Ebates Buys FatWallet

September 12, 2011 · 0 comments

Ebates has bought FatWallet, just months after buying recently-closed cashback competitor Cashbaq.

The purchase also included AnyCoupons.com, which was previously owned by 77Blue LLC, the same company that owned Cashbaq.  77Blue founder David Lewis has been a consultant to Ebates since the purchase of Cashbaq this spring.  According to Businessweek, 77Blue was purchased in its entirety.

77Blue/AnyCoupons and FatWallet are now subsidiaries, along with Ebates, of parent company Performance Marketing Brands, Inc.  The press release says they will continue to operate as independent websites.  The terms of the acquisitions weren’t disclosed.

This is a marriage of two VERY strong websites:  FatWallet has a US Alexa traffic rank of 408, while Ebates’ is 784.

Just for comparison:
ShopAtHome’s US Alexa rank is 156.
MyPoints’ = 621.
Upromise’s = 1,568.
MrRebates’ = 5,687.
Memolink’s = 6,607.

Alexa’s not the best comparison tool, but it’s at least a general benchmark of how these programs stack up.  ShopAtHome has an obnoxious toolbar that probably boosts their number.  Upromise has a substantial portion of their program activities that occur offline, so they’re a bigger player than their number reflects.

FatWallet was founded in 1999 by Tim Storm.  Initially a coupon/deal site, it has offered cashback since 2005.  However, their best-known feature is their discussion forum, which gained notoriety (and the undying respect of bargain shoppers) for standing up to retailers threatening legal action for Black Friday leaks.  FatWallet’s deal forums are so heavily trafficked by diehard deal shoppers that once a deal goes live, it often sells out immediately due to “the FatWallet effect” — a term I’ve seen referred to as far back as

Both FatWallet and Ebates have been impacted the the passage of  “internet sales tax” laws in their home states.  FatWallet relocated from Illinois to Wisconsin this spring as a result of this law.  They would have lost $4 million a year in revenue due to discontinued merchant relationships due to the tax law, and with net revenue of $13 million a year, that would have been an uncomfortably large chunk of their profits.  Ebates estimated a 20-25% impact on its revenue due to the passage of this law in their home state of California.

The new corporation, legally titled Ebates Performance Marketing, Inc., is registered in Delaware through a registered agent service company.  This gives them a nexus in Delaware although they have no offices located there.  Why Delaware?  It’s one of just five states that have no sales tax, and it’s also attractive to corporations because holding companies’ subsidiaries are tax-exempt, and the corporations themselves only pay a flat 8.7% tax.  Another potential benefit:  the possibility of side-stepping the internet sales tax.  It’s possible that being headquartered in Delaware will allow Ebates, FatWallet, and AnyCoupons to once again do business with some of the retailers (like Overstock.com) that discontinued their relationships after the passage of the “internet tax” laws in their home states.  Actually, FatWallet could, in theory, move back to their super-cool original offices in Illinois now that they’re under the umbrella of a Delaware corporation.

More reading:
“And now a word from our founder…”Tim Storm‘s announcement of the sale on the FatWallet forums.  FW staff in response to reader concerns, says:
-  “there has been no change to the management team that Tim put together” …although some staff may move to California
- the annual Black Friday t-shirt contest will go on as planned (you’d have to understand the culture to get the significance of this, and it IS significant)
- there will be no sharing of information between Ebates and FW for cross-marketing, says a staffer (though that would REALLY surprise me)
- Staffers gave slightly different answers to the question about whether Ebates and FW cashback accounts would/could be merged:  one said, “accounts will continue to be distinct and will not be merged,” but another said, “at this time, there are no plans to merge Ebates and FatWallet accounts.”  Very different answers.  And it would just make sense that FW’s members would be encouraged to move their accounts to Ebates — Ebates has been around longer, and it’s my impression that they have significantly more members and IMHO a much nicer interface — while FW’s deal forum would replace Ebates’ shopping blog.  But that’s just my thinking.

“The BHOs Have Won: Ebates Dines On FatWallet And Its Golden Rep”Angel Djambazov of ReveNews posts that Ebates is “marrying up” so to speak as FatWallet has a more pristine reputation (referring to the Moe Money Maker toolbar Ebates introduced in or around 2001 which was at times downloaded without the user’s knowledge or permission… though in their defense, it’s been removed from Ebates’ website for 3 years and wasn’t promoted for several years before that).  Both Tim Storm and Kevin Johnson have participated in the comments to the post.  Notable:
- Tim says, “A company really is its people, and after looking at the people of Ebates today, I didn’t have any hesitation.  I’ve had a good run (although admittedly not perfect) over the last 12 years.  I sincerely hope that I got this one right.”
- Kevin says, “I joined Ebates 3 years ago as CEO.  At that point, Ebates wasn’t installing [MMM] anymore but it still existed (accounting for a whopping 1% of the company’s transactions).  Once I learned about the software and how it had been installed, I made the decision to disable it…  Today our practices are quite different, and so is our team.  In fact, not a single member of the management team of Ebates today had anything to do with Mo other than killing it.  As for FatWallet…we think we can grow faster together than apart — and our compatible cultures and complimentary businesses will make it easy to collaborate.”

“Ebates Announces Creation of Performance Marketing Brands & Acquisition of FatWallet” – ABestWeb Affiliate Marketing Forum.  In this post, long-time members of the affiliate marketing community discuss the news of the acquisition.  Noteworthy:
- Brian Littleton of ShareASale calls Tim and his way of doing business a professional and personal inspiration to him.  He says that he feels there’s nothing wrong with moving forward past Ebates’ history and that the industry has evolved, and congratulates Tim and his team on the news.

Final Note:  Kevin Johnson was kind enough to respond to several questions I had for him in email today.  He says that “the state of incorporation is only partially relevant to nexus considerations,” and that Delaware was chosen for the new company’s incorporation because it “has well structured corporate law and is a favorable place to incorporate independent of various state nexus taxes.”    He says that they’re working on various ways to bring back the stores who had cut ties with Ebates due to the tax laws and expects most, if not all, back on the site within about a month.  And for those wondering about a merger of the Ebates and FatWallet cashback programs, he very firmly assured me that “FW will stay FW and Ebates will stay Ebates.”

Congrats to Kevin and Tim for a wonderful strategic alliance that will hopefully play off each other’s websites’ strengths and see us through another decade of fantastic deals with competitive cashback.

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