JV Deal? Joint Venture Marketing? Confused by the jargon? Greg Akselrud, Chair of the Internet, New Media & Entertainment Practice Group at Stubbs Alderton & Markiles, LLP makes it easy to understand in this SocialTech.com post:
Time – While co-marketing arrangements can be long-term commitments, they are more often structured as shorter term agreements (1-3 years) – so that the parties can facilitate key initiatives but also have an exit strategy if things are not working out. Joint ventures, on the other hand, are by their very nature long-term arrangements. They are an extended partnership between or among parties.
Commitment – Co-marketing arrangements require both parties to commit to marketing and distribution initiatives (both of which require financial commitments). Joint ventures, however, often take a further step in that they require one or more of the joint venture partners to commit real capital to form and operate the business, obtain office space for operations, and hire employees (among other things).
Management – Co-marketing arrangements have both parties contributing time and resources, but it is typically through their respective company’s efforts. A joint venture often appoints management from one or all of the joint venturers, or independent management in many cases. Sometimes the parties appoint a board comprising of all joint venturers, while only one party manages the enterprise. In all events, through such a combined management structure, among other factors, the joint venture takes on a life of its own.
Building Value – Co-marketing arrangements go far in building individual value for both parties. With a joint venture, the parties can actually build value, equity value or otherwise, in a third party – the joint venture.
Joint venture marketing is just another name for co-marketing. Many writers (especially in the Internet Marketing niche) commonly shorten “joint venture marketing” to JV or JV deals.
Many small-business owners don’t like joint ventures. They don’t like the idea of splitting revenues. They like selling their own products because they get to keep 100 percent of the revenues. This sort of thinking simply misses the mark. When a joint venture is executed properly, it doesn’t subtract from a business, it adds to it. There are many ways to do joint ventures. But for a growing small business, the most lucrative type of joint venture usually involves at least two of three key elements: a product, a promotion, and a market.
Joint venture marketing relationships can be extremely valuable. Every ambitious entrepreneur and marketing director should be open to them. Making them work, however, does take time and consume resources. And because you don’t have unlimited time and resources, it makes sense to be strategic in selecting your joint venture partners.
• Look for strong partners – businesses that have significant skills and/or resources that you lack.
• Make sure that your contribution to the deal is equal to your partner’s. An unbalanced partnership is not good for either party.
• Avoid partners you don’t trust.
• If possible, limit the scope of the venture in the beginning and extend it as trust increases.
• Make agreements simple, but put them in writing.
• To avoid costly misunderstandings after the venture has begun, identify the value of each partner’s contributions at the outset. These should include skills, intellectual resources, marketing resources, capital, and so on.
• In determining the value of those contributions, remember that fairness is not an exact number, but a range. Try to be flexible – and favor partners who demonstrate the same flexibility.
• Establish clear protocols at the beginning for amending or unwinding the relationship if it fails to meet expectations.
• Goodwill is essential for success. Goodwill means that you want your partner to benefit from the relationship as much as you do.