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When comedian Louis C.K. decided to produce his own event and sell video of it to consumers directly online for $5, little did he know that his experiment would spark a trend. But then again, little did he know that his experiment would produce hundreds of thousands of dollars in profit in a matter of days.

Louis C.K.'s ability to profit significantly while retaining creative control over his event, ownership of his content and the relationships with his fans is, not surprisingly, of interest to other established comedians.

One of them, Jim Gaffigan, was so inspired by the "the brilliant Louis C.K." that he plans to copy his colleague's blueprint by selling an upcoming special, Jim Gaffigan: Mr. Universe, for $5 through his website.

That got a couple of entrepreneurs thinking: "If Louis C.K. had to pay $35,000 to build his website, why don't we offer to build Jim Gaffigan's for free in exchange for a cut of the revenue?" Those entrepreneurs, Gareth Macleod, a former Facebook engineer, and Ross Robinson, decided it was worth a shot and launched a site, dearjimgaffigan.com.

That website contains a letter to Jim, which reads in part:

Hi Jim,

We love that you're pulling a Louis C.K. We'd like to make the website for Mr. Universe for free.

We’re a start-up taking the Louis C.K. model mainstream. We handle the website, payment, movie player, and some sexy social media integrations, for free.

Louis paid $35k for the “Live at the Beacon Theatre” website.

Jim, you can pay $0*.

The asterisk: "You could easily bankrupt us in bandwidth fees when millions of people stream your show. We'll have to take about 5% of each transaction just to keep the site running!"

While Macleod and Robinson deserve some credit for having the chutzpa to publicly reach out to Gaffigan, not surprisingly their pitch to Gaffigan has found more criticism than support.

The most obvious reason for criticism is a good one: the duo's "free" offer doesn't make much financial sense for Gaffigan, an established, popular comedian. While we don't know if his experiment will be as successful as Louis C.K.'s, it's not unreasonable to assume that Gaffigan will do well. As such, it's hard to see the wisdom in giving a couple of entrepreneurs (or would-be opportunists depending on your perspective) a piece of the action to avoid paying someone up-front to develop a website. Hence the criticism of Macleod and Robinson's efforts.

The lesson here for all entrepreneurs: sometimes "free" sucks. In this case, it's just a ploy to strike a revenue sharing deal. But that doesn't make sense for the target customer; it only makes sense for the entrepreneurs who know that they're taking on little to no risk in providing services up-front at their cost.

Obviously, free doesn't always suck. But savvy entrepreneurs shouldn't be unrealistic or greedy: when taking on cost on the front front end in exchange for a benefit on the back end, the front end costs realistically need to be high, if not entirely unpalpable, for the individual giving up the rewards on the back end. If they're not, "free" is not only a tough sale, it's downright unattractive.

Patricio Robles

Published 24 February, 2012 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

2341 more posts from this author

Comments (9)

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Christopher Rose

Christopher Rose, PPC Marketing Director at Rose Digital Marketing

Personally, I think it is an attractive offer. The site would only cost Jim Gaffigan $35k on sales of $700,000.

Mind you, I also think Louis C. K. was massively ripped off if he got charged $35,000 for a website...

about 4 years ago

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Hopeful cynic

I don't think it's such a dumb offer. Jim could well end up paying close to that 5% in transaction fees whichever route he takes. The only question is whether they can deliver on their promise.

It's also great publicity for their new start up which presumably will offer the same deal for lesser known comedians.

about 4 years ago

Christopher Rose

Christopher Rose, PPC Marketing Director at Rose Digital Marketing

I posted my own response to this yesterday bit for some reason the comment has gone missing. I hope it was not because I was appalled by the massive fee that Louis C. K. paid for his web site.

I also said it was not a bad offer and that Gaffigan would have to make sales of $700,000 in order for 5% to cost him $35k and he would have to pay the payment processor fees on top of that.

about 4 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Christopher,

Your first comment got caught in our spam filter.

In response to your comments:

1. I think it's a bit strong to say Louis C.K. was "massively ripped off" if he paid $35,000 for his website. We have no idea what that figure includes. At the end of the day, if he feels he got a good value, that's all that matters.

2. The source of the skepticism over the offer discussed here is not absolute dollar amounts. It's about asking for a piece of someone's business when there's no real justification for it. The complexity and downsides to revenue sharing deals are often underestimated and in cases where a service is largely commoditized and the buyer has manageable risk, a revenue sharing deal is frankly foolish for a buyer to entertain.

about 4 years ago

Christopher Rose

Christopher Rose, PPC Marketing Director at Rose Digital Marketing

I understand your argument, Patricio, but disagree on both points.

I don't care how complex a website is, there is no justification for a charge on that scale. I am not even all that great a web designer but know that I could easily build an effective e-commerce site for far less than that.

As to your second point, I think you have it back to front. Why should anybody have to commit to large scale expenditure when they can easily avoid that expense by forming an alliance with others who would have a vested interest in making the project a success rather than merely delivering on an expensive contract?

Frankly, if I was in that line of work, I'd have done it for 3%!

about 4 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Christopher,

1. One person's large expenditure is another person's small expenditure. $35,000 for a website might be a large expenditure for some, and a small expenditure for others.

2. Revenue sharing is often pence wise, pound foolish for obvious reasons. This is especially true when it comes to services that are largely commoditized (like web design and development).

3. The costs of revenue sharing relationships are not just measured in percentages. From control over business decisions to auditing rights to termination terms, there are plenty of pitfalls that often make revenue sharing deals nightmarish once the honeymoon is over.

4. Unlike revenue sharing agreements, fee for service arrangements are typically very clean. The scope of work, duration of the relationship and compensation are known, so there is little question about what's being exchanged. The value of this certainty should not be underestimated.

about 4 years ago

Christopher Rose

Christopher Rose, PPC Marketing Director at Rose Digital Marketing

Patricio,

1. Whilst that may be true, the only reason I can think of for charging that kind of sum for a fairly simple site is gouging.

2. I don't see the reasons you reference, so they are clearly not obvious. If these services are commoditised, surely price is a key factor?

3. Any relationship is fraught with potential pitfalls but that is no reason not to enter into them.

4. We live in an ambiguous world and most people are used to dealing with it...

Personally, having experience of both "dirty" ongoing relationships and "clean" pay and end type agreements, in the real world it is often wiser to work with people who have an ongoing involvement for reasons that ought ot be obvious.

about 4 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Christopher,

To answer your question: revenue sharing generally makes less sense with commoditized services (like general web design and development) because those services are not scarce and providers typically have a difficult time differentiating themselves so significantly that they can charge exorbitant rates. Thus, finding a competent provider able to deliver the desired services at a fixed cost without a sizable investment is quite achievable. You may believe that $35,000 for a website is gouging, but five figure sums for relatively simple websites are *not* outside the norm, so giving up a theoretically *unlimited* percentage of your top line revenue in *perpetuity* to "save" $35,000 on the front end makes little sense for someone who has $35,000 to spend, particularly when you either a) don't care about the risk of losing $35,000 and/or b) have confidence you're going to at a minimum break even.

Finally, I would ask two questions: how many revenue sharing agreements do you have in which you are earning an ongoing piece of multi-six figure or seven-figure revenue streams? And how many people do you know who have similar revenue sharing agreements with celebrities? Obviously, I don't expect you to answer this publicly; the answer is obvious. But his rhetorical question highlights my point: there's a reason people like Louis C.K. aren't doing revenue sharing deals for website build-outs to "save" what is to them a relatively small amount of money.

about 4 years ago

Christopher Rose

Christopher Rose, PPC Marketing Director at Rose Digital Marketing

Hi Patricio,

Building websites is not even close to my primary work focus, so I don't have any revenue sharing agreements in place but if I could tap into a stream of clients that were willing to pay such fees it would become much closer.

I would always believe they were overpaying though; the last one I built, which was last Autumn, was a complete e-commerce site that cost, excluding my time, exactly $90.

If you do know anybody that wants to have a site built and pay a five figure sum for the privilege, please feel free to recommend me!

about 4 years ago

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