Pirates or Partners

This holiday season I can't help but see Rakuten commercials, and I suspect you have as well.

Rakuten was formerly Ebates.com. When you purchase an item through them (at thousands of online stores), they give you cash back on your purchase. The business model is relatively simple: Stores give commissions for sales, and Rakuten shares their commission with you. This person earned about 5% back on his couple thousand in purchases this season.

Affiliate marketing is a partnership, because affiliates work to sell your products for you. Sure, a Rakuten user could go directly to Target and buy, and Target would make more money that way. However, affiliates like this one have critical mass, and is (as we see this Holiday Season on our TV screens) spending their marketing money (on your products).  As well, their members are hyper-engaged users who buy online, and have very good lifetime value. Despite giving up a bunch (sometimes the majority) of margin, the system seems to work.

If this sounds familiar to us, it's because it is. It's the ADW model in horse racing.

What's different is the response. Target is not withholding their products from Rakuten like a Sword of Damoclese signal deal. Target executives are not calling Ebates "pirates". We don't read articles on the Paulickshoppingreport saying Ebates has killed online purchasing and should be shut down.

There was a conversation this week on the twitter where a bunch of pretty sharp folks were talking about online wagering, mobile, horse racing wagering advertising, and assorted issues. There was a lament that racing has really missed the boat in the last fifteen years or so.

When we think about it - if you've long ago decided that someone selling your product for you is a pirate, how could it have turned out any other way?