Using your numbers:

a. assume 10 people order (10 x $100 = $1000 income).
b. assume $10 real cost (10 x $10 = $100 cost)
c. assume only 9 submit the rebate (9 x $100 = $900 outlay)
d. $1000 - ($100 + $900) = 0, breakeven.

So, as long as the non-submittal rate at least equals the percentage of the cost, they break even (that is, if the item costs 50% of what they charge, they need at least a 50% non-submittal rate).

I think your 10% cost ($10 cost of $100 item) is too low, it's probably at least 1/3. Given that, they only lose money if more than 66% of purchasers submit valid rebates. In general rebate redemptions rates are very low (some say 5%).

Granted, cyberrebate's will probably be higher, since that is the whole purpose of shopping there. However, having 1 out of 3 people forget to submit a rebate is not terribly unlikely to believe. Coupled with the float on the money, and then the people that have submitted valid rebates, but then never follow up if they don't receive them, gives cyberrabtes.com a chance to make some money.

Similarly, that's why airlines often give travel vouchers instead of cash. They know a certain percentage will never be used.

Jeff