Tag Archives: Deals

ILM West: Next Directions in Deals Space

It’s obvious that the deals business is going to quickly move to a broader set of offerings. But how? That was the question posed today at ILM West in San Francisco.

Belo Interactive GM Joe Weir noted that deals remains a great space to be in. Demographics of Belo’s deals are dominated by college educated women with a lot of disposable income — deals users extend many missions for Belo, he noted.

But CBS Local Media President Ezra Kucharz said that deals need to change because merchants and consumers are fatigued. Email open rates are declining significantly. And merchants want a higher revenue share.

Kucharz’s solution is to provide a richer experience embracing SoLoMo (social local media) and segmenting deals differently. CBS is adding experiential deals that may be once in a lifetime experiences; aggregating deals; allowing consumer to rate and review deals.

Some things he would like to do, however, aren’t necessarily going to be easy. For instance, he might like to add more deals from big national brands, but “they are being tight with deals,” he says.

Experiential deals have also been embraced by Thrillist, a site that is geared towards young men, or “dudes,” as VP Mike Rothman call\s them. Thrillist has developed experiences such as micro brew pub beer crawls. But these are hard to scale from market to market; What works in New York doesn’t necessarily work in Detroit, says Rothman.

The most extreme position on deals was taken by Michael Tavani, co-founder, ScoutMob. The idea of “Daily deals make us cringe internally at the office,” he says. ScoutMob is a mobile service based entirely for on the go mobile users. Its customers have no idea where they are having dinner that night, and they don’t want to pay in advance for deals, he says.

The company, which considers itself a “reverse FourSquare,” takes $3 or $4 commissions for customers that it points to merchants. Instead of printing out deals, customers simply show the deal coupon on their phones to merchants.

Strong Holiday Outlook for Deals

Black Friday and Cyber Monday for holiday shopping are bed rocks of the nation’s economy. Where do deals fit in?

As Bloomberg reports, Yipit Data forecasts that U.S. consumers will spend $80 million to $100 Million on daily deals gifts between Thanksgiving and Christmas, up from $15-$20 Million in 2010. A separate poll of 10,000 Yipit users found that more than 90 percent said they were likely to buy a daily deal as a gift this year.
Our gut also tells us that deals will be attractive for the holidays.

• They are fun and not stigmatized as “cheap”
• National brands account for roughly 15 percent for major sites, and will have some very attractive deals set for the major destination sites
• Social deals that give a free deal for three or more buys lend themselves naturally to the holidays.

The sites seem like they are prepared. As the Bloomberg article notes, Groupon expanded its Grouponicus holiday site to more than 40 cities, up from 20 last year. It also added more deals involving unique experiences, including tickets to Ellen DeGeneres and a half-price helicopter ride in New Jersey.

Deals are prominently featured at ILM West Dec. 12-14 in San Francisco, with cutting edge data from BIA/Kelsey and Local Offer Network; major media companies such as CBS and Belo talking about their experiences; and next wave providers including Thrillist and Scoutmob. Register here.

Groupon’s Successful IPO


Image Source: Reuters via New York Times

Groupon’s final IPO price went from dank estimates of $10-12 to $20 by the time it was priced, raising $700 million on a relatively small offering of its shares. That puts the company’s value at around $20 Billion, by some estimates.

As it turned out, the price could have gone even higher. Prices soared 40 percent above the asking price in the offering’s early hours.

What went right?
1- Investors believe in the long-term vision that deals represent just an anchor for a wide variety of local and national marketing services.
2- They believe that Groupon has established a brand and will outlast the fly by night competition and adjust to compete against major players now entering the market, such as Google and Amazon.

You know the stupid waste of money on the Super Bowl ads? Not so stupid. They really branded the company as a major play for the investment community.

Next up for Local IPOs: Angie’s List, which wants to raise $113 million. AutoTrader. (and based on today’s success, Living Social?)

Reassessing Groupon Prior to Its IPO


Image Source: Mashable

Groupon’s greatly reduced IPO is apparently set to take place on Friday, November 4 in an environment much less friendly than originally envisioned last spring.

The bloom has come off for a number of reasons. Groupon has almost no barriers to entry and has had to contend with dozens and dozens of copy cats –apparently 600 at the peak. The glut of services has led to consumer and merchant overload (including lower commissions in some cases), and perhaps fatigue.

The result is that “the fastest growing company ever” appears to have slowed down and perhaps even declined in its core daily deals business, per Yipit Data.

Groupon’s evident slow-down may have helped the company run-thru two short-lived COOs — a very unusual situation prior to an IPO. The unorthodox distribution of its last round of funding to its initial investors also appeared to signal an internal lack of confidence in the company, greed, or both.

The same could be said for the unusual accounting method in the initial S1 leading to the IPO, which sought to downplay the company’s marketing costs in the U.S. and especially, abroad. These have, in part, caused the company to be heavily-in-the-red.

At the same time, new tools and platform products that would extend Groupon’s relationships with SMBs, specifically GrouponNow instant deals, which are mobile-oriented, have had slow ramp-ups. They’ve only had a nominal impact on the bottom line.

Again, per Yipit Data, Groupon Now resulted in less than $1 million in net revenue from May to September – although results will be bolstered now that the product is offered in 25 markets and achieves greater penetration. Other new products such as Groupon Goods, Groupon Live and Groupon Getaways have had promising results, but are not yet strong enough to bet the company’s future.

Groupon’s troubles have not been suffered in isolation. They’ve had a trickle down effect on other Deals Companies. Most notably, BuyWithMe, the #3 or #4 player in the space, was unable to raise money in the wake of Groupon’s problems, and has now apparently been forced to sell at a fire sale price to Gilt Groupe, which may now grab its technology, lists and some of its sales force – even though GiltCity currently operates as a slightly different “flash sales” site. Groupon’s problems have also apparently caused Living Social, the #2 player, to put off its own IPO plans.

Is it all bad for Groupon and the Deals space? Of course not. Groupon continues to have a basically sound business – in the last quarter, it cut off most of its marketing dollars with little apparent impact on its business. This is what we’d expect. Groupon is not a new movie, and it doesn’t need to be constantly marketed.

Groupon also continues to leads the deals segment in virtually every market it is in. Its product lineup is also increasingly promising. At the same time, we see validation in the model by the major investments in the deals space being made by Google, AT&T and Amazon (but not Facebook or Yelp).

In our view, the big money may have been nice for the early investors – although they found their own path to getting paid back. Strategically, the $25 billion valuation was largely a yoke around Groupon’s neck. At a sharply reduced valuation of perhaps $12 billion – still twice the $6 billion offered by Google last winter — the company will now have a chance to grow its set of tools and platforms more organically…and to a certain extent, in its own sweet time.

ScoutMob: Mobile Deals, Flat Lead Fees


Atlanta-based ScoutMob has cut out the high commissions and has launched as an all mobile site as it prepares for the next wave of deals beyond the world defined by Groupon and Living Social.

The two year old, venture-funded site has 40 employees. It raised $1.5 Million in a Series A round, and is looking at a $5 million Series B round.

The site is now fully launched in New York, Atlanta, Washington D.C. and San Francisco. It also has “lite” versions in Boston, Chicago, Nashville, Dallas, Denver, Austin, Los Angeles, Portland and Seattle. Soon, it will also launch in San Diego, Phoenix, Houston, Miami, Philadelphia and Charlotte.

A key to the site is that it refers customers to deals via a phone’s geo-location capabilities. Indeed, 60 percent of its new traffic is coming in via smartphones, says site founder David Payne. At the end of the month, the site takes a flat $3 or $4 lead fee for each redeemed offer (depending on the size of the market).

Payne told us that he devised the lead fee because he just doesn’t believe that $12 or $15 commissions on a $30 deal is sustainable over time. He compares the lead fee to OpenTable, which charges per diner fees.

Payne also thinks its important for consumers to see “dozens or hundreds” of deals, rather than focus on a single daily deal. Deal curation is also important, and the site has recently been diving into experiential deals such as local tours or coming up, Halloween parties.

To get the best deals, you can’t fake the localness of a site, says Payne. He also notes that the site has been inspired by the way Yelp built local sites around community managers, The fully launched sites have local writers, managers and sales in each market.

Even with that local focus, it takes at least 12 months to hone a subscriber list at the local level, says Payne. He adds that he site now has 300,000 subscribers in Atlanta, its original market, and is moving up in its other markets as well.

Scoutmob co-founder Michael Tavani is speaking on our Deals panel at ILM West Dec. 12-14, along with leaders from CBS Local Media, Belo, Thrillist and Local Offer Network.

Deals 3D: Coupons.com CEO Steven Boal on Power of E-Coupons

While deals are getting most of the attention right now, coupons remain a substantially larger player in the promotions business, says Steven Boal, CEO of Coupons.com, who was keynoting at BIA/Kelsey’s Deals 3D conference this week in San Francisco.

Boal notes that deals and coupons have very similar demographics. They’re both heavily used by women, for instance. But the industries are really very different in terms of sales, product segments, redemptions and user habits. “We tried to get into the ‘local commerce’ space ten years ago” but it didn’t work at all, he said – something that the CEO of ValPak warned him would happen.

It has all ended up fine, however. Electronic coupons are poised to go deeper than the deals space with established consumer brands than the deals space. They enjoy huge redemption rates, and are riding the backs of social media to even greater, viral success. Indeed, the potential for electronic coupons lead institutional investors to recently invest $200 million in Coupons.com.

“Coupons were the first form of social media,” noted Boal. Historically, housewives “used to get together to clip coupons and socialize” Now, social capabilities might take coupons to the next level. “Social might be the next newspaper,” in terms of being an offer distribution point, he said. When brands like Oreos can attract 22 million fans on Facebook, they don’t need the Sunday paper anymore.

Coupons.com itself has implemented its offers within Facebook; integrated offers with fan pages, and applied the same app credentials across its entire platform. Mobile remains another opportunity. Boal said that much more is to come as the company spends some of the $100 million it has slated for development on integration and acquisitions.

The ‘Common Elements of Successful Promotions’

We’ve been focused so much on Deal a Day, that we sometimes forget that Deal a Day is just part of the mix when it comes to successful SMB promotions. Seth Gardenswartz of SpaBoom, a provider of promotion services for spas and restaurants, held a helpful Webinar last week that stressed the six “common elements of successful promotions.”

The first common element is “brand strength,” which might be measured in non-traditional terms, such as positive reviews. The second is the “quality” of the offer. The third is the offers “integration,” and whether it is effectively communicated across all mediums.

The fourth element is the level of “engagement” with the audience. The fifth is the promotional “reach” of the offer – not only the size of the list, but its effective segmentation. The sixth and final element is the offer’s “persistence,” and whether its effectively part of everything else that the merchant is promoting.

Gardenswartz’s webinar highlights three successful Spa promotion case studies, each focusing on different parts of the promotion spectrum . The Bella Spa in Merritt Island, for instance, scored $10,000 off a Mother’s Day gift certificate promotion, with 225 purchases averaging $125. Seventy-five percent of the customers were new.

One of the keys was that it encouraged people to spend more by providing a $20 gift certificate with a $100 purchase, and a $45 gift certificate with a $200 purchase. Usually, when a buyer meet a threshold, they aren’t actually incented to spend more, says Gardenswartz. The gift certificate promotion provided value without discounting.

The Spa also was able to leverage a very strong 5,000 person newsletter and 904 person Facebook marketing list, which it goosed prior to the mother’s day promotion with a $75 sweepstakes. “That gave them more people to talk with,” Gardenswartz notes. The heavy load of clicks for the sweepstakes also increased the spa’s prominence in the Facebook newsfeed — an increasingly important part of the equation that is often often overlooked.

Another spa, Cloud 9 in Gainesville, Florida, focused largely on adding Facebook fans with its sweepstakes, which was worth $250 in services. Clud9 started with about 1,900 fans. They had 1,346 people enter the sweepstakes, who invited a total of 4,857 to become “fans.” At the end of 8 days, they had 3,977 total fans. They have added around 600 since then. If you multiply that count by 130 — the average number of friends each Facebook user has — you’ve got quite a viral list, notes Gardenswartz.

While the first two case studies focused on social media, the third promotion focused more on email – many spas aren’t really going to be oriented towards social media. The unnamed midsized market spa provided a $25 Groupon-like deal for $50 of services, and gained $9,600 in website traffic –$5,000 in new sales. The price was deliberately set low to encourage more buyers (and extra spending.) The average purchase from this spa was $29.

From the spa’s point of view, the best thing was that the spa did not use Groupon, so it netted an extra $2,335 (after SpaBoom’s $1 per sale fee was deducted). Instead of Groupon, the spa relied mostly on its 1,467 person email list, which has been used carefully – the spa sends out just 12 emails a year. The appeal of the offer got a high 18 percent click thru rate, he says.