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Why coupon site owners hate RetailMeNot

Published September 25th, 2009 in Business Social. 16 Comments

I received a funny and angry email today from a coupon site owner who didn’t seem to be too happy about me listing RetailMeNot in my Popular Sites monthly list. He then goes ahead and gives me a link to a thread at ABestWeb forums which in essence is a 14 page long discussion between affiliate site owners and affiliate network managers about RetailMeNot. The conversation starts with Todd of AlexsCoupons complaining that RMN publishes his exclusive coupon for iFrogz:

This kind of crap has got to end. I am getting very tired of working my a$$ off to establish a good relationship with a merchant, only to see some scraper come along and benefit from my work. (They even listed the code as their exclusive code!)

First thing that strikes me is how difficult it is for somebody running an established affiliate site to accept that the business could be done in a non traditional way. The typical (or call it “legacy”) coupon site is operated by a stuff of a few people who get the coupons from merchants via affiliated channels and distribute them to their user base. The new breed however uses a different approach. They ride the “social phenomenon” and have the content posted to them by the community.

The new web

This can be difficult to understand for somebody who don’t keep their eyes open to what is happening around the web (which is often the case when you are “working your a$$ off” :-) ). Websites like Facebook, Twitter, and Youtube have popped up and boast millions of pages of content. Where did it come from? Did the YouTube owners post each video they have?

The same revolution happens in the affiliate world at a smaller scale and while the forum based website owners (like SlickDeals and Fatwallet) for obvious reasons have no issue with it, the traditional businesses do. So do some merchants. Here is one of them commenting to the same ABestWeb thread

My problem with RMN lies in that I have removed them from my affiliate programs, so they took it upon themselves to flood their site with every single unauthorized coupon code they could find, thereby compromising my marketing results. And what’s even more frustrating is that the consumer has no clue what they are doing is wrong. RMN tops my list of unethical affiliates and they seem to really enjoy the “bad boy” tag they’ve acquired in the affiliate world.

Consumers are not a hoard of animals. If they got to a RetailMeNot page they are intelligent enough to have figured out that they can use the web to search for coupons. That by itself is quite an achievement I should say. As to RMN flooding the site with “unauthorized” coupon codes. The codes are only “unauthorized” as long as the coupon site has an affiliate agreement with the store and guess what happens when you receive an email from a merchant and face a choice to remove the coupons or leave the program? This is exactly what we recently faced at Buxr when the email came from New York and Company. We took a hard look at what will be left should we remove the “unauthorized” coupons and figured we will be doing a poor service to our visitors and instead opted to break with the merchant. This may sound crazy to an affiliate old timer but this is the reality of doing affiliate business in a new way.

Too big to fail

There is a bit of irony in how affiliate network managers approach the situation. On one hand they take an action when merchants (or other affiliates) communicate problems to them about unauthorized use of coupons. Here is one such “action”:

OK, I found them in my CJ account and expired them. Thanks for the tip. They signed up last week so the URL was fresh in my mind.

If the outrage was over a small insignificant coupon site then this would be the end of the story, however as big as RMN has grown they represent significant lost revenue for any network that doesn’t stay on board and so the managers have a big incentive to keep things running, even to the extend of taking on policing the site for “bad” coupons. Here is a much later comment from the same manger (who took the action above)

Over the last few years I have developed an excellent relationship with RMN and am very satisfied with them. It takes me a minute to ask for a change or removal I control the copy on the merchants store page and optimize it. Don’t know other affiliates letting me do that.

So a compromise is possible? Sure thing. If there is a will there is a way and the fact that RMN rakes 4 million in sales each month somewhat helps the matter. :-)

And finally here is a comment that sums it up very well:

It is apparent that a) merchants like RMN because they bring in sales and b) affiliates are jealous of the RMN concept that has done very well. Not sure there is anything else to say about RMN.

Breaking old habits is hard but social bargain hunting is here to stay whether some like it or not. If old Terms of Service are no longer good then the new ones will be written. It is time for a change.

My little social bargain hunting experiment

Published May 13th, 2008 in Business Social. 3 Comments

Do you remember Modoshi? It is a deal site that launched in November 2006 and implemented a few interesting concepts that turned bargain hunting into a fun contest. The project eventually shut down but it really got me thinking.

Can a deal site be turned into a fun game where participants get rewarded for the bargains they recommend?
Can the site modeled around this concept be a successful and profitable business?

Ever since Modoshi shut down in summer 2007 I have been sitting on this idea. But I wasn’t just sitting, I was actually doing something. Read on to find what kept me sleepless over the past several months.

What makes people share deals?

Why people come to deal forums to post the shopping deals they find? For the most part it is because of the community. Initially they come to get information, feel thankful for the support they find and eventually come again to give back to the community that helped them. You could say that the community feeds itself.

Sometimes the site owners make an effort to help the community grow. SlickDeals encourages participation via reputation points the deal submitters receive from the peers. With DealsPlus each deal submission brings you closer to the next level - another star by your avatar. All these small attributes help the participants build their place in the community, help them feel useful and rewarded.

What did Modoshi do differently?

Why did I like Modoshi when there is already a number of striving bargain hunting communities out there? Because the team made an effort to improve on what some of these communities are doing. They have attempted to give the members a monetary incentive to participate and contribute. The incentives were offered in a form of daily and monthly contests that rewarded quality submissions and intelligent deal picks/votes which in turn brought a crowd of regulars to the site.

In addition Modoshi offered a huge number of tweaks for efficient bargain hunting on the site itself. The amount of product data they displayed made me think I am looking at a control panel of an airplane. It probably was a bit overboard but it appealed my geeky taste and built an invisible bond with the site creators.

I liked the idea so much that I decided to recreate it in a slightly modified form on Buxr, the project I started with my partner last year. Here are the basics (and I encourage you to comment on these!).

The daily contest

Users submit deals. Every day one deal is selected “the best of the day” based on user votes and our own judgment. The user who submits this deal is rewarded a daily prize (currently $10 via PayPal).

The monthly contest

There are two ways to participate, via deal submission and via deal votes.

Users submit deals. We select the best and the worst deal of the day on a daily basis. The user who submits the best deal gains 5 points, the user who submits the worst deal loses 5 points.
Users vote deals up/down. At the end of the day we compare user votes with our deal picks. If a user votes up the best deal of the day, or votes down the worst deal of the day, they earn 1 point. If a user votes down the best deal of the day, or votes up the worst deal of the day, they lose 1 point.

The user who collects the most points at the end of the month earns the monthly prize (currently Apple iPhone).

We plan to tweak these rules going forward as we learn from the participants, but the goal will stay the same, to build an exciting environment for people to come and share shopping deals, given whatever limited resources we have at hand.

Modoshi failed. Why am I doing this?

I strongly suspect a part of the reason why Modoshi closed was the lack of experience from the team (or the individual) who was running the site. Both my partner and I have been in this niche for a while and have come here to stay. Buxr doesn’t bring any significant revenue right now, not even enough to compensate for the prizes we offer. Yet we believe that the community around a deal site is the single most important side of a successful shopping affiliate business. It brings life, triggers conversations, helps with viral marketing.

Personally for me, it also gives a meaning to my life. I have always said that comments on this blog make me wake up in the morning and write more. Buxr is my new (more bargains focused) way to talk to you guys. The good part is that now you can initiate conversations as well! :-)

RetailMeNot launches shopping network

Published March 17th, 2008 in Business Social. 1 Comment

RetailMeNot, an Australian based coupon site that launched in October of 2006 has just officially announced that they are adding a social network portal to support the main site.

Adding a full blown network is a logical step for RetailMeNot who already largely rely on community to submit and rank coupons. The new functionality allows registered users to make friends, share coupons/deals, showcase profiles, and blog about… that is right, shopping.

Any social network is only good if there is a community to support it, and this is what will eventually be the breaking point. Nevertheless, the site is certainly a leader in such a narrow niche as coupon clipping (currently ranking 2nd) and so I would say the network has a good chance for success.

Here are some interesting traffic and financial stats from the RetailMeNot launch announcement at TechCrunch:

RetailMeNot is pushing through some amazing figures for a bootstrapped (non-funded) startup with three employees. The site averages $4 million a month in sales that are accurately recorded through affiliate channels, with only 40% of codes on the site having a direct benefit for RetailMeNot. Estimated total sales through the site are $10 million a month or approx $100 million a year. 600,000 non-affiliate clickthrus were recorded in February 2007 and 440,000 affiliate clickthrus. The site offers 71,000 coupons from 13,000 merchants and is adding 200-300 new coupons a day, 300-400 new comments per day and 9000 votes per day. Traffic and revenue grew at 20% per month through 2007. King wouldn’t tell me how much the site was making, but told me that it was profitable in seven figures.

As you can see running a popular coupon site can be a very profitable business. It is unfortunate none of that goes back to the users who help build it, and I am not talking about ad revenue profit sharing on user forums. Show us the real money! ;-)

Has Modoshi social experiment failed?

Published August 17th, 2007 in Business Social. 1 Comment

You might remember Modoshi, the social site for bargain hunters that launched early this year. I wrote about them back in January and my overall impression was that the team has found that key ingredient of a successful social deal site. I have recently received an email from one of my readers complaining that Modoshi team has essentially abandoned its members.

The site has been dormant

I went to check out the website and it does really look like Modoshi is having problems. The last deal posted dates July 26 and the last message from the admins at the bulletin board says:

Hello everyone, sorry for the almost non existent responses. We are deciding the fate of the site and are acertaining whether we can continue to support this model.

It looks like the idea hasn’t picked up as much as expected and the team of early adopters who came to play the bargain hunting game Modoshi was running (read: earn prizes) hasn’t brought enough main-stream users who would actually come to shop at the site (read: spend some cash).

Is business model broken?

When I praised Modoshi for its social direction, I didn’t pay much attention to the financial side of the experiment. It now looks like the model used by Modoshi lacks certain attributes necessary for a profitable business.

For example members are compensated for bringing referrals who then post quality deals. This makes sure that the posted products are true bargains. However no one is compensated for referring people who will come to shop. This means that the members are not directly interested in bringing revenue to the site.

I am sure the founders hoped that viral marketing would take care of this issue and it is hard to speculate why it hasn’t been successful for Modoshi. I still think the team has done a great job with the site and with a little bit more luck Modoshi wouldn’t be having problems now. The idea is good and it might just need a little help to pick up.

What will happen next?

I have sent an email to Modoshi but didn’t receive any response. An eBay exit might be one option, or alternatively the current founders may choose to re-adjust the model a bit and restart the experiment. In any case I hope we will find it out very soon. It is very sad to see a good idea die like that.

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