iPhone app revenue sharing between developer & sales/marketing guys

First, hiring you solely on the basis of a percentage of revenue is not hiring you - it's becoming a partner. If you're questioning whether a 50/50 split is fair, than 66/33 couldn't possibly be fair.

Now, in terms of your current product, find out what the rate is for marketing something similar, and work out what you want to earn per hour. So if you want to earn $50 per hour, and the cost for marketing would typically be in the area of $10,000, then that works out to 200 hours.

How much time have you already put in? If you've put in 800 hours, than 20% would be a fair amount to give him. If you've put in 100 hours, than he should be getting about 66%.

Granted, these numbers aren't exact, and they don't take into consideration the fact that it was your idea, and that you took the risk initially in developing the product (with potentially 0 sales) and he is taking an existing products with some (albeit small) sales. However, this exercise can help you determine what a fair number might be, and give you a starting point for negotiation.

I find it comical that he is asking for 50% of revenue for an app you already wrote, bu is only willing to give you 1/3 for apps that are only concepts that you will have to write.

My advice would be to learn/try to do your own marketing and promotions. If/once you get tired of that then go ahead and team up with someone. 50% (or whatever split) of some non zero amount is more than 100% of 0...

You need to call him on the inconsistency of the revenue split though. That is just offensive.

Good luck.

Let us know how it works out.

Keep in mind you are not making any money right now so 50% of more money is almost always better than 100% of nothing (or hardly nothing).

My recommendation is to put all your expectations in writing before hand. You expect him to work XX amount of hours each week marketing. You expect him to spend YY amount of dollars marketing. His plan is this...etc. Make sure they are measurable expectations. Then have it in the contract what happens if he doesnt meet one or more of these expectations.

I wouldnt even begin to discuss future projects until you see how this one goes.

Best of luck!

50% of the app you have already built sounds too much.

Does the acquaintance have a demonstrable track record of his marketing and the sales performance of apps under his brand?

He offer you any kind of contract? If he has dealt with other developers he may have a standard contract you could use.

Depending on how you feel about your current progress as a solo developer you might want to look into working with him for one project for the experience. This could give you some insight into the marketing side of things, perhaps even increase your exposure.

I am in a similar situation where I want to build a set of apps for a publisher so they have mobile apps that leverage their existing services which are limited to a conventional web site. I want to work with them and suggested we could do a revenue share with the ads that are coming from the mobile apps that I build. I am not sure what rate I should suggest so I am looking for what others have done.

One approach I may suggest is taking 75% of the ad revenue up to the point the app reaches 50% of my billable time. So if I spend 40 hours on it at my rate of $100/hr I would charge them outright $4000 to build the app. With revenue sharing I would set the 75% rate to 25% after it reaches $2000. And then I would set the time period for this revenue share to 2 years since it may take a year to really get a lot of people using the app and to add more features to make the app more compelling to use. I may make most of my ROI in the 2nd year. At that point we can negotiate a continued relationship where I continue to make updates to the app. If they want a completely rebuilt app and I need to drop many hours of work into it again I would go back to 75% until I reach my 50% point.

Is this fair? I cannot determine that until I see what others have done with revenue sharing. I do know that I am taking a risk by suggesting the revenue sharing model. I may not make it to the 50% point in 2 years and they may not do a good job of promoting the app through their publication. There may not be enough of a population locally to reach a significant number of users to even justify revenue sharing. I think I will still try it for this one app. I just have to determine which numbers are fair.

My short answer would be that you need to set up the revenue share model so that the sales side has an incentive to do more. If you stay at a constant percentage through the life of the partnership you are not setting up an incentive for the sales effort to put in the work as much as if you were to tie the percentage to a "per unit" value.

If this month X units are sold the percentage is 25%. If it is Y it is 75%. What is the X and Y?

Another approach might be to start out with a schedule where in the first 6 months the percentage is triggered based on the previous months performance. If sales have gone up then the higher percentage is active for the next month and so on. After 6 months I would go back to the number of units because you cannot expect continued growth forever. Once you know what is reasonable to sell in a month you can set the X and Y appropriately. Perhaps at 6 months you set the X and Y values at 80% of the averages sales of the previous 3 months. At that point the sales efforts would have kicked in a bit so that you can get an impression of what sort of sales you can expect going forward. If the sales and marketing effort slips the get a lower percentage in the following month. They will want to keep their efforts going.

Meanwhile you will need to be fixing bugs and tweaking the app as you go to address user issues. That should also be a part of the agreement with major new features outlined for the next major release which would fall under another agreement. You should also lock in ownership of these apps so that this sales person cannot take it and start selling it or future versions without you.

I think I've had a totally different experience. As I've created several apps and my dev outsourcing has been less than 10% of my budget. I've found with most my apps I can get them done very satisfactory online at taskcity and often come in under budget. With the number of apps out there, there's no doubt tons of great ideas that go unnoticed because there isn't someone talented behind the marketing and sales of them. I think going unnoticed is worse than creating a bad app. All this beijing said, I think you still need to look at the total time/cost of dev vs marketing.

this discussion is very useful. I'm almost in a same condition to on revenue split basis for development team as a marketer, manage blog posts, help decide on designs and sales strategies. 25/75 Seems more appropriate specially when you own application.

In my case I'm going to work on 15/85 at start-up (not involved in development).

Sounds like there are three on this thread (idea guy, designer & marketer). Why dint you three team up?

I reckon I've got a great idea & just trying to look for best way to get it built & marketed.

I think your idea and dev experience is worth a LOT. More than 50%. Definitely have an operating agreement and have YOUR lawyer look it over. Your lawyer should be familiar with software law and startups, if not find one that has experience. Make sure to cover how it all ends. For instance, if the marketer doesn't show workable hours within 6 months etc, his rev gets dropped. How will you measure bug fix/update time and mktg time?

Be creative. You could do a 50/50 split for the first year and then it switches to 70/30. This will be an incentive for mktg to produce results. If sales/downloads are over a certain amount, it stays at 50/50, otherwise it changes.

Your ideas are everything, and ONLY if they are acted upon. Ideas are just multipliers of EXECUTION. You can't market anything without those two things first. Your idea is the Gold, marketing is the sign outside the mine. Read this fantastic article by Derek Sivers. http://sivers.org/multiply

50% is very fair because the money you will be receiving is 100% money that you are not currently getting. As long as it is not exclusive. What if you had 10 guys like this guy marketing your product for free? You would be making a lot of money. As far as the other new apps, 50/50 should be good after he pays you to develop it.