What’s the Deal with Groupon?
Post by guest PR columnist, Alison Kenney.
I’m fascinated by Groupon. And LivingSocial and Local Ginger — to name a few of the many “daily deal” sites I subscribe to.
While I know that the concept of “daily deals” or “limited time-only specials” that is not new, I’m amazed by how many of these sites exist now and am blown away by the estimated valuation of Groupon, as evidenced by the fact that Google was offering to buy it for over $5 billion. Yes, that’s billion with a “B.”
Recently I had the pleasure of listening to Ted McNamara, CFO of Rue La La, another daily deal site. He explained Rue La La’s approach to advertising and customer acquisition this way:
Under the traditional online shopping model, merchants pay Google to appear near the top of the list when a shopper searches for a brand on Google. The problem with this model from an online merchant’s point of view is that there’s rarely a chance to build loyalty. Instead the customer builds their loyalty to Google and its search capabilities and returns to Google the next time they want to find/buy something. Rue La La decided they could scrap their Google Ads budget and be much more cost-effective and productive by encouraging shoppers with exclusive (but free) “membership” to their daily digest of high-end boutiques offering selective merchandise at great value. As a Rue La La member, the customer is more loyal to the site and returns much more frequently.
TechCrunch also wrote about these “build it” vs. “buy it (ads on Google)” options from a local merchant’s point of view and the Groupon vs. Google struggle for local social mindshare.
Groupon’s success and its somewhat stunning dismissal of Google’s acquisition offer have led many to speculate about the future of Google. Groupon has shown that social and local are hot. In addition to failing to acquire Groupon, Google also failed in a bid to acquire Yelp last year and killed Foursquare predecessor Dodgeball after acquiring it. Does Google just not understand social? Are entrepreneurs like Groupon’s Andrew Mason afraid of what will happen to their social local businesses once Google gets them?
What do you think? Do you use daily deal sites personally or as a marketer?
Alison Kenney an independent PR practitioner with more than 15 years of PR consulting experience. She is based on Boston’s North Shore and has worked with organizations in the technology, professional services and consumer industries. She writes a bi-monthly PR column on LindsayOlson.com. You can find her at www.kprcommunications.com. Learn more about Alison Kenney.
Photo credit: Groupon
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Date: December 7th, 2010 / Author: Lindsay
Posted in Public Relations / Tags: Alison Kenney, daily deals, groupon, guest column
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This blog is to share my recruiting experiences and discuss thoughts on the job market, PR industry and technology.
Alison Kenney is an independent PR practitioner with more than 15 years of PR consulting experience.
Jim Berkowitz (December 8th, 2010)
Alison… I think you might be onto something. Google hasn’t had much if any success with building or buying into “Social” and I think that there $5+ billion attempt to buy Groupon smells of desperation. On the other hand… Groupon should have probably taken the money and run (like Mark Cuban did).