Wonder how do cashback companies make money? (2024)

It is quite natural to question why would cashback companies give you cash back on purchasing online. How are they making money to give you the cash back? People always have different views on purchasing through the cashback website. Some find it fishy and some find it convenient.

The idea is quite simple. Instead of going to the shop directly, you can purchase your preferred products online using a link from a cashback website. Retailers want to attract more customers.

This is how it works.

Before we jump into the business flow, let us understand what is “Affiliated Marketing”.

Affiliate Marketing : a marketing arrangement by which an online retailer pays a commission to an external website for traffic or sales generated from its referrals.

It is a very common practice for retailers to have affiliate marketing program in place. Meaning they award commission to those who refer more customers to them.

The business model looks like this :

Let us look at an example.

1. The consumer views all the listings on the cashback website. For e.g.: E-bates is a cashback e-commerce company. Once the consumer goes to E-bates online website, they see all cashback offers listed.

Prerequisite : Consumers must have signed up with E-bates in order to view the listings. i.e.: Consumers must have a user id and password.

2. Now, the consumer clicks on what ever he wants to buy. For e.g.: I want to buy some snacks. Boxed.com gives 15% off on your first order.

3. The consumer now clicks on “Shop now” button. The Consumer is then directed to the merchant site through a tracking link of the cashback website.

Merchant site in this case is : Boxed.com

Tracking link looks something like this : https://www.boxed.com/products/category/1/all-products/?utm_source=cj&utm_medium=affiliate&utm_content=46157&utm_term=12077761&ref_id=0b8494e456f711e7812c848f69845969_112803928326055947%3AJpClghlJH19f

This is an affiliate link through which consumer makes the purchase on the merchant website. This helps the merchant to identify where their customer came from. That is how cashback websites seamlessly transfers you to merchant website.

4. Once the purchase made by the consumer gets confirmed by the merchant website, the affiliate (cashback company) gets their commission paid. The affiliate company then sends you the rebate on the purchase made.

It is obvious that everyone gets excited about saving money and having huge discounts. Having a cash back is after all not a bad idea. Why not get a rebate?

Check out E-bates.