First-Year vs Lifetime Commissions

First-year commissions pay a partner on a referred merchant's revenue for a set window (often 12 months), then stop. Lifetime commissions pay for as long as the merchant keeps paying you. The choice comes down to one thing: how long your merchants stay. For a sticky app with multi-year retention, lifetime revenue share can quietly become your single largest cost line; for an app with high churn, it barely differs from first-year and is a stronger recruiting hook.

What each actually costs you

Model it before you commit. Take a typical referred merchant's monthly revenue, your gross margin, and your average retention in months. First-year caps the partner's cut at twelve months of that revenue no matter how long the merchant stays. Lifetime keeps paying the partner every month the merchant does — so on your best, longest-retained merchants, the partner earns the most exactly where your own lifetime value is highest.

When first-year (or fixed-months) makes sense

• •Your merchants retain for years — lifetime would compound into an uncomfortable share of mature revenue.
• •Your margins are thin and you need the cost to be bounded and predictable.
• •You want a clean number for forecasting: 'a referral costs us up to X over its first year.'
• •You're paying agencies who are motivated by the upfront win as much as the long tail.

When lifetime makes sense

• •You're early and recruiting is hard — lifetime is the most attractive offer you can make.
• •Your merchants churn relatively fast, so 'lifetime' and 'first year' are nearly the same in practice.
• •You want partners emotionally invested in bringing merchants who stay, not just merchants who install.
• •You have the margin to sustain it on your best cohorts without resentment later.

The middle ground most founders land on

A fixed window — commonly 12 or 24 months — captures most of lifetime's recruiting appeal while bounding your exposure. It reads as generous to a partner ('two years of revenue share') and it self-corrects: if the merchant churns early, you paid less; if they stay, your cost stops at the window while your revenue continues. Decide the window from your actual retention curve, not a round number that sounds nice.

Changing the terms later

You can tighten terms for new partners at any time, but never silently cut existing partners — that's the fastest way to lose the ones who trust you. Grandfather current partners on their original terms and apply the new window going forward. Announce it plainly. A partner who keeps their lifetime deal while new partners get 24 months will forgive you; a partner who discovers a quiet pay cut will tell every other partner in the ecosystem.