper than equity.

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