Sorry ! Ninja lawyers demanded redaction of the original post.
A summary of what was discussed follows :
Nayana Somaratna:
- I am negotiating an exclusive deal with an ad-agency to monetize my mobile apps.
- They are offering eCPM rates a magnitude higher than AdMob, iAds, etc.
- They also have arrangements to assure 100% back fill.
- The minimum duration is 6 months, following which the agreement may be extended.
- Their share is to consist of an initial 15% service fee + 50% of the remainder.
- As an example, if the deal were for $100 of ads, it would be split as follows:
- 15% of $100 to the agency = $15
- 50% of the remainder to the agency = ($100 – $15) * 0.50 = $42.50
- The remaining money goes to us = $42.50
- As an example, if the deal were for $100 of ads, it would be split as follows:
Is this a good deal ?
Alok Kejriwal:
- 15% pre money commission is not unusual
- Keep the lock in’s flexible so that you can exit when you want.
- Best, keep a couple of apps free for yourself to use.
- Review their performance in 3 months and compare
Mahesh Khambadkone:
- Looks like a great deal.
- Make sure that the back-fill agreement is water-tight
- Ensure that the exit-clause is favorable to you
Kanchan Kumar:
- There are only 2 important things worth negotiating here :
- Defining a performance parameter and review it quarterly. Have a clear exit clause for the scenario where performance is below a pre-defined level.
- Add the clause of using some other platform (like ad-mobi) for unutilised inventory.
- Time is money : go ahead as quickly as possible. Each passing day results in lost revenue.
- Agility is the key in this market and only way to learn is by “doing” it, as long as you are not stuck with a long term contract.
Abey John:
- Check what happens if the advertiser does not pay the advertising agency – will you get paid for the used inventory in such a scenario ?
- Have a clause that guarantees minimums like 40% irrespective of whatever expenses are incurred by the agency and a defined time period for payment irrespective of their collection.
- If the advertiser wants to reach your users they will come you ! It might be worthwhile putting a “Want to advertise?” link in the apps which will direct advertisers to a contact page.
- Negotiation is all about what you have and what they want and how much they are willing to live with. If there are many apps with a similar user base then you have less bargaining power.
Many thanks to Alok Kejriwal, Abey John, Mahesh Khambadkone and Kanchan Kumar for their great advice !