How does RetailMeNot make money?

The website is paid a commission for promoting digital coupons on behalf of retailers

I love a good coupon, and, honestly, who doesn't? It feels good to feel like you're getting a little discount, even if its small.

Earlier today, for example, I went to buy tickets for a thing I am going to with a co-worker later this month. I did a quick Google search for a discount and that led me to RetailMeNot, which had a code that saved each of us $2. Even if it's only a couple of dollars, at least that's something, right?

That is the whole idea behind RetailMeNot, which runs collection of coupon web sites. Its properies include Deals2Buy.com, ZenDeals.com; VoucherCodes.co.uk, a voucher code site in the United Kingdom; Deals.com in Germany; ActiePagina.nl, a voucher code site in the Netherlands; and Bons-de-Reduction.com and Poulpeo.com, digital coupon and cash back sites in France.

It acts as a marketplace platform to help retailers and brands connect with shoppers. It now has more than 600,000 coupons and offers for 70,000 retailers.

So how does the company make money? By being paid a commission for promoting those digital coupons on behalf of retailers. The commissions it earns are tracked and paid by performance marketing networks, who provide the retailers on the site with affiliate tracking links for revenues attribution to publishers.

Basically, you click on a coupon, then click through the site to get to that retailer, use the code, and RetailMeNot will get a percentage of that sale, between 5% and 6%. So if you spend $100, with a 10% off coupon, bringing the price down to $90, then RetailMeNot, with a 5% commission rate, would get $4.50 for that sale.

RetailMeNot has a big problem, however: it generates consumer traffic to its websites mostly through search engine marketing, or SEM, search engine optimization, or SEO, email campaigns and social media referrals.

The company, which went public in 2013, has been absolutely pounded in the last year and a half. That came as a result of Google tweaking its alogrythm, which took away a big chunk of the company's traffic.

As a result, RetailMeNot has been losing revenue. In the second quarter of this year total net revenues declined 11% to $53.2 million. While in-store advertising revenue increased 72% year-to-year, and mobile online transaction net revenues increased 91%, the company took a big hit on desktop, where transaction net revenues declined 25% to $38.6 million.

It has also lost a huge amount of its stock price, dropping almost 80% from its high of $43.78 in March of 2014, to $8.91 a share on Thursday.

(Image source: thetribuneregister.com)