Ibotta (pronounced like “I bought a”) has made many twists and turns between when it was founded 13 years ago and going public last week. It was founded as a cashback app that earned a living on the value of customer receipts. And its evolution since then is emblematic of the industry’s overall transition from third-party data marketplaces to first-party and retail media data.
The initial model – and still Ibotta’s largest revenue line – is a DTC app. Its users upload pictures of their receipts and receive cash returns. Ibotta is paid by advertisers, which promote certain discounts within the app and use the data for attribution.
In 2022, the company launched the Ibotta Performance Network (IPN), a performance marketing network for other apps, stores and publishers, so that they can white-label the deals targeting system without the shopper having an Ibotta account or using the app.
In Q1 2024, Ibotta’s DTC app revenue actually ticked down year over year, from $49 million in 2023 to $47 million today. But its third-party network business grew from $8 million in Q1 2023 to almost $35 million now.
The bull case
Ibotta has plenty to be optimistic about, though.
Even if its DTC app monetization is flat or slightly down, that’s more than made up for by the IPN. The company bounced back from an overall loss of almost $55 million in 2022 to earning $38 million in net profit last year.
Ibotta is also the beneficiary of trends in data monetization. In the days of aggregated third-party data marketplaces, companies like Oracle’s Datalogix and Nielsen Catalina Solutions (now NCSolutions) had massive advantages of scale. Ibotta’s user base is relatively small in comparison, so it sees a smaller slice of grocery consumption.
But the market flipped. Third-party data marketplaces withered under privacy scrutiny – to the benefit of first-party data owners like Ibotta.
The big kahuna
It is impossible to discuss Ibotta’s prospects without talking about Walmart.
In 2021, Ibotta signed a deal to be Walmart’s exclusive rebate management provider. Walmart, by the way, is a major Ibotta shareholder (it owns more than 5% of the company, which is all Ibotta discloses).
In an interview with me last year, Ibotta Founder and CEO Bryan Leach described IPN as “air traffic control” for retailer discounts. Retailers need a system that monitors deal offers as they’re taken in and sent out by different retailers, affiliate networks or publishers, he said.
By putting their weight behind an intermediary, retailers solve a sticking point with digital deals.
Formerly, deals were just, sort of, put out there. A retailer might publish a code that works for a day like a paper coupon. Except, paper coupons are used once. Digital rebates were shared and abused by savvy deal hunters.
Having one traffic control for deal offers prevents that from happening because deals can be changed or pulled once they’re redeemed.
And Ibotta can switch from cash refunds to store-based credits since it now plugs into retailers.
Ibotta doesn’t redeem all Walmart rebates by depositing cash in individual accounts, like with its app. Walmart digital account holders can be credited in the form of Walmart Cash.
The advantage of store-based credits rather than cash refunds can be seen with newer online shopping marketplaces.
One of Temu’s quiet killer discounting tactics has been a generous system of rebates called Temu Credits.
Sure, that thing you bought is a piece of junk, but it costs $3 and is refundable. But the refunds are Temu Credits. Or if the price on an item drops after you buy it, Temu discounts the savings from your purchase. But those refunds are in Temu Credits, too. The idea is people just pay it forward on the next plastic thing coming off a container ship.
Retailers want the same effect, but without the rock-bottom prices.
Today, retailers prefer not to simply offer enticing deals. They want a loyalty and rewards program to personalize offers, improve retention and enrich first-party customer profiles, which is the benefit of merchants white-labeling the IPN to keep customers within their own site or app.
The bear case
But for every blessing, there is a curse.
Ibotta’s jump in profitability last year was aided by deep cuts.
Sales and marketing expenses dropped from 52% as a share of overall revenue in 2022 to 36% in 2023; R&D dropped from 20% to 16%, while administrative costs went from 23% to 16%. The company saved an additional few million in 2023 by reducing data hosting costs and subscription software licenses.
Seemingly every consumer tech business underwent head count reductions in the past year and a half, so Ibotta was not alone there.
But while the immediate result is a return to profitability and great year-over-year results, Ibotta’s Q1 2025 earnings report will face a tough comparable period, even if revenue is up.
The trickiest issue for Ibotta, though, will be to navigate client friction.
Having Walmart as a backer and exclusive partner is pretty sweet. It means major CPG brands must be on the IPN.
But that’s a risky business.
Triad was Walmart’s exclusive shopper marketing agency, until Walmart in-housed those capabilities.
And remember AudienceScience? It was Procter & Gamble’s white-labeled, exclusive trading desk vendor for a time. Then it wasn’t.
Ibotta is different than shopper marketing agencies, since it has the DTC business and Walmart couldn’t just in-house its network of other retailers and shopping apps – they wouldn’t use the solution if it was owned by their primary adversary.
But, either way, Ibotta is playing with fire.
Walmart is a major shareholder, which is one way to retain the account. But if Walmart accrues greater profit margins or creates efficiencies by in-housing, the value of its Ibotta stake is fractional compared to its potential gains over time from building its own solution. Plus, Walmart doesn’t lose the Ibotta equity if it switches when the contract is up (at an undisclosed future date).
Though Walmart isn’t Ibotta’s only client with equity grants.
Three board members – Amanda Baldwin, Valarie Sheppard and Amit Doshi – are, respectively, the CEO of hair care brand Olaplex, the former longtime treasurer and VP at P&G, and the CMO of Brittania Industries, a large Indian snack and biscuit maker. Koch Industries, a huge manufacturer of household paper products, is another big stakeholder.
It’s a good thing when blue-chip clients are supporters of a tech vendor. But balancing the imperatives of retailers, web publishers and CPG advertisers will be difficult.
One thing brands, retailers, investors and Ibotta can likely agree on: At least Ibotta’s retail media data business isn’t ad tech.
“In a world where one can trace a digital interaction all the way out to an in-store or online sale, we believe that the rationale for selling ads or promotions on anything other than a fee-per-sale basis is weaker than ever,” wrote Leach in a letter to potential investors in the company’s S1 filing.
Take that, CPMs.
