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Based on analyzing the first sale, we’ve realized that PayPal and other payment processors such as Stripe do not only charge a flat percentage but also charge a hefty per-transaction fee. Seems to be something we missed while preparing the beta for launch.
Most of these organizations charge a minimum of $0.30 per transaction + about 2-3% of the total fee. This is higher for international cards.
We originally assumed that we would be able to easily cover the loss on these transaction fees for the 100% revenue share through the revenue retained through the 80% revenue share sales, but that system won’t work. As it is, on a $1.99 sale, for example, the total transaction fees are about $0.36. This leaves about $1.63 in revenue, which, even at an 80% sale, leaves Symzio with pretty much nothing to work with.
In other words: If a customer purchases something on Symzio by finding it through Google, Symzio retains only $0.04. On every other transaction, be it affiliate or self-referred contributor, Symzio loses money. $0.04 is the maximum possible revenue Symzio would retain on a $1.99 sale.
This means our original plan to market through affiliate sales as well would make Symzio lose about $0.15 per transaction. This will obviously vary depending on the number of image purchased per order, and whether the customer is international or not, but taking everything into account, we’ve concluded that the percentage must be adjusted by 10% to sustain Symzio.
So the new revenue share has to be as follows:
70% on all contributor sales
10% for all affiliate sales
90% for all contributor sales where they are also the affiliate.
This means that on a normal 70% contributor sale, Symzio will retain about $0.24 cents and the contributor will get $1.39.
On an affiliate sale contributor will get $1.39, affiliate $0.19, and Symzio $0.04.
And on a self-referred sale contributor will get $1.79 and Symzio will lose $0.16.
We were considering having different percentages depending on the number of images in the order, or based on how much it is, but that makes it really complicated. I personally don’t see any option but to do this because these numbers are more in tune with our original projections on creating an agency that can try to advertise for itself, but this can’t be sustained if it’s losing money on every single transaction.
With this system, self-referred sales for contributors on Symzio still actually save them more money than if the customer were to purchase the image directly from their site due to the $0.16 that Symzio is taking a loss on.
If you guys have any comments, let us know.
I checked my own Paypal account as I rarely look at individual transactions. The amount of the fee on a large transaction – my $35 sale seems reasonable at $1.32, but on my $0.99 sale, I only get around $0.64 as you mention. Until there is a more cost effective payment system, I think we are stuck with your logic.
I see this as all part of adjusting the pricing and policies within the beta period. That being said, PayPal transaction fees have been pretty steady for a number of years so as a baseline, I don’t see this changing. But clearly with this latest sale it seems our price point is really good for upselling, and we still make a large amount of money on these sales as compared to subscriptions with agencies, but the numbers needed to be tweaked to make room for affiliates and some growth in Symzio.
I am going to start focusing on marketing the affiliate program and was doing some analysis and realized that there would be no point because Symzio would actually lose about 16 cents a transaction with every sale, which doesn’t actually yield growth. Now, even if the profit is only a meager 4 cents, at least there is the possibility that some of the orders will be multiple images which will then allow Symzio to grow with increased sales, thereby marketing to multiply that.
In the end the point is sustainable growth and so every necessary cost must realistically be covered, otherwise we’re just fooling ourselves. But IMO this isn’t a huge deal. Just as the original pricing model needed to be tweaked, so too does the revenue share, and other things may need to be tweaked as well as we see more growth.
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