Ebates Pioneered Cash Back for Online Shopping and Steadily Grew a Massive Following by Focusing on Consumer Satisfaction
Posted: 4.21.17 Online Savings

Ebates Pioneered Cash Back for Online Shopping and Steadily Grew a Massive Following by Focusing on Consumer Satisfaction

By: Jon McDonald

The Crunch: Born at the end of the dot-com boom, Ebates didn’t have long to establish its value proposition before the internet bubble burst. Luckily, the company’s idea of delivering cash back to consumers for shopping online was an incredibly popular one, helping Ebates thrive during a challenging time for e-commerce. To date, Ebates has given more than $325 million back to customers through its online shopping portal and has developed tools, like a browser plug-in, to make shopping even easier. And Ebates is growing to provide more ways to earn cash back, including through in-store purchases and a rewards credit card. By focusing on giving back to consumers, the company continues its rise as a rebate powerhouse.

Online businesses were booming in the late ’90s, and everyone seemed to be getting in on the action. Silicon Valley was a hotbed of innovation during this digital heyday and incubated its share of successful big ideas during the dot-com boom. But for every success, there were 10 failures, and as the internet bubble began to deflate in 1998, a pair of unlikely entrepreneurs decided to start an online business.

Alessandro “Sandro” Isolani and Paul Wasserman were deputy district attorneys working for San Mateo County, just up the road from Silicon Valley, and wanted to bring their ingenuity and love for computers full circle. Paul told the San Francisco Business Times that while brainstorming an idea for the new business, the pair’s mantra was simple: “It had to be something that our mothers would understand.”

Their idea was Ebates, an online shopping site where consumers could earn cash rebates on their purchases from partnered retailers. The idea was so popular with consumers that Ebates was able to weather the burst of the internet bubble and thrive in the years that followed.

Ebates logo

The site began with close to 40 online retail partners and was immediately popular with consumers, receiving over 100,000 hits a day by the end of its first week. In 2000, Ebates boasted two million members and 300 partners, which caught the eye of venture capitalists who wanted to fund its growth.

By 2001, Ebates had paid out $1 million in rebates and had a large following that would foster its steady growth over the next decade. Today, Ebates is a titan in the online shopping industry, partnering with more than 2,000 retailers and maintaining the same commitment to consumer savings that it had in 1999.

But Ebates is also branching out, providing shoppers with even more ways to earn cash back while shopping. Through its In-Store Cash Back program, credit card, and browser plug-in, the company has a clear path for growth ahead.

Coupons and Deals Generate Real Revenue for Users

Much of Ebates’ popularity is due to the simplicity and effectiveness of its value proposition. Customers shop at stores and get a percentage of their purchase price as cash back, which Ebates stores in a user’s account and pays out every three months.

Payments are made automatically, so there is no need for a shopper to request money, and come in the form of a check or Paypal deposit. Ebates covers postage fees to mail a check and pays sender’s fees on Paypal. And for charity-minded individuals, Ebates can donate a user’s balance directly to the organization of his or her choice.

Consumers can take advantage of coupons and deals on the site to get a discount on the front end and still be rewarded with cash back later. It costs the shopper nothing, as Ebates is paid a small commission for referring customers to retailers.

Screenshot of Ebates homepage

The Ebates website makes it easy to browse or search cash back offers from more than 2,000 stores.

To expand the application of its website on desktops, Ebates even launched a dedicated browser plug-in called the Cash Back Button. After it’s installed, a user can peruse the internet as he or she normally would, and if they land on an Ebates partner site, a button will appear with the cash back percentage that is offered at the store or for the purchase of a certain product. With a click, the shopper can order the item through the Ebates portal, giving consumers a simple, unintrusive way to maximize their shopping.

And Ebates continues to grow the ways in which consumers can earn that cash back, bringing its online business model into shoppers’ everyday lives through brick-and-mortar cash back options and a credit card, both of which boost the amount of money a user can earn.

Expanding Cash Back Benefits to Brick-and-Mortar Shopping

The In-Store Cash Back program brings all of the benefits of shopping online with Ebates into physical store locations while maintaining the same ease of use. First, users link a credit card to their account and then browse cash back offers as they normally would.

When shoppers find the right cash back deal, it can be linked to a credit card on their account, making sure Ebates can verify the purchase when shoppers use that card for the transaction. The cash back goes directly into the user account without any hassle of saving receipts or proving an item was purchased.

And the Ebates mobile app grants access to all of the website’s power on the go, which allows a shopper to select a deal and link it to a credit card while in the store. Ebates has also made the natural next step into the credit card space to give consumers the chance to make cash back even more lucrative.

Credit Card a Natural Extension of Ebates’ Reward Philosophy

With the Ebates Cash Back Visa credit card, shoppers can take advantage of added incentives on top of what they already earn. Cardholders earn an extra 3% cash back on offers from Ebates purchased with the card.

Screenshot of Ebates credit card cash back bonuses

With an Ebates credit card, cash back percentages get a boost when consumers purchase products through the site.

Shoppers can also earn 1% cash back on all other non-Ebates purchases. And if the card is linked to a shopper’s Ebates account, he or she can take advantage of Ebates In-Store Cash Back option as well.

Branching out into credit cards was a natural progression for Ebates, which wants to cultivate as many ways to help customers get as much value as possible. With so many other cards on the market offering cash back percentages on all purchases, Ebates thought it would be a great way to reward its customers even more by stacking a higher percentage of cash back on their Ebates purchases.

Patience, Commitment, and Acquisitions Result in Steady Growth

The Ebates business model was meticulously built around consumer satisfaction, and the company didn’t get ahead of itself by scaling up too fast or chasing early traffic numbers through the kinds of expensive advertising campaigns that have doomed other companies.

Rakuten logo

Instead, Ebates relied on its value proposition and word of mouth to do most of the promotional work, which helped the company make it through the dot-com bubble bust unscathed. By focusing on partnerships, technologies, and ventures that bring consumers the most value, the company has not only been able to grow but also fold other startups and established brands into its portfolio.

Over the years, Ebates has acquired seven other companies that provided value in the retail space, including Shopular, ShopStyle, and Cosmic Cart, among others. Ebates itself was acquired by Rakuten, Inc., a powerful Japanese e-commerce firm, for $1 billion in 2014.

And the company continues to partner with some of the biggest names in the retail industry because the value proposition is a win for all parties involved.

Ebates Looks to Build on More Than 2,000 Retail Partnerships

Since it launched in 1999, Ebates has seen rapid growth in both the number of users and cash returned to customers. Ebates has paid out more than $325 million to customers since its inception and has seen 40-50% growth each year since 2008.

And Ebates continues to grow its partner base by seeking out more retailers, which can drastically increase the company’s revenues and reach. Customer acquisition is always a challenge for business owners, but with Ebates’ user base and unique service, retailers can realize a steady influx of online consumers.

The fact that Ebates was started by two deputy district attorneys just before the dot-com collapse and survived is an incredible success story in and of itself. But that it has seen incredible year-over-year growth ever since is a testament to its value proposition and how easy it is to understand — even for a mom.