[7Figures2Commas]

> Although Hipmunk has raised $40 million in venture capital funding — $20 million of it in May from Oak Investment Partners and others — it decided not to lavish it on television advertising like competitors “because that means going head-to-head against companies spending hundreds of millions a year.”

> Mr. Goldstein would not discuss specific financial terms of the company’s deals with Yahoo and Yelp, but said they would participate in the benefits Hipmunk received — commissions, usually — when one of its users booked a flight or hotel through a travel partner.

Hipmunk's position in such a competitive market is not enviable.

These types of revenue sharing deals often look very attractive on paper because they don't require much if any capital, but they can be disastrous and far more costly in the long run. In a good outcome, you frequently end up with a handful of partners who drive most of your business, effectively own many of the customers they send you, and have a permanent claim on a substantial portion of your margin.

Put simply, these deals tend to defer the hard costs associated with customer acquisition but also drive them up.

[shostack]

In some cases the amount of leverage these sources of customers have over you can be crippling as well.

The other factor that I feel doesn't get brought up enough is the attribution piece. How much did they REALLY contribute to bringing a customer vs. all your other marketing efforts, brand awareness that has built up over time, etc.?

In the worst cases, some partners can just be parasitic and leech off bottom of the funnel traffic to maximize their return and minimize their risk. The trick is finding the right balance between all those efforts which requires data, flexibility, and trust between all parties in the relationship.