How Does Swagbucks Make Money? The Swagbucks Business Model In A Nutshell

  • Swagbucks is an American reward and loyalty program platform founded in 2008 by Scott Dudelson, Josef Gorowitz, and Eron Zehavi. The company began as a search engine that donated a portion of advertising revenue to charity.
  • Swagbucks acts as a two-sided network by connecting consumers who are willing to perform actions with businesses that benefit from those actions.
  • Swagbucks earns money through affiliate commissions whenever a member purchases from more than 1,500 eligible partners. The company also sells valuable consumer demographic data retailers use to guide product development and marketing strategy.

History of Swagbucks

Swagbucks is an American reward and loyalty program platform founded in 2008 by Scott Dudelson, Josef Gorowitz, and Eron Zehavi. 

The Swagbucks story began three years earlier as a private-label search engine making money through keyword-based advertising. Unlike competitors, however, a percentage of advertising revenue was donated to charity. The service also allowed celebrities, brands, and sports teams to engage with their fans through branded rewards programs and merchandise. 

When Google started to become the dominant search engine player, the service was forced to pivot. Swagbucks gained early traction as one of the first businesses to have both a Facebook and Twitter page. Traction was also helped by the referral program which increased word-of-mouth advertising among users.

By 2010, the company had already amassed 3.3 million users. Soon after, it introduced shopping pages where members receive cashback points for shopping at selected retailers. The company continued to experience rapid growth and became profitable in 2013.

Fundamentally, Swagbucks allows members to earn points simply by doing everyday activities, such as watching videos, surfing the web, playing games, answering surveys, and shopping. These points are then redeemable for gift cards from retailers such as Amazon and Walmart. Alternatively, Swagbucks members can opt to receive cash back from PayPal.

Today, the company has paid out almost $600 million to its members with 7,000 gift cards distributed daily.

Swagbucks revenue generation

For Swagbucks to distribute cash and gift cards to its members, the company has a relatively simple revenue generation model.

Swagbucks acts as a two-sided network, connecting consumers who are willing to perform actions with businesses that benefit from those actions. When a member performs an action for Swagbucks points, the company sets aside a portion of the revenue it receives from partners to fund the reward the member is working towards.

It’s important to mention that one Swagbucks point is quite small in dollar terms. For example, a $15 Amazon gift card is worth approximately 1500 points while $50 cashback from PayPal will require 5,000 points.

For the company to make a profit, the value of the actions required to accrue the necessary points must be higher than the value of the gift earned by the consumer.

This begs the question, how does Swagbucks earn money from the actions of its members?

Affiliate commissions

Swagbucks collects affiliate commissions from the brands it partners with whenever a member makes an eligible purchase. 

Considering the company partners with more than 1,500 online retailers, this is likely to be a significant source of income. The exact affiliate commission is based on the contractual arrangement held with each partner. 

Aside from the purchase of physical products, some partners also pay Swagbucks whenever a member completes a survey or watches a video. Ostensibly, Swagbucks is collecting and then selling valuable consumer data to retailers who then use it in product development and marketing.

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