How Ibotta Is Changing the Coupon Game
Brand engagement and data analytics are just two of the ways that Ibotta is modernizing coupons.
How Value Creation Fits into the Operating Model
Ibotta is a multi-sided platform that leverages brand engagement to create value for consumers, brands, and retailers. Ibotta provides a marketplace for brands to offer coupons to consumers. However, unlike traditional coupons, consumers must “unlock” the coupons by interacting with the brand in some way. Examples of these interactions are completing surveys, watching videos, or learning new recipes.
For the consumer, Ibotta creates value in a number of ways. First, Ibotta provides consumers with the ability to find a variety of coupons all in one place without the hassles of traditional coupons, such as cutting, sorting, and transporting. Second, Ibotta uses the data from past redeemed purchases to learn the consumer’s preferences. Using this data, they are able to curate each consumer’s dashboard with customized coupons, saving him/her time associated with browsing through irrelevant deals.
Ibotta creates even more value for the brands. First, the brand engagement gives the brands an opportunity to perform consumer research on many different types of customers. Further, Ibotta tracks sales history down to the consumer level and is able to link that data to other trends like lag time, redemption rate, click through rate, etc. Next, the digital component of Ibotta allows brands to adjust rebates in real-time giving them more flexibility. For example, a brand can sort through consumers’ demographics to run A/B tests by experimenting with different rebate amounts. The Ibotta team also offers hands-on assistance to help each brand create a customized campaign and analyze their data.
Retailers play more of a secondary role in this platform, but they still receive much of the data analytics benefits that the brands do. Ibotta also drives store traffic by convincing consumers to shop there for specific rebates and builds consumer loyalty. It’s also easier for retailers to cash in on Ibotta rebates because it is all documented through the platform, so they don’t have to worry about mailing coupons in.
There are other digital coupons in the market, such as Checkout51, but none of them provide the extra benefit of brand engagement like Ibotta does.
How Value Capture Fits into the Operating Model
Ibotta is free to the consumer, so all of the value capture comes from the brands and retailers. Interestingly enough, Ibotta only charges for sales, not eyeballs. Meaning brands only pay if consumers redeem rebates, which revolutionizes traditional advertising into a more commission based model. This is a more attractive and safer model for brands and retailers and sends a signal to the market that Ibotta is confident that their product will yield results. Ibotta does not say how much they charge, but my sense is that they have a tiered payment system depending on how much data the companies want to extract from the consumer.
What’s Next
Ibotta recently added a teamwork mode so consumers can meet savings goals as a group and receive bonuses. This is an effort to increase network effects, which I think is a good idea, especially since there is a gaming aspect to this app.
Since Ibotta is still a startup, they do not disclose whether or not they are profitable yet. This is to be expected as they build up the different sides of their platform. However, with the on-boarding of over 2 million active users, iconic brand conglomerates, like P&G, General Mills, and Unilever, and retail powerhouses, like Walmart and Target, I would say that their future looks good.
Does the addition of a teamwork mode start to add noise to the data?
I’m not sure how it functions, but if people start to participate and redeem coupons as groups, then doesn’t Ibotta lose visibility into the preferences of the individuals making up the group. Assuming that teams are dynamic, isn’t the individual data worth far more than a group’s data?
Really cool company, thanks for sharing. I’m really intrigued by the concept of giving consumers a bigger discount after participating in market studies. In some sense, maybe the discounted amount represents the economic value of that additional piece of data to the company. Right now this may be in the order of magnitude of tens of cents (I’m making up a number here), but over time perhaps this economic value will go towards 0 as it becomes easier and easier to collect information from end customers.
This does remind me a lot about digital advertising as well. It’s sort of like the video advertising model: in order to see a video, you HAVE to watch this ad. And (as Hulu does), if you tell us which of these 3 ads appeal to you the most, you can just watch ONE long-ish ad to avoid many short ads throughout your TV episode. I wonder why this engage-then-advertise model hasn’t caught on in more instances; perhaps users just really, really dislike it in other contexts?
Definitely cool idea – I was surprised to learn about the big name brands and retailers that Ibotta already has as a part of their product. The next step to increase the value of the platform then, becomes attracting users in critical mass. Of course, there is a lot going on in digital couponing nowadays, and consumers have tons of online couponing options without having to necessarily take polls or watch videos. So, there has to be in incremental value-add to consumers for using Ibotta instead of other channels – are the discounts larger, for example, than other digital couponing methods because of the valuable additional data that brands and retailers are gathering? Ibotta will also have to fight what I imagine might be existing inertia for consumers who use a retailers existing digital couponing solution, simply because they’re familiar with the store name rather than the Ibotta name. In any case, great idea and a lot of valuable information here & I hope they do well!
This was a really interesting post! I’ve actually used Ibotta and do think that the gaming aspect makes it more interesting and potentially more attractive than other digital couponing platforms. That being said, I do feel that awareness is very low, and I wonder how they are going to draw more users. I also have to wonder how well it can really offer targeted advertising with just 2 million users. You really need a much larger user base before you can choose narrow segments to target. Lastly, I didn’t know they were only paid on redeemed coupons. I think that is likely huge in attracting advertisers. Just having customers see their product on the Ibotta platform builds brand awareness (and is largely free if not everyone redeems).