Tag Archives: envaulted

Why You Should Follow The Money

Whenever I’m trying to understand why things are the way they are, I often find it useful to try to follow the money, so to speak. By following where money goes and to whom, it often becomes clear why people/companies act the way they do.

A prime example in the points/miles blogosphere is why there are so many posts talking about certain credit cards on a subset of the blogs. The answer? Because these bloggers get paid money when people click on their links and apply for the credit cards that they advertise. Money is flowing from the credit card issuers to the bloggers. Thus, when evaluating the content of said blogs, it is often useful to ask yourself whether or not these bloggers have your best interests at heart, given that they make money when you apply for credit cards using their links.

On the flip side, most of the points/miles blogs out there don’t make money from credit card affiliate links, largely because they don’t drive enough traffic/applications to them. Does this make those blogs inherently more trustworthy? No, not necessarily, but I think sometimes people unfairly attack these blogs under the pretense that they’re making money via credit card links when they’re actually not.

Another example: a couple of years back (in 2010/2011), there was a company called Envaulted that offered 1% cash back if you gave them access to your credit card purchasing history (by providing your credit card website login credentials). This was in addition to whatever rewards your credit card already gave you. Supposedly, they were going to use that information to then sell to advertisers which advertisers would pay premium dollars for since they would be super targeted since they knew what you already spent money on.

A lot of people were skeptical, but I milked as much as I could out of it at the time because the flow of money was venture capitalists to Envaulted straight into the pockets of customers. I also knew that this business model wasn’t sustainable, so the company probably wouldn’t last in its original incarnation (they did pivot to other sorts of offers for a while, but then they shut down their website abruptly while lots of people had large balances of unredeemed cash back). Essentially, they ran out of funding and weren’t able to prove out their business model, so they had to call it quits.

Compare this to Amazon Payments. Amazon Payments was the goose that kept laying golden eggs, and people were quick to blame bloggers when it finally died. Honestly, bloggers weren’t the problem. The consumer product of Amazon Payments was a money loser for Amazon for years, but they didn’t really care because they’re Amazon. The money flowed from Amazon’s coffers straight to people like us, but 1) the losses were relatively constrained because of the $1,000 per month per person limitation and 2) Amazon is such a behemoth and they’re notorious for losing tons of money on new products that even a “big” blogger posting about Amazon Payments and getting lots of people to sign up isn’t enough to materially make Amazon change its strategy. In fact, I’m pretty sure that a large part of the reason why Amazon Payments was shut down was because it wasn’t popular enough, so it didn’t make sense for Amazon to keep losing money on a product that wasn’t reaching the kind of adoption that they wanted.

This tactic of following the money is often useful in our hobby because our hobby is now so dominated by credit cards and financial institutions, but it’s also a good tactic for understanding things like politics. But beware that you shouldn’t believe everything that you read on the internet, so even if people are writing about money flows and it seems reasonable, it’s entirely possible that they got everything wrong (like my examples in this post could be completely false, but obviously I don’t think they are).