Is it possible to make money on display by giving away coupon codes?
Coupon sites are one of those “sexy” internet business models because they only require a little overhead to set up. You don’t have to create a physical or digital product. In fact, there are no deliverables whatsoever.
Plus, it’s pretty easy to build goodwill with your visitors because you’re not selling anything. In fact, you’re giving them deals on stuff they already want to buy.
This seems like a dream business model, right?
However, like most “sexy” business models, turning a profit on a coupon site is a lot harder than most people assume. Coupon sites make 99% of their money off of advertising revenue and affiliate commissions. A coupon site needs A LOT of traffic to be profitable.
So how exactly are sites like Coupons.com and RetailMeNot making hundreds of millions of dollars in revenue each year?
It all comes down to display advertising.
Coupon Sites: How They Work
Whether you’re watching TV or surfing the web, you don’t have to look very far to find a coupon site. They’re everywhere. From groceries to tech gadgets and accessories, there’s a coupon site for just about every industry. And people love them. Thirty-three percent of shoppers say that they frequently use coupons for their purchases, while 38% of shoppers are always on the lookout for coupons. That’s 71% of shoppers using coupons consistently.
With customers’ obsession with coupons in full effect, it makes sense that coupon sites would want to get in on this. Gone are the days of shoppers collecting stacks of weekly flyers and clipping coupons. Now shoppers log onto one of the many sites available to quickly find what they need. Coupon sites have emerged to become a profitable internet business because they’ve found a need and filled it.
And that’s not all; these sites don’t just offer a discount code for products; coupon sites come in different formats. For example, you can consider:
- Printable coupons from sites like Coupons.com and RetailMeNot. While you might still find the odd coupon in newspapers and flyers, these sites have mostly replaced these options. Now all shoppers have to do is print and scan coupons or scan them from a mobile device.
- Coupon referral sites like FreeDailySamples, which aggregate deals across a wide selection of industries. When users click on a coupon, they’re taken to a third-party website to purchase their coupons.
- Group-buying sites like LivingSocial, where coupon offers are based on sales volume. These platforms partner with merchants who offer deep discounts on their products and services. Only after a minimum sales volume has been reached does a deal activate and take effect.
- Cashback sites that give users money back for shopping online at places they normally shop at. Users get a discount coupon and a cashback offer of up to 15%.
The great thing about these sites is they cover a wide range of products and services. Depending on what people are searching for, chances are there’s a coupon site out there for them.
An emergent extension of coupon sites are sites that also offer browser extensions as another way to make money. These sites advertise the extension and try to get installs to generate additional revenue. Two great examples here are Honey and Wikibuy.
Honey is a browser extension that finds coupons online and automatically applies them to shoppers’ purchases. This way, shoppers don’t have to scour the web looking for deals; the deals come to them.
Once shoppers download the extension, they browse stores like Walmart, Home Depot and Best Buy and add items to their cart the way they normally would. At checkout, Honey searches the web for coupon codes and automatically applies the best code to the purchase.
Let’s say a shopper is in the market for a new camera. They like to shop at Target and don’t have the patience to find applicable coupons for the type of camera they want. They simply install the Honey extension, head over to Target’s online store and search.
When they find the camera they want, they add it to their cart. Honey shows an applicable coupon, the shopper applies it to their cart, pays, and they’re done.
Keep in mind that Honey offers more than just coupons. The browser extension also looks for promo codes and deals. The whole point of the extension is to find offers that save the shopper the most money.
It’s free to download the extension so how does Honey make money? When shoppers apply a coupon or promo code to their purchase or earn Honey Gold points, Honey gets a small commission from the retail. So in our example above, Honey would have received a commission from Target when the shopper applied the coupon and bought the camera.
The better Honey is at finding deals online, the higher its earning potential. It’s a great concept especially because people want to save but don’t have the time to search for coupons. If Honey can consistently find the best deals for shoppers, the revenue potential is enormous.
Wikibuy is an iPhone and Chrome extension that works with Amazon. For shoppers who rely on Amazon to make their purchases, Wikibuy compares products from stores like Walmart and Target to find an exact match. If the products are lower at these stores, the savings are automatically applied to the Amazon purchase.
If shoppers like the offer, they apply the code Wikibuy provides at checkout and save on their purchase.
The extension is the whole product, so to get shoppers to take action, the deals Wikibuy finds are time sensitive. Shoppers have a limited amount of time to decide if they’ll use the coupon, apply it and buy.
Just like with Honey, Wikibuy gets a small commission every time a shopper makes a purchase using the coupon offers Wikibuy finds. Their retail partners pay this commission.
With both of these options, shoppers save with coupons they normally wouldn’t have known about. The browser extensions take the hassle out of savings for shoppers and help the platforms make a tidy profit at the same time. It’s a win-win situation for everyone involved.
It doesn’t matter what format these sites take; coupon sites are a good business model because they serve a wide audience. There’s no shortage of people eager to save money and coupon sites cater directly to this need.
Let’s look at the different ways these sites make money and examples of sites that have made a profit with this business model.
How Exactly Do Coupon Sites Make Money?
Most large coupon sites spend millions of dollars a year on paid traffic. This begs the question:
How in the heck are they making money?!
Each of the advertisers you’ll read about here has its own unique strategy. Plus, these sites definitely have behind-the-scenes revenue streams that aren’t obvious or immediately visible. Keep in mind most coupon site revenue is generated in three ways:
1. Affiliate Commissions
Coupon sites will either use affiliate links or affiliate discount codes. The site will then receive a small commission whenever someone buys a product through their link or with their specific coupon.
Here’s how it works:
Let’s look at an example using Free Daily Samples’ process:
[Source] An example of sponsored ads on FreeDailySamples.
[Source] Users are taken to a product page to choose their coupon.
[Source] Shoppers are taken to the brand’s product page to buy what they need and save.
Later, we’ll see how Offers.com sends traffic to landing pages with long lists of affiliate links.
2. Direct Media Buys
A direct media buy is when an advertiser purchases ad space directly from a publisher. The advertiser can purchase a creative or–as you’ll see is the case for Crest and Coupons.com — they can purchase an entire page.
How it works:
An advertiser, let’s say Crest, has to be clear on who their target audience is and know where they spend time online. Crest’s recent ads target two main groups of women: those concerned with gum disease and those trying to whiten their teeth. With this information, Crest can approach publishers like NBC News and The Hollywood Reporter to buy ad space on their website.
The main advantage of this option is that there’s no middleman for the advertiser to work with. As a result, if their targeting and placement are right, they stand to make a bigger profit than they would have otherwise.
3. Ad Arbitrage
Ad arbitrage is the process of buying and selling ad impressions on ad exchanges and networks and making money on the margin. It’s basically a cheap way to buy traffic. The site can earn money by monetizing with Google AdSense or another network that gives a nice payout.
How it works:
An advertiser buys cheap clicks and then sells them for more to make a profit.
For example, Coupons.com has brought in an estimated $1.6M in publisher revenue over the past six months through Google AdSense and direct buys:
There are probably other ways that some of these sites are monetizing, but these are the basic methods.
Cotter Cunningham of WhaleShark Media — owner of RetailMeNot — on how they make money:
“We make money two ways. We make money off advertising — it’s a very valuable consumer. You’ve held up your hand and said you’re going to buy something today. That in-market consumer has enormous value and advertisers are willing to pay for that. For about 10% of the merchants on our site, we have a small commission. Commission is actually a bit bigger in revenue, it’s funny because when I originally got in the business I thought advertising would be bigger. Maybe over time, that’ll change.”
Now let’s take a look at how these sites are running and optimizing their Display campaigns.
Case study #1 – BeFrugal.com
BeFrugal’s Ad Spend
BeFrugal.com has spent an estimated $22M over the past six months. BeFrugal allocates most of their ad spend to the Google Display Network.
BeFrugal only advertises coupons for restaurants.
Their ad creative formula is pretty simple:
- First, they start with an image of a tasty looking dish.
- Then, they add the restaurant’s name followed by “FREE COUPONS!”
- Next, they include the same call-to-action on every ad, which is simply, “Get Coupons.”
Here are a few creatives that BeFrugal has recently run:
The first publisher you’ll notice is mlb.com which comes before allrecipes.com. The spend on these two publishers could be to get wide exposure of their niche audience.
You’ll also notice that BeFrugal buys inventory on weather.com and espn.com. However, they don’t buy ads on random pages on these sites. They also target placements that are related to food or food deals. Here are a few of their placements on weather.com:
As we’ve mentioned before, sites like mlb.com, espn.com and weather.com can be fantastic sources of traffic if you buy ads on pages and channels that are relevant to your offer.
BeFrugal uses templated landing pages. Every one of their landing pages has the same basic design. The only differences are the headline, the logo next to the headline, and the picture of food to the right of the opt-in form.
Case Study #2 – ShopAtHome.com
ShopAtHome has spent an estimated $75.5K over the past six months on Google Display Networks. They have also spent approximately $7.2K on Bing Ads Content.
Unlike BeFrugal, ShopAtHome runs ad creatives for various types of deals. Their most recent coupons include auto parts, aquariums, and movies.
You’ll also notice that each ad creative has a dotted border to give it that “Sunday newspaper coupon” look. It’s worth mentioning that the CTR of an ad creative can be affected by simply adding or removing a border.
A dotted border with scissors might not be appropriate for your market, but you should test ad creatives with borders vs. ad creatives without borders.
Vegas.com and Yahoo.com appear before a site like couponmom.com which is geared towards coupons. Again, this is done to make sure there’s adequate exposure to their target audience.
ShopAtHome matches the ad creative’s content with the publisher’s content. For example, they run Las Vegas coupon ads on Vegas.com, food coupons and Food Network and general coupons on general sites like Coupon Mom.
ShopAtHome.com also uses templated landing pages:
You’ll notice that the landing page is the same for all ad creatives except for the tiny coupon box at the top, and to the left of the opt-in box.
Case Study #3- RetailMeNot.com
RetailMeNot.com has spent an estimated $3.1M over the past six months on the Google Display Network.
RetailMeNot has fairly general creatives. Their most recent ad creatives are focused on how quick and easy it is to save on their platform. Their ad creatives are somewhat less compelling than those of the other advertisers in this post.
If you look at the trend lines to the right of each publisher, it appears that RetailMeNot’s most successful publishers — the longest running — were How Stuff Works and Wikia. These ads focus on getting people to add the RetailMeNot Chrome extension so they can save on their purchases.
RetailMeNot’s landing pages are these two web 2.0-style landing pages. The first page is a general page that just lists many of their deals. The second page is for RetailMeNot’s latest venture, the RetailMeNot Genie Chrome extension.
Case Study #4 – Coupons.com
Coupons.com — aka Quotient Technology — is the big kahuna of coupon sites.
Coupons.com has spent an estimated $1.6M over the past six months on Google Display Network and Direct Buys.
All of Coupons.com’s ad creatives are for specific products:
Coupons.com matches the product shown in the ad creative to the publisher’s content and audience. For example, they advertise cold medication on WebMD, supplements on Very Well and food coupons on Cooking Panda.
Coupons.com uses two different styles of landing pages. The first is a general page that shows a list of coupons for various brands and products. The second page appears to be an advertorial page. It lists foods that are in line with specific coupon offers.
Case Study #5 – Offers.com
Offers.com has spent an estimated $540K over the past six months on Google Display Networks and Google Native Ads. It is one of the few coupon sites that is testing out Native ad networks like Taboola.
Offers.com is running traffic on both standard ad networks — like the Google Display Network — and Native ads on Taboola. You’ll see that they’re using different strategies for both types of networks.
Offers.com’s standard ad creatives are all text ads on the Google Display Network. These ads send traffic to a landing page with a large list of different coupons, offers, and deals. You’ll see what those exact landing pages look like in the “Landing Pages” section, but here are what their text ads look like:
All of Offer.com’s Native ads are related to credit cards and Amazon promo codes. After the prospects click on the ad, they are taken to an advertorial-style landing page with affiliate links for various credit card offers.
Offers.com buys ads on a variety of different publishers related to the products being advertised on their ad creatives.
Here is an example of one of Offers.com’s main landing pages. It looks like a review page with product specs and ratings. After a few seconds, viewers are presented with a discount offer via a pop-up overlay:
Native Landing Pages
Here are the landing pages for all of Offers.com’s native ad traffic — for credit cards and for Amazon promo codes:
The first landing page is for many different credit cards. It’s written like a review you’d find on a personal finance blog. There’s no doubt that Offers.com receives an excellent affiliate commission if someone applies and is accepted for one of these credit cards. The second landing page is for different Amazon promotions.
Get Creative With Your Site
Coupon sites are a viable business model if you’ve got the time, money and resources to invest. However, it’s not one of the easiest business models to make work. On the other hand, there will always be a demand for resources that help consumers get products they want at a discount. If you’re interested in creating this sort of business model, then it might be worth it in the long run.
I’m interested in this niche. Can you recommend a source that I could get more specific information and possibly someone who I could work with in this market from a mentoring position?