Who Makes Money From Online Coupon Codes? - YouTube

Everybody loves a good deal, so much so, in fact, that online deal finding has become a big business in its own right.

Humungous Japan conglomerate Rakuten spent a billion dollars to get into the cashback deal space here in the U.S.

My largest check I received was over 800 bucks and I've made over a thousand

something dollars. I'm almost at nine thousand dollars.

Racketed behemoths like Goldman Sachs and PayPal are snapping up sites that curate coupon codes, and even banks like

Capital One are getting in on the game.

And with the huge boost in online shopping during the pandemic, digital coupons surpassed paper ones for the first time ever in 2020,

When slick deals saw 40 to 60 percent increase in online sales during the height of the pandemic.

We saw, you know, new customers getting generated to new retailers.

More than 80 percent say they've actively looked harder for coupons and promotions since the pandemic began.

We want to have that confidence and peace of mind that we're not overpaying for something and that if there is a dealer discount to be

had, that we're going to find it.

So it's no surprise that the online coupon industry is a crowded one.

With nearly 2000 businesses in the daily deal site space alone, it's filled with legitimate businesses and plenty of Fly-By-Night

sites working to rise to the top of your search results without any interest in whether that promo code actually works

Because you're looking for a coupon code online.

And so you click through on whatever site you go to, whether or not that coupon code works, if you just go through and purchase, even without the

coupon code, that company is going to get credit for that sale.

But when the deals are legitimate, it can mean big money for retailers, shoppers and the deals sites from honey to slick deals, Rakuten

rewards to Brad's deals.

We asked the major players what it takes to find deals that are real, why the business model works, and precisely how saving

consumers money makes big bucks for companies in the vast world of online deal hunting.

The first coupon, a word derived from a French word, meaning to cut, was mailed to consumers in 1887.

It offered customers a free glass of Coca-Cola, then priced at five cents if they'd come try it in a nearby pharmacy in

1989, Post created the second coupon for a penny off grape nuts.

Cereal coupons became widely used during the Great Depression and the first company devoted to coupons, Nielsen Coupon Clearinghouse, was

founded in 1957.

By 1997, the U.S.

deemed September National Coupon Month, and by 2010, TLC had an entire show devoted to extreme couponing.

I run my house like it is a business, and my husband and my five kids are my employees and I think you did,

you did OK.

The overall coupon industry declined in 2020 as people stayed home, but digital coupons were still on the rise.

More than 130 years after coupons were first introduced, Digital has officially surpassed paper in more intelligence.

A firm that's been tracking coupons for 40 plus years found that even though 181 billion paper coupons were distributed in

2020 compared to just seven point five billion digital coupons, a larger percentage of redemptions came from digital coupons.

Savings was really important being a single mom, and then when I met my second husband and

we married, I realized how much he ate, so it was good to saving more money.

And Andrenette Clifton-Correa is a mother of three and the manager of a funeral home in Houston.

Her and her husband had covid last year.

So for a while I had anxiety about getting back out.

After I suffered with that,

She used to go to the mall at least once a week.

Now, she says 90 percent of her shopping is online.

I didn't realize that plant stand was over like three hundred bucks and I pay like twenty thirty.

But I mean, it was dark.

She was just that day it was a promotion.

They were running. And I got the email because I received emails from recording too on great deals that come through Daily Mail

On Amazon alone.

Online deals during Prime Day brought third party merchants more than three point five billion dollars of sales over just two days in 2020,

up nearly 60 percent from the year before.

Juniper Research estimates that digital coupon redemptions will surge to ninety one billion dollars by 2022, up from 47

billion in 2017.

Big retailers like Walgreens, CVS and Target are responding with more coupons available digitally.

CVS updated its app during the pandemic to include the coupons that are usually found on the back of its receipts.

Walgreens stopped printing its weekly deals in June last year and says it's seen an 80 percent increase in digital coupon redemptions

target, which was the first major retailers to offer scannable mobile coupons back in 2010.

Now has a loyalty program that offers one percent back on every purchase.

Target told CNBC its circle members have earned 200 million dollars toward future target purchases since the program launched in

2019. While staying loyal to one brand can have perks, the vast majority, 86 percent compare product prices

elsewhere as they shop online.

But I talk to a lot of consumers who spend hours and hours each week looking for coupon codes and trying to apply those

codes at checkout, only to find out that they don't work.

But a whole industry has popped up to do this work for you using browser plug ins and apps,

Things like our savings finder tool that searches for finds and automatically applies coupon codes at checkout so that

you don't have to go try to find them yourself or our drop list tool where if you're interested in an item as a consumer but

you're not ready to purchase it yet, you can add it to the drop list.

And Honey will actually send you an email when we see that the price has gone down for that item.

In 2020, PayPal acquired honey for four billion dollars.

Another sign it's at the mainstream is that Honey is a sponsor of the L.A.

Clippers. Although Amazon once warned users Honey's browser extension could be a security risk, Honey says it never shares shopper

data.

And we also don't ever sell any data and we don't collect data for non e-commerce sites because it's not pertinent to what we're

trying to do.

Honey primarily uses algorithms to scan for codes at its 30000 plus retail partners.

Other deal sites rely on employees to find the deals, while many allow shoppers to submit promo codes.

Retail me not, for instance, has more than a million users who help source the coupon codes and deals on its website, app and browser extension.

Slick Deals is another huge player that relies on user generated deals, which are submitted and rated by its 12 million monthly

users.

Only way a deal makes it to prominent placement on slick deals, as if the community of other shoppers have all given it thumbs up and given it

great approval. On top of that, we have our own deal editors that go in and kuai they go and

make sure that the deal works, that the coupon code works.

Slick Deals is the most visited coupon site in the U.S.

and the biggest source of outside referrals to Amazon's marketplace.

Ok, I'm looking for a six hiking shoes.

Let me set an alert for that.

And slick deals will notify the shopper either via our mobile app or email when we found a great deal on the

product that they're looking for.

In twenty eighteen, Goldman Sachs and Hearst acquired slick deals for half a billion dollars.

The fact that huge companies like Goldman and PayPal have purchased these coupon code curators begs the question, why is this business model

lucrative

When you as a consumer click on a deal that's on the broad scale site and you are taken to that retailer's

website. If you make a purchase, we will earn a small percentage of that sale.

Brad's Deals sends out a daily email of deals fully curated by its employees.

Others get money from online ads, and some deal sites are certainly riddled with them.

But the vast majority of revenue comes from commission.

We earn about two thirds of our revenue from commission.

We earn also another third of our revenue just from regular advertisements.

Commissions range from one to three percent on low margin items like electronics, up to 10 percent on categories like home and kitchen.

This makes sense for retailers because deal sites or affiliates, as they're known in the industry, drive traffic and sales.

They only have to pay us if product sells.

Our vision here is to be half a billion dollars in the next 18 months.

And to get there, we need the affiliate influencers to push our products and to push our brands.

Retailers like Proozy can appear on a deal site with or without an active partnership.

But sometimes retailers bring coupon codes or info about an upcoming sale directly to the deal sites.

They can also strike exclusive deals like a three pack of Under Armour shirts that prosy sold through a Brad's deals exclusive for

$34.99.

I think we sold maybe three to four hundred thousand dollars worth of of a deal that we just we collaborated on.

Cruzi has seen big growth since partnering with Brad's deals six years ago.

But there are some retailers that don't want to be featured on deal sites at all.

I think Burberry, which famously burned unsold merchandise to maintain brand value

Over the last 10 years, brands that had no interest in working with us whatsoever are suddenly becoming very interested in

working with us, you know, and real designers.

But again, accessible designers, not we're not looking at the thousand dollar handbags.

You're right to help connect the huge number of deal sites with the retailers that are interested.

There's an entire industry of middlemen called affiliate marketers.

One of the biggest is C.J affiliate.

It connects its 160 7000 publisher.

Clients think deal sites and influencers who get a commission with more than 4000 brands or advertisers.

We are the ones who are facilitating that marketplace.

We are the ones who are helping with the logistics, and we are the ones who are also helping, you know, process the payments

between the advertisers and publishers.

In exchange, C.J and other affiliate marketers also get a commission from each sale.

Less trustworthy sites are after that commission to.

I have Googled coupon codes before when I've been looking for something in particular, and I find that I don't

often use them because I feel that I don't trust them and I think that they are.

Sometimes phishing scams, rank in search results is key for generating clicks and commissions, but the quality of sites varies wildly.

Most people are not going to be digging around on the third or fourth page of a coupon code.

Results like that's just not something most people are going to do.

Open an incognito window if you don't want to give them credit and do your transaction that way.

You can complain to the Better Business Bureau about things you know.

The question is, is whether people do

Even for legitimate businesses, tracking sales and commissions means gathering a lot of data.

But across the board, all the major deal sites say the data is not sold or shared externally, but only used to better understand consumer

behavior.

What this allows us to do is do the same level of targeting that Facebook and Google do, you can target by shopper

behavior, you can target by affinity, you can target Bigo, you can target by demo.

So it's not anything that any individual needs to be worried about their privacy on because we're really looking at these

overall big trends that we're seeing.

Data can translate into direct value for customers when there's enough of it, Brad's deals, for example, has more than 20 years of data on

historical best prices within certain categories.

This kitchen stand mixer that's normally like three hundred and fifty dollars was down to your net cost was like one

hundred and five dollars or something.

Founder Brad Wilson was shopping at his college bookstore in the early 2000s when he realized he could find much better prices on the just

developing world of online retail.

He plastered fliers all over campus with a breakdown of the best deals he found.

Now Brad's deals posts 120 to 150 deals per day on its site or app, emailing them out to six million users each day.

One of the best KitchenAid stand mixer deals we ever saw.

It was over nine hundred thousand dollars in sales were generated from from that single post

prosy.

CEO Jeremy Siegel says the Brad's deal model makes the most sense for him as a retail partner.

Retail Minot's not is not for us.

We've identified them as a.

A little too much in the coupon space, we want to be more exclusive.

For example, I think is the 100th or one tenth biggest website in the country, huge web website.

Brad's just seems to be a little bit more of a niche affiliate for us that matches our kind of our ethos as a brand.

Caroline Campbell looks at her Brad's deals email every day.

The biggest thing that I've saved money on was my patio furniture.

That would normally be maybe a thousand dollar item that I ended up getting for I say maybe five hundred and fifty

dollars.

Campbell says Brad's is the only deal site she's willing to use

To get ads on Instagram and things like that that make you end up clicking on some of the other sites that I have found that

I typically end up subscribing to those emails because they do feel really

Spamming every single day.

Some retailers are telling you it's the biggest sale ever ends tonight, biggest sale ever.

Don't miss that. And we speak in a much more normal tone.

Some of the biggest online deal sites like Rocketdyne Rewards have found success by offering direct cash, cashback or other rewards in exchange for

loyalty.

If there is an unfortunate component of this industry, I think that over the years popped up.

But then there are several players that are very large where this is a very legitimate business model.

Rakuten Rewards has a browser extension that can ping some of its 14 million users when cashback is available on a purchase

In exchange for access to this very large audience, those retailers are paying us a commission and all of the transactions that

those consumers are making on their site.

So effectively, it's a little bit of a finder's fee.

What we do is we go and we share about half of that commission with our members

In the first quarter of 2021, Rakuten says one user got a single quarterly cashback check for one hundred and eight thousand dollars.

The model also makes sense for its 3500 retail partners.

Cashback shoppers tend to spend and shop.

I think that the stat that I've seen is one point seven acts more than the average shopper, and they place sixty two percent more orders.

Founded in 1998, Eberts was the first major cashback site.

Rakuten Rewards acquired Eberts for a billion dollars in 2014 and switched to the Rakuten name in twenty eighteen retail me not

also offers cashback.

Honey Gold is another example.

Our shoppers can earn and accumulate gold points and then convert that into cash through gift cards.

With Honey now owned by PayPal, which owns Venmo to one big change coming to the world of online coupons is automatic integration

into payment apps.

It will help you manage your daily finances with tools like budgeting and things like that, and then also shopping, discovery of of great

deals and discounts and gold loyalty programs inside the PayPal wallet.

And what's next for others, slick deals and Rakuten are investing heavily in personalization, using all that data collected from each sale.

Historically, slick deals was one size fits all.

All the greatest deals online for everyone.

But what we're seeing is that there's a tremendous opportunity for us to personalize the results.

And we're doing that both through asking users what they're interested in, but also looking at the the

products that they look at and learning and getting smarter from that.

And one of the things that our data helps us do is specifically target the right retail partners for the right

members.

Deal hunting can be a win at every level, from the consumer saving to the retailer making a sale, the affiliate marketers and the deal finding

sites, getting commission.

But the industry depends on legitimate businesses rising to the top.

There is a lot of appetite to making sure that there is health in the industry because it doesn't serve any of us.

If if this is something that, you know, is allowed to sort of proliferate out there and then ultimately doesn't drive any

results, a

Lot of survival of the fittest takes care of it.

Right. That is why consumer matters, all platforms and technology and networks like ours allow for all

removal of of bad actors.

When it is when it is, it is spotted.

Retailers can also take responsibility.

And in making sure that they are partnered with with good sites, with upstanding sites, we would welcome

regulation.

We are very much for doing things the right way and in a way that is doing the right thing for

customers. So consumers really will ultimately figure it out and make the right choice.

While reading the online coupon space of poor quality sites is the dream shoppers committed to deal finding are here to stay.

I can honestly say for the rest of my life I will be that woman that will find the best deal

ever. Couponing.

However, I need to get it.

I'm going to get it and I'm going to find it.