A lot of people have trouble understanding how cashback sites stay profitable and make their money. It’s quite simple. Online stores are interested in new customers and they have come up with a new clever way to boost their sales.
Back in the day online stores used discounts, coupons and promo codes to attract customers, the current latest trend is offering cashback. Essentially, it’s still a discount, but you get it after the purchase instead of before, and you also get it in cash. This cashback isn’t paid to customers directly, but is transferred to a cashback platform that charges a commission for its services and gives part of the cash back to its users.
How much do cashback platforms make? On average they give away 40% to 70% of the money they receive from the online stores. Thus, a cashback platform that has, say, about 3000 active users will bring its owner about $27,000 a month. And the more users you have – the more money you make.
Similarly, the less cashback a site gives to its customers – the more money it makes off every purchase of its users. By the way, the more a platform works with a particular store (the more the turnover) – the higher cash back rates that store will give.
Here’s how a typical cashback platform operates
Aliexpress, one of the largest online stores in the world, pays 8% to 14% off every purchase to cashback platforms (depending on the overall turnover, i.e. the total amount of money spent on Aliexpress.com by customers brought in by the platform). Therefore, it’s not hard to calculate that when buying $100 worth of goods on Aliexpress the customer receives $4-7 of cashback, while the platform receives $4-7 and keeps the change.