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.
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.