23 Comments

The BHOs Have Won: Ebates Dines On FatWallet And Its Golden Rep

Sep 9, 2011
by

What do you do when one of the companies you trust least buys one of the companies you trust most? That scenario happened for me today as news came Ebates bought FatWallet. For affiliate industry advocates this news is simply worse than a kick in the gut. For diehards it is the industry’s equivalent of Greedo firing first.

A Black Spot

Once you develop a bad reputation it can be hard to shake.Ebates has not had any high profile legal issues or backlash within the industry for a while. Still they’ve had a hard time shaking the reputation they earned from developing Mo Money Maker. The sites ultra-aggressive “rebate reminder” software is considered a Browser Helper Object (BHO); such objects are often associated with spyware/parasiteware since they are usually bundled with innocuous products the consumer wants. In Ebates’ case, along with other tactics, they used to bundle it with screensavers.

Although Ebates has cleaned up, due in part to industry pressure, and is technically in compliance within the terms of affiliate networks like Commission Junction, the reputation they earned still persists. Now, by no means is Ebates remotely close to being the worst player in the space. But it is telling that ABestWeb, the largest affiliate marketing community, still maintains a forum for Ebates under the inauspicious headings of Parasiteware and Suspicious Activity.

Business Happens

By comparison FatWallet and founder Tim Storm, have enjoyed a stellar reputation. They’ve been embraced by networks, merchants, and publishers alike as a winning model. FatWallet even enjoyed recognition outside the industry being recognized as one of the 50 Most Engaged Workplaces in the United States. Their reputation was so bulletproof that when they announced a forthcoming toolbar, something most advocates would bristle at, they went by unscathed. In fact, when affiliate network ShareASale decided to open up the debate on allowing toolbars, the fact that FatWallet had one was used as an argument as to why the technology might be okay.

So why sell a successful company with such a golden reputation? Two reasons:

  1. The recent nexus tax legislation in Illinois hurt FatWallet and forced it to move out of state.
  2. Increase in industry competition, specifically due to WhaleShark Media’s recent buying spree. The fact that Ebates is using this opportunity to launch of Performance Marketing Brands is a sure sign they are gearing up against WhaleShark. Combine that with the rise of the daily deal sites (Groupon, LivingSocial, etc.), competition for merchant’s offering and budgets is fiercer than ever.

Tim even states in the acquisition announcement that “shoppers are bombarded with an overwhelming number of coupon codes, deals and sales.” Staying competitive was obviously key to FatWallet’s decision to sell.

The Good Guys Lost

Since I began writing this piece, I’ve had Leonard Cohen’s song Everybody Knows in my head. It’s an appropriately jaded song for such a post.

Over the last two years there has been a decrease in industry advocacy around what constitutes an ethically acceptable affiliate marketing business model. Some would say that because the industry has cleaned up the need has lessened. That might be true, but I think rather than really cleaning up by making the tough decisions, the industry has simply become more compliant out of fear of legal repercussions. The success of openly blackhat forums like WickedFire seems to testify to that.

Some say that many of the advocates have simply stopped speaking up for various reasons: they’re tired of being marginalized; they’re tired of the networks being so slow to listen; they’re tired of bad behavior being rewarded. Whatever the case, when controversially outspoken industry advocate Haiko de Poel Jr. sold ABestWeb there is no doubt that the volume of advocate activity dropped sharply.

Ultimately I don’t have the energy to begrudge Ebates’ success or their acquisition of FatWallet. Part of me just says, “That’s how it goes…and everybody knows.”

 

About Angel Djambazov

Born in Bulgaria, Angel Djambazov has spent his professional career in the fields of journalism and online marketing. In his journalistic career he worked as an editor on several newspapers and was the founding Editor-in-Chief of Wyoming Homes and Living Magazine. Later his career path led to online marketing where while working at OnlineShoes he earned the Affiliate Manager of the Year (2006) award at the Affiliate Summit, and In-house Manager of the Year (2006) award by ABestWeb.

For four years Angel served as OPM for Jones Soda for which he won his second Affiliate Manger of the Year (2009) award at Affiliate Summit.

Currently Angel serves as OPM for KEEN Footwear and MedicalRecords.com. His former clients include: Dell, Real Networks, Jones Soda, Intelius, Graphicly, Chrome Bags, Onlineshoes.com, Vitamin Angels, The Safecig, and Bag Borrow or Steal.

Angel is the Editor-in-Chief and Co-Publisher for ReveNews.com and ReveNews.org.

Angel lives north of Seattle, spending his free time reading up on obscure scientific references made by his wife MGX, while keeping up with a horde of cats and a library of books.

You can find Angel on Twitter @djambazov.

Filed under: Adware, Spyware, Greynets, & Internet Fraud + Affiliate Marketing + News Briefs + Performance Marketing
  • Pat Grady

    i wish everybody knew that the dice are loaded, but the fact is, they don’t.  given the deception and mis-attribution theme, i’m instead, thinking of a line (not) from PT Barnum.

  • http://twitter.com/billykay Billy Kay

    The coupon/rebate business model is so over-saturated… as as you mentioned, so competitive and cut-throat. If Tim was offered a lot of money to get out of the grind – more power to him. I’m sure he’ll reinvest in another website.

  • http://twitter.com/billykay Billy Kay

    The coupon/rebate business model is so over-saturated… as as you mentioned, so competitive and cut-throat. If Tim was offered a lot of money to get out of the grind – more power to him. I’m sure he’ll reinvest in another website.

    • http://www.revenews.com Angel Djambazov

      I have no issues with Tim personally. I like Tim, I think everyone does, he is
      hard not to like. I think what’s being overshadowed here in the
      sentiment I’m hearing for Tim, is that this ultimately was not a good
      event for our industry.

      • Tim Storm

        Thanks for the kind words Angel.

        You might say I have some familiarity with the matter at hand ;-)

        It was very very very clear to me that the Ebates of today is much different than the Ebates of years gone by.  It comes down to the people in the seats, and I’ve been very impressed by the leadership team that I’ve had the opportunity to work with in developing this deal.

        I kind of wish I had kept count of the number of times I said “no” to opportunities to take on additional investment…  For me it came down to having the right partner that would continue the brand that I started, understand the business, and take care of the people that make the whole thing work.

        It is clear that the industry is maturing to some level of consolidation – The fit between Ebates and FatWallet from a talent and product offering point of view looks very solid from where I sit.  (and no, I’m not sitting on the beach)

        (yet)

        • http://www.revenews.com Angel Djambazov

          Thank you for responding Tim. Hopefully something good will be created from PMB. And I do really wish it was from the beach :)

        • Joe Sousa

          Congratulations Tim. From what I know of you I know you wouldn’t make a bad decision on something like this. I know you care for your employees and the company you have built and you wouldn’t do anything that would be bad for either.

          Now you need to start teaching business seminars so we can all learn from you!

  • Kjohnson

    Angel:

    I’m sure I won’t sway your opinion formed years ago, but here goes…. I joined Ebates 3 years ago as CEO. At that point, Ebates wasn’t installing its BHO 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 — not due to industry pressure, but because I didn’t think it was a good/fair practice (though we still have customers bemoaning its cancellation years later).

    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, you are right. It’s a great site/company and set of people. Ebates didn’t buy FW to take advantage of (or hurt) its golden rep. Rather, we think we can grow faster together than apart — and our compatible cultures and complementary businesses will make it easy to collaborate.

    I hope you continue to trust and respect FatWallet and give Ebates another chance some day.

    Sincerely,
    Kevin Johnson
     

    • http://www.revenews.com Angel Djambazov

      Kevin,

      I appreciate you taking the time to respond. The fact that Mo Money is gone and there is acknowledgement on the part of Ebates that it was not a good or fair practice is a start.

      With the pressure coming from WhaleShark plus all of the pressure in the deals space I have to wonder what impact it will have on your ongoing policies. The stakes are even higher with the set of investors you have.

      How will that pressure affect you as a company? It will be interesting to see what side of the consumer privacy argument PMB will come out on when it comes to retargeting. It will be interesting to see whether you will bundle your local offers in ways that are not clear to the consumer what they are agreeing to. It will be interesting to see whether the pressure of competition will cause you to use technology to cut ethical corners like you did in the past.

      I welcome change. I hope that PMB can be a positive example of performance marketing. The industry could use more positive examples. As you know, we’ve had enough negative ones in the past.

      • Kjohnson

        Thanks Angel, we have had (and continue to have) some negative examples indeed.  At the moment, I am probably more worried about risks to the industry are from misguided nexus taxes, the complexities of attribution as seemingly everyone (including payment providers) becomes an affiliate, and occasional  purposeful lack of attribution by retailers. Let’s hope we can all grow ethically both as individual companies and as an industry.

  • Scott Hazard

    Wow. An Ebates CEO who admits what they did was wrong. That is certainly a start! 
    Now if only they would pay back the millions of people whose computers they infected with their pop-up adware being forcefully installed and the thousands of affiliates whose commissions they robbed with their BHO. I saw first hand how Ebates handled their relationship with Zappos. I have video of their BHO automatically popping and forcing a cookie immediately upon arrival at the Zappos web site. This resulted in Zappos devaluing the affiliate channel, lowering their commissions from 15% to 12% and costing honest affiliates lots of money. That is just a single example of the damage they did to the industry. Until they find a way to compensate customers and affiliates alike for their egregious actions of the past, they are the still the same as ever.

    Tim, congratulations on the sale of your company. I don’t blame you one bit for selling it to them. You are fortunate enough to recover the money they took from you over this period of time.

    • Kjohnson

      yep, the old BHO is also responsible for the death of Jimmy Hoffa. That’s why it’s in hiding in a cave in Afghanistan.

      • Tim Storm

        As a strategic advisor, I feel it is important to note on the record that the BHO is in an unmarked grave.

        On a more serious note – 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 pretty good run (although admittedly not perfect) over the last 12 years.  I sincerely hope that I got this one right.

      • Kellie Stevens

        Your second response doesn’t help build the creditably nor trust of your first response. Is flippancy really productive? It’s also pretty tactless considering it’s one day before Sept 11th…just saying.

        • http://www.facebook.com/loxly Deborah Carney

          I’m with Kellie on this one.  First all the politically correct answers, then WHAM a flippant, inappropriate comment that pretty much will make everyone discount or at least look differently, at your previous comments.

          • Kjohnson

            Deborah and Kellie: I meant no reference to September 11 and apologize for any negative connotations created.

            As for my attempt at humor taken as flippancy, I apologize for that too. 

            Also, I’d like to note that my first answer was not an attempt at ‘political correctness’. Rather it was simply an  heartfelt and factual answer. 

            My response was met by Scott with the claim that Ebates’ download single handedly devalued the industry and reduced commissions at Zappos — and the demand that we must pay reparations before being considered anything but ‘the same as ever’.  

            Perhaps I was wrong, but I didn’t take that as evidence that the heartfelt approach is effective with Scott and I took a different approach.  I’ll try not to make the same mistake again.

            Thanks,
            Kevin

  • Pat Grady

    “Ebates wasn’t installing its BHO 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 — not due to industry pressure, but because I
    didn’t think it was a good/fair practice”

    i’m the sort of guy who, after witnessing past behaviors, is very slow to trust the same source, even after being told the source itself has turned over since.  others, like the old guard there, built my cynicism – and that cynicism still makes me question everything claimed in this statement.  just one example is “transactions” (vs revenue).  but, suffice it to say re-word-smithing shouldn’t be done on my account, my cynicism includes the category of bald face lies, so we needn’t dissect anything said.  time will tell.  if anything’s worth parsing on my behalf, if i knew specifically how long ‘unfair’ had gone on, i’d be willing to open my mind some after that same amount of time had passed subsequently playing ‘fair’.  that’s my minimum doghouse term, not the standard one, but the minimum.  until then, though painted over, i still see the zebra’s stripes.  and anyone who expects no lasting ramifications or memory of unfair being wielded at others, is exactly the sort of person i inherently dismiss as a charlatan.

    all that said, if i myself joined a caravan of reformed hucksters, buying Tim’s real value add FW would certainly be something i’d expect others to question initially, then eventually regard over a long time, as another redemption-consideration-worthy step taken.  so bravo to Tim, and provisionally, to the painted zebra.

  • Michael Coley

    It’s really hard to forget about past actions.  I know they’re supposed to be cleaned up now, and supposedly have been for a while, but the old impressions remain.  In the Bible, there’s a story about a harlot named Rahab.  After Jericho is defeated, she leaves that lifestyle and is even named in the lineage of Christ.  But the name Rahab the Harlot stuck with her throughout her life and all of history.
     
    I’d like to be excited for Tim.  He’s an awesome guy and he has done incredible things, ethically.  I’m sure this was an excellent move for him financially, and I’m happy for him for that.  But I don’t think he would have done it JUST for the finances.  I think he truly thinks this will be good for FatWallet and good for the industry.  I think most of us are skeptical on those two points.  I hope that our skepticism is unfounded and that Tim is right.

    • Anon

      Wow! Really! It’s amazing to me that so many people that quote the bible or biblical tales are so blind to the basic principles of their faith. I am speaking about forgiveness. Must be nice to live in that glass house.

  • http://www.automatedsocialnetworking.com Treb

    Very interesting post… I love the information shared here also with the comments below… Thanks for sharing…

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  • http://twitter.com/FikirBorsasi FikirBorsasi

    @angeldjambazov:disqus @ Tim Storm Payback.de recently launched its deals business.  Incumbent cash back and loyalty platforms have large user bases and relationships with merchants.  Groupbuying is trying to capture this market by offering time limited deals with even deeper discounts… Cashbacks and loyalty will enter group deals or consolidate?  How do you see the future?Â