Rob Manuel

Recently I’ve had a bit of a revelation when it comes to websites - many of them earn their cash by recommending other sites and collecting the ‘affiliate’ money. I.e. a kick-back for finding a new customer.

Some sites are acting reasonably responsible - for example I always stick an affiliate code on the Amazon links to the Sick Joke Book and earn an ooh 10p extra cut on each sale.

Whilst others are simply raking in the moolah.

(Naming no names, but look hard at those supermarket points websites that suggest you buy stuff via their link, and get oh-so valuable points on your card. How generous Mr Supermarket man. Cheers.)

In the process of digging about and finding out how this stuff works, I came across a site called Quidco which gives back all this money to the consumer. Feeling a little investigative, I thought I’d ask them a few questions.

WARNING: Some of this stuff is a bit wordy, and if you want to skip this bit then go-ahead. The crucial point is Quidco are legit and you will earn good money back if you use them.

Interview With Paul Nikkel, co-founder of Quidco.

What’s your background?

Paul: None of the us who founded Quidco had any commercial background, what we did have a was an interest in making a site that would work for consumers instead of against them. I don’t really like business and I think if we came from a business background we probably wouldn’t be running Quidco the way it’s run. We’re all in our mid-twenties and Sheffield based.

Rob: So, two of you run the site. What are your roles?

Paul: Actually there’s a few more than two of us running the site now. When we started in May 2005 it was myself and my wife who came up with the concept and implementation. At that point we had a friend who did the back-end programming to put things together. This stayed the same for about 10 months as we grew and then we had to take on more people. We now have a couple of programmers who work on the site as well as two other customer service people to handle member emails and transaction enquiries (when things don’t track properly etc). That’s the basic structure.

How did it all start?

Paul: I don’t know if you’ve read it but we have a little Quidco story on the site that covers that one.

The basic thrust of it is that we’re pretty savvy online shoppers and we wanted to make the kind of site we wanted to use. We knew the fundamentals of how reward schemes like Nectar e-stores work and we knew how much potential money was sitting there for consumers. So we figured let’s make a co-operative out of this where we pass on all that money as real money and give it back to the consumer. Of course we have to make something too and so we came up with the model where we hold back the first £5 a member makes in a year. That way no one is ever out of pocket, no one is ever charged a fee as we can only hold it back if you’ve actually earned it on the site.

The other fundamental aspect of it for us was that we wanted an ad/spam free site. So we don’t do any flashing ads, we don’t do banners, we don’t do email shots, we don’t sell/trade addresses, and so on. We think there’s a huge potential for any site that actually takes its members seriously and doesn’t try to push things down their throat. We’re seeing this clean/honest way of thinking more and more with the new breed of web business models but in most of online shopping there’s still this old “portal” concept with noisy ads, email shots etc. We didn’t want to be part of that.

Surely you earn more than £5 per user? There’s interest, and the people not logged in…

Paul: I think there’s a difference between how you make money on a site though, between making money as an incidental or how you make it as a business model. Our business model is built on holding back that £5 and that is what we fundamentally rely on to run the site. As incidentals there is a very small amount of money made from people who click on the red “You are not logged in and won’t earn cashback” links but I’m not sure why someone would visit a cashback site to not earn money on their purchase. We have these there so visitors understand how the site works even if they are not logged in.Also, with interest, we do not have a minimum payout, we will pay out our members each month even if they have only 1p in their account. As we are generally paid in the third week of the month we hold on to member earnings for about a week while we allocate it into their accounts. Again, if a member didn’t enter their payment details for a few months then yes we would be holding it and making interest during that time but again it’s an incidental and not a business model.

The interest one is a question of scale also, at today’s current account rates you would need an absolute pile of money before you’re going to see any kind of notable money coming in off that in a week; and the issue with scale here is that to get an absolute pile of money you would need an absolute pile of members which are going to be requiring, well, an absolute pile of administration which leaves that interest again as an incidental amount.Not to make an essay out of that but we get the question a lot and there is a distinction there I think. If a site’s model is fooling people into clicking the not logged in link, or setting minimum payout levels and extended payment periods in order to hang on to money longer then I think that would be opposite to the ethos of Quidco. As a side note here, another aspect of the co-operative is that many referral programmes are based on activity tiers so the more members we do have the more we often get on certain programmes, this is passed on to members also.

Rob: Yep, I’m not trying to catch anyone out. I’m just trying to understand the business model. I’m surprised that the earnings on the non-logged in users would be low. As a large proportion of web traffic is often simply people passing by, clicking the odd link, moving on. This sets a cookie, la la la, you know better than me how affiliates work.

So what about the suggestion that sending people to merchants in bulk, negotiates a better percentage which you don’t give back to the user?

Paul: I do get a little insulted when people make that claim. Yes we could hide things but I think the amount of programmes where we are publishing the highest tier shows that we are not out to hide anything. I would hope blog items like our eBay dilemma also show this. From the beginning the idea of climbing the tiers has been central to what the point of Quidco was as a cooperative, by pooling our earnings we climb into higher tiers.

I totally agree with you about being open with every penny and that’s what we try to do. However, we always have and always will come across people out there who refuse to believe we are running this on what we say we are. I think there is also a fair amount of bitterness from the old guard who were holding back 50% of commissions that seeps out here and there.

So you’re really earning only off that fiver? No funny business?

Paul: On a regular site you have people passing through but on Quidco they are coming specifically to shop and get cashback through partner merchants so there is little reason to be passing through otherwise.

How do you know it’s me who’s bought a tv?

Paul: We track the user to the purchases through the affiliate reporting. The member doesn’t have to do anything like submit a claim etc. As this works on cookies and such though there are some things we recommend members check like the settings on Norton Internet Security, Search and Destroy, etc. (these have settings to block third party cookies and affiliate tracking which we actually need to work in this case). As with everything there can be problems with tracking especially if a user has a lot of anti-ad software or if the merchant hasn’t set up tracking properly etc. and in that case we have to take their information manually and raise it with the merchant which is a pretty long drawn out process.

The bigger picture, what do other sites think?

Paul: I don’t have much of an idea of what our competitors think of us. I assume it’s probably the same as in any business where I doubt they love us as much as our members do.

Why no Amazon?

Paul: We’re talking with Amazon about joining Quidco. There’s a few issues with them.

Your future?

Paul: We’d like to see Quidco as the place savvy internet shoppers go when they start shopping in the UK. There’s more and more ad money coming online and it only makes sense for the smart shopper to be taking advantage of cashback.

The crucial “how much do you earn question?”

Paul: Number of users isn’t a public number sorry. I would say it’s a bit irrelevant anyway. It’s kind of like talking about website “hits”.

Rob: Ha ha. Now, don’t fob me off so. It’s nothing like the same thing. Presumably you don’t want to make that number public as people like me would times it by 5 and say “Quidco are making £x” And you’d have to say, “No. It’s more complex than that. X% of our users sign-up and never come back, hence we never get the £5″ But once the number was out there, it would be a hard thing to kill.

Paul: It is more complex than that as you say. And also a lot of people count rows in their database as “members” which make it fairly irrelevant. I know it’s something everyone wants to know though. I guess I use the hits analogy as it’s often bandied about to the same effect, more to impress rather than make any sense.

If you need a number the public one we use is £26 million bought through partner merchants by Quidco members so far in 2006.

People earn money online in such weird ways…

Paul: Yup it’s very interesting. Here’s a few that get me… people will buy from merchants through quidco and then resell on ebay. They find a bargain (1. merchant makes money), go through Quidco (2. we make money), resell on ebay (3.ebay makes money and 4. they make money) and probably the user pays with Paypal thus 5. Paypal makes money. Five steps (well there’s more if you take in other spin-offs like the network makes money and the agency that deals with the network - but these are the main ones) and nothing has really happened but everyone made some money. Or how about matched betting? People placing opposing bets on various online gambling sites with slightly different odds to end up ahead…and gambling profits are tax free. The list goes on and on. There’s a lot of stones to look under online…

Is the future cashback AND price comparison?

Paul: Combining price comparison and cashback has been done/tried on both sides of the pond and is still done here and there. The problem with price comparison is that it takes massive resources and you need to use 3-5 to get a proper comparison anyway (hence why there are meta-comparison sites). It seems what happens is that you end up putting massive resources into price comparison only to have members use several others anyway. Someone like Pricerunner in the UK (valueclick company) has a large amount of staff manually inputting data as well as trying to untangle automated product feeds and databases. So far it seems better to let users find prices using whatever service is best at that time and skip on the resource loss. It is something we keep an eye on though yes.

The funny thing is the whole concept sounds too good to be true to most people.

And the world beats a path to your door…

It is a very word of mouth thing overall but I think it will always be something for people who are shopping online already. My mum really doesn’t get it for example but she doesn’t shop online and so she the reward/risk ratio doesn’t really work well for her.

So there we go. Money for old rope? Visit Quidco to find out for yourself.

This entry was posted on Monday, December 4th, 2006 at 11:57 pm and is filed under article. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.