Profit sharing partnerships – A new trend to meet advertising demand and supply

You complete me!

There are two ways of looking at an alien company in the market – a competitor or a complementor. While the former is a direct challenge that is eventually to be met (often leading to your product being valued either more or less, in the market); the latter if used correctly and as the name suggests, is capable of adding great value to your services or products, thus creating an even greater appreciation for what you sell.

A long time ago, well established mobile network companies whose main mode of operation was through capital-intensive setups, realised it was difficult to break-even when entering smaller markets to sell their services. These so called ‘test’ markets were filled with fractional players each having a sizeable customer base but no real infrastructural backup. And for a bigger player to enter, the costs involved in setting up cell towers and rolling out cumbersome marketing plans, were often dissuasive.

Figuring a way around this, in 1999 Virgin Mobile created the first successful virtual mobile network operator. The popular UK cellular giant had being eyeing American markets for a while, when they finally partnered with a local US based telecom provider, on a revenue sharing basis, to create Virgin Mobile USA. The new venture sold different products and even charged its clients differently. In one inexpensive and innovative move, Virgin had managed to establish its brand in America and gain a whole new customer base by simply sharing its infrastructural advantage, for a fee. Years later, and an example more close to home – Tata and DoCoMo.

Recently, two similar partnerships, and what’s probably going to be the beginning of a lucrative new trend amongst advertising and media agencies around the world, are the ‘virtual’ tie-ups between UK’s creative hot shop – Beattie McGuinness Bungay (BMB) and  Omnicom’s network agency – Goodstuff; and our very own Rediffusion Communications with global media network, MPG India. The concept of a revenue sharing model between these big-time media houses and smaller advertisers is an advantageous way to make use of one’s already-established (and rather expensive) media network, while tapping into some unique creative talent.

Since the model allows for retaining individual customer bases and separate billing, this is an opportunity for advertising agencies to build their own media brands & grow their media business. That is to say, all the while improving levels of customer service. And, for a media agency, the tie-up is an opportunity to add some B2B partnerships to their existing B2C model; without any additional investments.

The trend is fast becoming a popular one, giving businesses to opportunity to venture forth with minimum risk. And, in a post-recession period like this, it’s a safer bet for both!

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