Ibotta is a North American mobile technology company operating a cash-back shopping app. It was founded by Bryan Leach in 2012 after he watched an airline passenger go through the tedious process of uploading receipts for an expense report.
One of the more well-known early investors in the company is Larry Sonsini – a senior partner and founder of Wilson Sonsini Goodrich & Rosati. The firm is well-known in Silicon Valley because it took Apple, Tesla, Google, and many other companies public
Ibotta earns affiliate commissions from some of the biggest brands in the world. When a user makes an eligible purchase, the brand pays Ibotta a fee of between 3 and 10%.
Business Model Element
Analysis
Implications
Examples
Value Proposition
Ibotta’s value proposition includes: – Cashback Rewards: Offering users the opportunity to earn cashback on purchases made at partner retailers both in-store and online. – Ease of Use: Providing a user-friendly mobile app that simplifies the process of earning and redeeming rewards. – Wide Partner Network: Collaborating with a broad range of retailers, brands, and services to offer diverse cashback opportunities. – Personalization: Tailoring offers and recommendations based on users’ shopping habits and preferences. Ibotta attracts users looking to save money on their everyday purchases through cashback rewards and a convenient app.
Provides a way for users to earn cashback on everyday purchases. Simplifies the cashback process with a user-friendly mobile app. Offers a wide variety of cashback opportunities through partnerships. Enhances the user experience by personalizing offers. Appeals to cost-conscious consumers seeking savings on their shopping.
– Users earning cashback on groceries, clothing, and other purchases. – Redeeming rewards and cashback through the Ibotta app. – Accessing cashback offers from a range of partner retailers. – Receiving personalized cashback offers based on shopping behavior.
Customer Segments
Ibotta primarily serves the following customer segments: 1. Shoppers: Individuals looking to save money on groceries, household items, and various products. 2. Brand Partners: Companies seeking to promote their products and attract customers through cashback offers. 3. Retailers: Partnering with retailers to drive sales and foot traffic by offering cashback incentives. Ibotta focuses on connecting shoppers, brand partners, and retailers to create a mutually beneficial ecosystem.
Targets a broad audience of cost-conscious shoppers seeking savings. Attracts brand partners interested in promotional opportunities. Collaborates with retailers to enhance their sales and marketing efforts. Facilitates connections within the retail ecosystem.
– Individuals looking to save on everyday purchases. – Brands wanting to offer cashback promotions. – Retailers partnering to drive sales and customer engagement.
Distribution Strategy
Ibotta’s distribution strategy includes: – Mobile App: Providing a mobile app available on iOS and Android platforms that users can download to access cashback offers. – Partnerships: Collaborating with a vast network of retailers, brands, and services to offer cashback opportunities. – Marketing and Advertising: Promoting the app and cashback offers through digital advertising, social media, and other marketing channels. Ibotta relies on its app, partnerships, and marketing efforts to reach and engage users.
Offers a mobile app as the primary platform for accessing cashback rewards. Establishes partnerships with retailers, brands, and services to expand its cashback network. Utilizes digital advertising and marketing to attract and retain users. Implements a tech-savvy distribution strategy in the cashback and savings industry.
– Downloading the Ibotta app to access cashback offers. – Shopping at partner retailers to earn cashback rewards. – Discovering cashback promotions through digital advertising and social media.
Revenue Streams
Ibotta generates revenue through the following channels: 1. Commissions: Earning a commission from partner retailers and brands for driving sales and customer engagement. 2. Data Insights: Providing data and analytics services to brands and retailers based on user behavior and shopping trends. 3. Premium Features: Offering premium features or subscription plans for enhanced cashback opportunities. Ibotta primarily relies on commissions and data insights as its revenue streams.
Earns commissions from partner retailers and brands for driving sales. Offers data insights to brands and retailers based on user shopping behavior. May generate revenue from premium features or subscription plans. Diversifies revenue sources within the cashback and savings industry.
– Partner retailers and brands paying commissions for sales driven by Ibotta. – Brands and retailers utilizing data insights for marketing strategies. – Users opting for premium features or subscription plans for enhanced savings.
Marketing Strategy
Ibotta’s marketing strategy involves: – Digital Advertising: Engaging in digital advertising campaigns to promote cashback offers and the app. – Social Media Presence: Maintaining a strong presence on social media platforms to connect with users. – Referral Programs: Encouraging users to refer friends and family to join Ibotta through referral incentives. – Personalization: Tailoring cashback offers and recommendations based on users’ preferences and shopping behavior. Ibotta combines digital advertising, social media engagement, referral programs, and personalization to effectively market its cashback platform.
Increases brand visibility through digital advertising efforts. Connects with users and provides updates through social media. Utilizes referral programs to encourage user growth and engagement. Enhances the user experience through personalized cashback offers. Implements a comprehensive marketing strategy in the cashback and savings industry.
– Encountering Ibotta’s digital ads showcasing cashback offers. – Following Ibotta on social media platforms for updates and promotions. – Participating in referral programs to earn incentives. – Receiving personalized cashback offers based on shopping preferences.
Organization Structure
Ibotta’s organizational structure includes: – Executive Leadership: Comprising executives responsible for strategic direction, decision-making, and overall company management. – Technology and Development Teams: Managing app development, data analytics, and user experience. – Partner Relations: Building and maintaining partnerships with retailers and brands. – Marketing and User Engagement: Handling marketing campaigns, social media, and user engagement efforts. Ibotta maintains an organized structure aligned with its mission in the cashback and savings industry.
Led by executive leadership for strategic guidance and decision-making. Manages app development, data analytics, and user experience. Builds and maintains partnerships with retailers and brands. Focuses on marketing campaigns and user engagement strategies. Maintains an organized structure to support its role in the cashback ecosystem.
– Executive leadership for strategic direction. – Technology and development teams. – Partner relations teams. – Marketing and user engagement teams.
Table of Contents
Origin Story
Ibotta is a mobile technology company founded in 2012 by Bryan Leach, who envisioned a service allowing consumers to simply upload a photo of the receipt and receive instant cashback. Indeed, Ibotta makes money via affiliate fees and advertising.
Ibotta is a North American mobile technology company founded in 2012 by Bryan Leach.
Leach had the idea for the company after observing a passenger uploading a receipt for an expense report on an international flight. Based on this observation, he started to think about how mobile technology would empower consumers and save them “time and money through a single mobile app that would become a starting point for all rewarded shopping.”
To that end, he envisioned a service allowing consumers to simply upload a photo of the receipt and receive instant cashback. What’s more, cashback could be earned for any product or service – whether that be online or offline.
Early investment
One of the more well-known early investors in the company was Larry Sonsini – a senior partner and founder of Wilson Sonsini Goodrich & Rosati. The firm is well-known in Silicon Valley after it took Apple, Tesla, Google, and many other companies public.
Later, Sonsini introduced Leach to former Netscape CEO Jim Clark. Clark came well-recommended as one of the few American entrepreneurs to launch three companies in three different industries and grow them to a $1 billion valuation.
Clark made his first investment in Ibotta in 2014. He was joined by Tom Jermoluk, a long-time collaborator of Clark’s who has also founded several companies.
Early headwinds
Ibotta’s first office was located in the dark basement of a historic fire station where there was only one bathroom for 25 employees. The second office was later flooded after a main valve ruptured which caused staff to be evicted.
Some of the brands and retailers Ibotta tried to partner with initially turned them down because they wanted to build their own platforms. Over time, however, Leach discovered that consumers didn’t want an app for each brand and instead preferred to use one app that would work wherever they shopped.
Denver headquarters
Leach decided to base the company in Denver, Colorado – a city not known for its tech scene and far less popular than Silicon Valley or New York.
When quizzed about his decision by Forbes contributor Amit Chowdhry, Leach explained that since consumers in Denver were more representative of middle America, the app would gain critical early traction from users looking to save money.
Leach also noted that despite perceptions, Denver had a close and supportive entrepreneurial community where start-up companies had each other’s backs. Perhaps the only drawback to a Denver base was the city’s lack of diversity when compared to some other areas. However, it was acknowledged that the trend in Denver favored increased diversity over time.
Expansion
Early versions of the app were limited to groceries and everyday purchases. The ability to purchase alcohol, travel and fashion items followed in 2014, and, two years later, online and mobile functionality was added. Consumers can now pay for an entire purchase and earn cashback instantly via the Pay with Ibotta service.
Ibotta’s first significant expansion outside of groceries and other everyday needs came after a partnership with big box retailers such as Hallmark and Best Buy.
As we touched on above, it then launched a broader cash-back rewards scheme for online and mobile purchases. Specifically, the scheme enabled users to earn rewards whenever they hailed an Uber, booked a room on Hotels.com, ordered food to their home, or watched a movie on iTunes, for example.
Later, Ibotta users could earn rewards for purchases on Jet.com, Walmart.com, Amazon.com, and numerous other websites.
The company ethos states that it is better to pay consumers than advertise to them. To that end, Ibotta shares a portion of its revenue with the consumer as part of the cashback scheme.
This begs the question – how exactly does it generate revenue?
Keep reading to find out!
Affiliate commissions
When an Ibotta user makes an eligible purchase, the company receives an affiliate commission from one of its advertising partners. These partners are some of the biggest brands in the world, including Kellogg’s, Amazon, Target, Uber, and Coca-Cola.
While it could be argued that these brands could advertise their own products, they are in effect paying for access to a highly targeted audience. Indeed, most of the Ibotta user base is comprised of middle to upper-middle-class female millennials.
Brands can also target consumers on the Ibotta platform on multiple channels and at different stages of the buying journey
The exact commission is negotiated between both parties and is based on purchasing volume. However, it is typically in the range of 3 to 10%.
In some cases, the company also makes money by asking users to watch short videos or complete surveys to unlock special deals.
Advertising
The Ibotta platform does feature advertising in the form of video content and other promotional material.
Once again, brands pay Ibotta for the additional exposure to a highly targeted audience. They can elect to pay for advertisements on a per-impression or fixed-fee basis.
Key Highlights
Origin and Founder:
Ibotta is a North American mobile technology company founded in 2012 by Bryan Leach.
The idea for Ibotta came to Leach when he observed a passenger uploading a receipt for an expense report, inspiring him to create a service for consumers to receive instant cashback by uploading receipts.
Early Investment and Supporters:
Notable early investor Larry Sonsini, founder of Wilson Sonsini Goodrich & Rosati, a law firm known for taking tech giants like Apple, Tesla, and Google public.
Former Netscape CEO Jim Clark and entrepreneur Tom Jermoluk also invested in Ibotta.
Early Challenges and Growth:
Ibotta faced initial challenges and had modest beginnings, including office issues and rejections from some brands.
Bryan Leach recognized that consumers preferred a single app for rewards instead of separate ones for each brand.
The company decided to base itself in Denver, Colorado, to tap into a diverse user base representative of middle America.
Expansion and Partnerships:
Ibotta’s early versions focused on groceries and everyday purchases, later expanding to include alcohol, travel, fashion, and online/mobile functionality.
Partnerships with big box retailers like Hallmark and Best Buy facilitated further expansion.
Ibotta’s partnerships now extend to over 1,500 brands and retailers, providing users cashback on more than 2,700 brands and retailers.
Revenue Generation:
Ibotta’s business model revolves around sharing revenue with consumers rather than traditional advertising.
The company earns affiliate commissions from advertising partners when users make eligible purchases through the app.
Affiliate commission rates, negotiated based on purchasing volume, typically range from 3% to 10%.
Ibotta offers users additional deals through watching videos or completing surveys.
Advertising on the Platform:
Ibotta features advertising content, including videos and promotional material, to monetize the platform.
Brands pay Ibotta for exposure to a highly targeted audience of mostly middle to upper-middle-class female millennials.
Brands can choose per-impression or fixed-fee payment models for their advertisements.
A platform business model generates value by enabling interactions between people, groups, and users by leveraging network effects. Platform business models usually comprise two sides: supply and demand. Kicking off the interactions between those two sides is one of the crucial elements for a platform business model success.
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.
In an asymmetric businessmodel, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.
A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.
The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.
Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.
The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a businessmodel. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.
In a franchained businessmodel (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
