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$500 million revenues - is that their commission or is it the total amount they intend to bring in (including commission and sales) - there's a huge difference
by unohoo 16y ago
$500 million revenues - is that their commission or is it the total amount they intend to bring in (including commission and sales) - there's a huge difference between the two. Assuming $500 mill is their total sales and their commission is 50%, this brings their 'actual' revenues to $250 mill - not a tiny amount, but not nearly $500 mill as well.
- jonknee 16y agoAFAIK that's not how revenue is typically calculated. Google for example counts all the money it gets from AdWords campaigns even if the clicks came out of AdSense, which means they didn't keep it all. In Living Social's case with a 50% split the revenue would be $500m and the cost of revenue would be $250m. Gross profit would then be $250m, from which operating expenses would be subtracted. Further subtract taxes and then you're left with net income.
- portman 16y agoYou're using "sales", "commission", and "revenue" imprecisely/incorrectly. The money they collect from customers is "revenue". A portion of those revenues are paid to the local merchant. That is the "Cost of Goods Sold". The revenue minus the COGS is the "Gross Profit". So, in your example, then they would indeed have $500M in revenue, and $250M in gross profits.