Looking at the number of bargain hunting sites that mushroomed in the past several years one can wonder what attracts them in the numbers they come. They don’t manufacture anything; they usually are not official resellers of any particular brand… So how do they make money?
I will try to summarize what I know about different business models and will also try to compare them one to another. In addition I will try to list how a user of such web site can make money (yes, many sites offer incentives to lure visitors). I don’t claim to know all the inner workings of how the system works but let this be the starting point. You are welcome to comment with additions/corrections.
How can web sites make money?
Affiliation Programs - so far the most popular/effective way to bring cash flow to the site. How does it work? The web site opens a special affiliation/partnership account with the merchant. The site content is then designed so that all links pointing outside to that merchant include a special id which allows the merchant to distinguish the affiliate account associated with the transaction. If the visitor ends up buying something from that merchant then the web site gets a commission.
Pros: non-intrusive, seamless for the web site visitor.
Cons: requires a) establishing and maintaining affiliations with multiple merchants, b) designing the web site so that visitors use the links with affiliation id in them. If you are not careful you can anger your competitors. ;-) If your affiliation is terminated and you don’t notice it then the links pointing to that merchant may result in an error thus disrupting normal web site operation.
Direct Advertisement - can be used when affiliation programs are not available or not possible to implement (or to supplement the affiliation revenue). Context sensitive ads are desired as they perform better than static/random ones. If no specific context can be determined the ad should still target your potential audience - the people who try to save while shopping.
Pros: web site owner often can deal with just a single ad provider/reseller thus minimizing maintenance time/effort.
Cons: web site should be designed to accommodate context sensitive ads (if possible). If used excessively the ads can clutter the web site thus sending the visitors away.
How can users make money?
Affiliation Programs - just like the web sites do it for themselves the users can also participate. The idea is still too new and not popular yet I know of at least one example: dealplumber.com. How does it work? The web site basically gives up their chance to profit from affiliation programs for the deals posted by users. They still can profit from the deals they post themselves (or insert an id when the user doesn’t provide one).
Pros: the most promising option for a web site user. Since you get a commission from every sale made using that link a truly good deal may bring you a significant profit.
Cons: most time/effort demanding option. Establishing affiliations and adding your id to the links can be a hassle. May not work for certain demographic groups (e.g. young people with no credit history to establish an affiliation account).
Cash Back - some sites (e.g. fatwallet.com, ebates.com) offer cash back if you buy using the links from that web site. How does it work? The web site provides user a special link that a) allows the web site to identify who originates the transaction b) contains the web site affiliation id. When sale is complete the web site will share with the user the commission they get from the merchant.
Pros: the most accessible option - no special accounts needed for the user. As a minimum you just need a subscription with the web site and a mailing address to receive the check.
Cons: have to follow the web site instructions on how to make the purchase using the links and/or special coupons. The cash back may take up to several months to show up.
Sharing Ad Revenue - some bargain forums (e.g. spoofee.com) will share with you their advertising revenue when you post a deal. Only the revenue from the ads placed on the page containing your deal posting will be shared. How does it work? You need to establish an account with whatever ad provider the web site uses (Google Adsense in the case of spoofee) and give the web site your account id. Every time someone clicks on the ad you have a chance (e.g. 50/50) of earning from that transaction.
Pros: this can be the middle ground for the users in terms of value vs. time/effort needed.
Cons: the web site has to be popular enough for you to really see those clicks coming.
Conclusion
While it looks like a lot of options I still see additional opportunities as to how a web site can be designed so it accommodates the user and the web site owner’s interests the best. What are they? Let’s make Designing a Perfect Web Site the topic of one of our next discussions.
Ops, it is 4am. This is what usually happens when you try to combine your hobby with your full time job. :-(
I only use dealnews and its subs. What kind of model to they use?
Dealnews live off of affiliate commission they get from the merchants. Basically whenever you click on a link at their web site that link has an ID that the merchant uses to identify dealnews as the source. Dealsnews also has some direct advertising on their web site which is probably a supplementary revenue for them.
As far as I know they don’t offer any monetary incentive to their users. All deals they have are posted by stuff with occasional tips from the users (all of which are moderated). This is the legacy model that mainly fits the mainstream shopper.
I can see a trend among early adopters to shift to models where users have more say as to choosing the best deal and to those that provide some monetary incentives to shoppers.