Does AppSumo Really Take 70% of Revenue? (And Other Misconceptions)

From time to time, it comes to our attention a certain lore has developed around our brand. The good news is that 99% of it is pure fun.

• Noah Kagan’s taco fixation
• Our copy’s addiction to FOMO
• The way everyone loses their mind when Black Friday Deals drop

But certain myths have built up that aren’t totally accurate. Truth be told, we’ve often failed to clarify misconceptions as they come up—and that’s on us.

If you’re reading this, our hope is that we can use this space to address some of these myths and give you more information about how we roll here at AppSumo.

So without further ado, let’s set the record straight…

Myth #1: Does AppSumo really take 70% revenue share?

Our business model is simple: We partner with some of the best SaaS brands in the world to give Sumo-lings (our customers) deals on the tools and resources they need to grow their businesses. We’re the marketplace, and our partners bring tools to promote to our community.

Misconception: AppSumo’s revenue share is 30/70 with partners.

Truth: We actually have two revenue share models:

Partner Revenue Share

We allocate a lot of money to get deals in front of potential buyers. Marketing is a huge ongoing expense that is required to make the magic happen. So our real revenue share model splits our revenue 50/50 with our partners., i.e., we each take home 30%. Here’s the breakdown:

• 40% of revenue is immediately invested into marketing, advertising, affiliates, and payment processing fees (We spend $100,000+ in payment processing fees alone each month!)
• Our default revenue share model is to split the remaining 60% with our partner

130% Partner Commissions

But as if that weren’t enough, you may not be aware that every partner receives 130% commission for every new buyer they bring in. This way, partners can actually make more money on our platform than if they did a lifetime deal (LTD) on their own.

Here’s Olman (“Olo”) Quesada, our Head of Business Development:

Olo: Some of our best partners have taken advantage of their exclusive partner affiliate link to make way more than 30%. Past partners have sent their link to cold email lists or used it to re-engage customers who churned. We firmly believe partners should be compensated adequately for new buyer acquisition, and this is our way of doing it.

Let’s run the numbers. Say a partner launches a $69 LTD on AppSumo. If they share their link with certain cold segments of their list, getting 50 new buyers to purchase their deal, here’s their extra revenue:

Marketing Budget

Here’s a sampling of where that 40% marketing spend goes to promote partner deals:

Ad spend

We allocate upward of $5M a year toward ad spend, mainly Facebook and Google ads. We’re continually optimizing our ad spend to get the best results we possibly can.

Content

We have a kickass content team that touches every product that comes through our store—deal copy team, video team, webinar team, and email copywriting team. We spend over 7 figures here annually.

Affiliate program

Then there’s the AppSumo Affiliate Program: We have over 4,000 affiliates in our network who get 100% commission on each new buyer they bring in, up to $50. We pay 5% on all affiliate purchases made by returning customers.

But we eat the cost of other marketing expenses, including:

Referral program

As of 2020, we have an altruistic referral model (Give $10, Get $10) using a tool called Friendbuy. 10% of all purchases made on AppSumo are made with free credits given to new and existing Sumo-lings through this refer-a-friend program.

AppSumo Plus

The bulk of all purchases made on AppSumo come from our AppSumo Plus Membership that offers members 10% off every tool they buy.

Myth #2: AppSumo only promotes products straight out of beta

Yes, it’s true we find many diamonds in the rough who use AppSumo to launch their product to the world. For example, Lemlist launched on AppSumo out of beta, scaling to $1M ARR in less than two years. In these cases, Sumo-lings are like early adopters who are kickstarting SaaS products—microinvestors who care more about product than profit.

Zapier famously used AppSumo to launch out of beta back in 2012:

But as we’ve grown, perhaps we haven’t emphasized this evolution enough. Today, it’s increasingly common for established SaaS products to launch promotions on our marketplace. Whether it’s launching into the North American market from abroad, promoting a major rebrand or product overhaul, or simply avoiding spending hundreds of thousands of dollars on a major Facebook ads campaign, SaaS companies of all stripes partner with us to promote their products.

Here’s a few of our recent partners from this year alone:

• Malwarebytes – Est. 2008, 247K+ product installations/day
• WishList Member – Est. 2008, over 100K users
• Crello – Est. 2017, over 2M users
• Depositphotos – Est. 2009, clients in 192 countries
• BIGVU – 2016, 1.5m users, 30K subscribers
• PromoRepublic – Est. 2012, raised $2.2 million seed round in 2019

When you launch on AppSumo, you’re joining a community that includes names like Twilio, ClassPass, Shopify, Zendesk, Intercom, Bill.com, Optimizely, UserTesting, Buffer, Freshbooks, WP Engine, Audible, Evernote, and many more.

While we do launch beta products, we’ve evolved to give our community of over 1M entrepreneurs, agency owners, and freelancers a wide breadth of deals — from all types of partners.

The diversity of our marketplace is definitely something we’re leaning into.

Myth #3: AppSumo partners fail

According to Lighter Capital, 92% of SaaS startups fail within 3 years—even with a 20% compound annual growth rate (CAGR). Despite that alarming statistic, our team has still managed to partner with a very high percentage of winners over the years, and has brought our community millions of dollars in savings along the way.

Olo: We do our best to partner with tools that are in it for the long-run. But no selection process is ever going to be 100% foolproof — just ask the folks at SoftBank.

 

But as we’ve run the numbers, we’ve found our partners to follow the opposite trend: Over 92% of products we launch are live after 3 years. We actually have a really high percentage of picks — one reason why Sequoia Capital has started to pay attention to our partner list.

 

Due to our rigorous Business Development and Beta-ling vetting process, an AppSumo launch is a signal to VCs that you’re worth a double take. A successful launch can provide a valuable proof of product/market fit, a key validation VCs obsess over. Former partners like HeySummit, Grammarly, Headspace, UserTesting, 99designs, Bonsai, Help Scout, and many more prove this.

Myth #4: Reviews are fake (or too good to be true)

From our perspective, reviews are important but moderation is low priority. Sumo-lings write reviews and they get approved. It’s an important part of our ecosystem, but we don’t have control over how many tacos Sumo-lings give a certain product.

The only reason reviews get taken down is if they contain profanity, a support issue that’s been resolved, or it’s just a total shitpost — rules we share with every Sumo-ling before they leave a review.

We’ve heard complaints about the number of reviews written by Sumo-lings who have only bought one deal or who “Joined today.” But for context, 4-5K new Sumo-lings join the community every month. We love it when they leave reviews. It’s an important part of being a part of this community.

We intentionally added visibility into the number of purchases a reviewer has made to increase transparency, so Sumo-lings can weigh each review however they see fit. We want each buyer to be empowered, knowing when a given reviewer bought their deal, joined AppSumo, and how many deals they’ve bought. We invite everyone to assess the credibility of each review—and ultimately judge for themselves.

Myth #5: AppSumo partners can’t grow sustainably

In the past 10 years, we’ve done over 1,000 unique launches with SaaS partners. Fewer than 20 of these companies have gone under or completely failed. Some have been acquired, but not all acquisitions result in a lack of Sumo-ling support for the AppSumo deal.

The AppSumo community has essentially been micro investors for the past 10 years. Our partners have raised over $17 billion in funding, making waves across the technology world. Here’s a small sampling of recent partners:

• Restream: Raised $50M Series A a year and a half after their AppSumo launch
• Frase: Had the biggest launch in AppSumo history, their website traffic is up 500% above pre-launch levels two months after their deal and weekly active users are up from 840 to 13,579 (an 1800% increase!)
• Process Street: Raised $12M Series A in the year following AppSumo launch
• Respond.io (formerly Rocketbots): Co-Founder Gerardo Salandra was on the Forbes 30 Under 30 list for Enterprise Technology in Asia in 2020
• Krisp: Raised a $5M Series A one year after their AppSumo launch
• CloudApp: Raise a $4.3M Seed Round a year after their AppSumo launch

Olo: We like to say that AppSumo is like training at high altitude: On launch day, you get to see what it looks like to onboard hundreds of customers in real time. This allows you to stress-test your product—and your team.

 

The customer base you get from an AppSumo launch is the base you use to grow. Sumo-lings make phenomenal affiliates. If they love your product, there’s no way you can keep them from talking about it a lot, publicly, all over the internet. We encourage our partners to capitalize on the noise and energy of a launch. If your product is solid and you have a dedicated team to support your users, you will thrive. But on the flip side, AppSumo isn’t going to save you if you don’t have those elements in place.

 

The truth is, the type of company that has a great launch would have been fine without us. We just help our partners reach that next level of success faster and stronger. But what we’re looking for is companies with a healthy run rate. We make sure partners have at least a year’s worth of runway to launch a deal with us.

If you’re curious about our other requirements, check out How to Launch a Product on AppSumo.

Don’t take it from us

But enough from us. If you’d like to learn the inside scoop from our partners, here are several others perspectives to check out:

• From 169 Customers to 8,266 in 28 Days: How Frase Built the Biggest AppSumo Launch Ever
• The PromoRepublic experience: how a startup can get supersonic acceleration in the American market through partnership with AppSumo
• How We Made $250,000 In One Week: A Guide For Successful Appsumo Promotion [Update]
• $93,884 & 3,500 customers in 3 weeks: Our AppSumo experience
• Why You Want To Be Featured On AppSumo (Even if It’s Risky)
• Are You Launching a Product? See How We Made $450k in the First Two Months