Internet retail giant Rakuten has sent the affiliate marketing industry into a frenzy with a buyout of top US publisher Ebates.

The Japanese firm reportedly laid out $1 billion in cash to strike a deal for the California-based rebate site and, after a series of lengthy discussions, has now moved to confirm that a purchase has taken place.

Its new acquisition is one of the leading suppliers of money-back rewards in the US. Recent figures from Ebates suggest the company is currently in partnership with over 2,600 stores including Amazon, Best Buy and Home Depot, who benefited immensely from the $2.2 billion spent on acquiring products through the publisher last year.  

Though with Rakuten retaining ownership of affiliate marketing network Rakuten LinkShare, and its partnerships with several Ebates competitors, PerformanceIN decided to ask members of the cashback community about their general feelings towards the move.

Wide-ranging implications

Boasting partnerships with TopCashBack, Quidco and myvouchercodes among others, Rakuten LinkShare’s publisher list no doubt includes a who’s who of cashback/rebate sites. By connecting with the company, PerformanceIN sources have suggested that Ebates could potentially leverage data and various insights from its Rakuten LinkShare-supported competitors for an inside advantage.

The monetary value of coming under new ownership will help Ebates make real strides towards becoming a US publishing force. However, being able to keep tabs on exactly which types of deals are interesting customers across its sector could be worth even more in the long run.

Despite this, Adam Bullock, head of operations at Rakuten LinkShare-listed affiliate TopCashBack, says he does not expect the deal to impact his own partnership with the company.

“A merchant chooses a network to work with based upon an number of factors including the range of affiliates which they have access to and maintain relationships with. Therefore we feel that LinkShare would need to continue to grow their partnership with other affiliates such as ourselves in the USA in order to ensure they on-board new merchants as well as retain their current partnerships.”

Bullock added that he felt it would be a “fairly risky” move for an affiliate network to move away from the impartiality the industry relies upon.

In comments after the deal was confirmed, Rakuten founder and CEO Hiroshi Mikitani chose not to focus on the conflict angle, insisting the Ebates partnership was “all about the consumer” while announcing plans to expand on the retailer’s own affiliate programme through its new link-up with the site.

Cashback hits the big time

On one hand, there are obvious points to be made about a conflict of interest from Ebates’ indirect partnership with Rakuten LinkShare. On the other, there are plenty of positives to be taken out of the news.

If Ebates’ suggested worth in the eyes of a top global retailer is anything to go by, cashback/rebate publishers around the world could be set to hit a goldmine.

Sites that split their advertising commission with customers for money-back rewards have enjoyed a rapid rise to prominence and Ebates could be one of the first big-money buys in 2014 and beyond.

Andreas Andreou, commercial director at cashback publisher Quidco, told PerformanceIN that he was not surprised at the value of his competitor.

“I think this proves how far consumer platforms like Ebates and Quidco have developed and the value we hold,” he said.

“The scale of our member base and the breadth and frequency of their shopping behaviour combined with constant multichannel innovation has enriched our platforms, meaning we’re driving real value for retailers and consumers alike.”

Also commenting on the purchase price, Bullock said Ebates’ valuation was “fairly high” but not overly excessive in comparison to acquisitions involving tech companies with no proven track record of success.  

Stock takes a tumble

In the short term, Rakuten will have to stem disgruntlement from a more pressing angle if it is to welcome immediate benefits on the back of the purchase.

Shareholders have reportedly raised doubts over whether the company can make quick gains from a partnership with Ebates considering the initial acquisition fee. With Ebates only generating $167 million of revenue last year, questions will need to be asked over its ability to pay back the faith that Rakuten has shown.

A sudden drop in Rakuten shares on Monday added weight to the rumours  - the figure dropping 4.2% to the lowest price since June 24. Stock dropped by a further 1.3% on Tuesday morning as talk of a completed deal filtered through.

Ebates CEO Kevin Johnson has also tipped the deal to help Rakuten gain a greater share of the US e-commerce market. Analysts have questioned this motive too, asking whether the company can take on the likes of Amazon and eBay in such a competitive field.

Update: Tony Zito,  president of Rakuten Marketing, has looked to quell speculation about a potential conflict of interest with the following announcement.