With all the time people waste surfing the Web, watching Internet videos and playing online games, wouldn’t it be great if they could make money while they do it?
That’s the idea behind Swagbucks, a Torrance website that gives reward points to people who complete their everyday online tasks through its website. Those points can be redeemed for gift cards, prizes and discounts.
But up until last month, Swagbucks users couldn’t earn points for one of the most common online activities: shopping.
Swagbucks launched a shopping feature in early November that allows a person to earn reward points – also known as swagbucks – based on how much they spend at affiliated e-commerce shops such as Amazon.com, Target.com and Walmart.com.
“We’ve been giving all this money back to the consumer, now let’s have them spend it through us,” said Josef Gorowitz, co-founder and chief executive of Prodege LLC, the parent company of Swagbucks. “We came to the realization that if we could bring discovery, entertainment and consumption of commerce to our users, we’d have the full value.”
People looking to earn reward points while they shop can use the Swagbucks shopping web page to click through to the websites of the company’s e-commerce partners. For every dollar spent on one of those partner sites, the shopper can get up to 40 swagbucks depending on the promotion. When redeemed, 100 swagbucks equals $1.
The company also awards points for searching through its customized search bar, watching videos, taking surveys and playing games. When people have accumulated enough points, they can redeem them for gifts or discounts at popular stores. An iPod Nano, for example, costs 20,000 swagbucks. Some retailers give a 20 percent-off coupon in exchange for a certain number of swagbucks.
By expanding into shopping, Swagbucks has tapped a fast-growing industry of affiliate websites sending traffic to e-commerce shops. But the space is already occupied by several companies that reward users for shopping with them. Some of the biggest include MyPoints, a San Francisco company owned by Woodland Hills’ United Online that gives gift cards and cash back when customers shop through the website, and Ebates, also in San Francisco, which offers similar rewards for shopping through its site.
Rebecca Madigan, executive director of the Performance Marketing Association in Camarillo, said having Amazon Inc. as a partner lends Swagbucks’ shopping platform a certain level of credibility. The Seattle e-commerce giant works with only a handful of affiliate channels.
“Amazon recognizes that Prodege has done an awesome job of building up customer loyalty that Amazon can’t do on its own,” she said.
Targeted advertising
Swagbucks makes a small commission – known as a referral fee – when people use its site to search online, make a purchase or other actions. It gives part of that fee back to consumers in swagbucks and keeps the rest for itself.
The company also sells advertising on its site. Because it has data on the web browsing and purchasing history of millions of users, it’s able to sell highly targeted advertising. Known as performance marketing, the advertiser only pays Swagbucks when someone makes a purchase or otherwise interacts with a brand after clicking through the ad.
Swagbucks is able to charge a premium for such ads because they are so highly targeted, said the marketing association’s Madigan.
But the biggest challenge Swagbucks faces is getting people to go to Swagbucks to watch videos instead of YouTube or to the Swagbucks search bar instead of Google.
Elisabeth Osmeloski, an editor at search blog SearchEngineLand.com and its sister blog MarketingLand.com, said people have to weigh whether they will benefit from putting in the time to use Swagbucks on a regular basis.
“The challenge that most consumers face is the value of your time versus the level of your effort,” said Osmeloski, who used Swagbucks for a year a few years ago to earn enough points for a pair of $900 skis. “From what I’ve seen, it’s a legitimate way to earn a reward.”
Scott Dudelson, the company’s co-founder and chief operating officer, said the company recognizes that there’s a barrier of entry to get people signed up and using Swagbucks as habitually as they would other websites. But he noted that the promise of rewards helps get people to the site.
Growing fast
In 2005, Gorowitz and Dudelson started Prodege as a branded search engine for celebrities and musicians. Prodege introduced the “swagbuck” in 2007 as a form of currency that could be redeemed for merchandise. A year later, Gorowitz and Dudelson launched Swagbucks as a standalone website.
Since then, the site has expanded from only search to six verticals through which people can earn rewards. Swagbucks has also launched a mobile app for viewing videos and expects to launch apps for its other verticals next year.
Along the way, Swagbucks has added 6.7 million users. Prodege is nearing $35 million in annual revenue – which primarily comes from Swagbucks – and has been on the Business Journal’s list of Fastest Growing Private Companies two years in a row.
The staff has grown from five to nearly 70, causing the company to knock down walls in its building off Del Amo Boulevard to create a mazelike two-story office. Gorowitz said the company will probably move into a bigger office next year.
The company’s growth is driven by the addition of verticals such as online videos and shopping. Swagbucks’ videos have already generated close to 100 million views a month since they were introduced earlier this year. The videos are either branded or feature ads before the original content starts.
Gorowitz said people are happy to view the video ads when they know they are receiving rewards for their time.
“Nobody loves watching commercials,” he said. “With us, you get the brand advertising, but you’re also getting rewarded for it.”
