If you’ve followed headlines about the online deals space over the past year, you might wonder if the phenomenon has lost its appeal.
In our monthly Locals Only column on Search Engine Land, I discuss that while the industry is facing challenges, both local businesses and consumers continue to see promise in the medium. I lay out 10 key questions that local businesses should consider when deciding whether an online deal makes sense for them.
Consumers are becoming daily deals junkies – checking sites like Groupon and Living Social each day and awaiting the daily e-mail from platforms like Gilt City and Google Offers to see the latest deals in their city.
Last week, in the midst of SMB Digital Marketing 2012, BIA/Kelsey released a new report projecting that daily deals spending will rise by 87% in 2012 alone. U.S. consumers will spend $3.6 billion on sites like Living Social and Groupon by the end of the year.
BIA/Kelsey expects the daily deals space to grow an additional 23% in 2013 and projects that it will become a $5.5 billion industry by 2016.
Growth in this area presents a major opportunity for small business. Stay tuned.
Sanjay Gupta., VP – Global Merchant Marketing, Groupon, described their approach to winning new clients for the daily deal. He made the important point that the term SMB can be very broad – it covers a multitude of business owners from the one person kiosk to much larger, more sophisticated concerns, and each has differing needs.
His formula for reaching merchants seems to contradict accepted tropes about small businesses:
Keep it simple – everyone talks about how busy SMBs are. Groupon has found that they may be busy, but SMBs will spend time to learn complex ideas. He addressed what he thinks are some common misconceptions about small business:
Very Concerned About Price – Groupon has determined that with trust, SMBs will pay for product/vendor stability.
Don’t Have the Time – Gupta says that merchants will find the time for critical needs.
Know it All or Not at All – maybe, but he says that Groupon’s experience is that SMBs are willing to learn.
Groupon specializes in small, “Mom and Pop”, local merchants and is winning them over through 5 main tenets –
BIA/Kelsey anticipates strong grown in the daily deals space over the next few years as large businesses enter the fray and add their loyalty programs to the mix. Meanwhile, it appears that Groupon is continuing to reach SMBs of all sizes with a combination of new tools and traditional customer care.
Brett Truka, regional sales manager at Groupon, provided a behind-the-scenes view of life inside the originator and largest daily deals provider. According to BIA/Kelsey, Groupon represents 58-60% of the daily deals space, which currently comprises more than 600 daily-deals providers.
Truka said that Groupon’s sales team, made up of reps ranging from backgrounds in newspapers and Yellow Pages to recent college grads, generally goes by a model ensuring 70% of reps time is spent inside the office contacting local businesses by phone, and 30% outside in the field.
Every day, Groupon needs to put out a deal in each of its markets. Truka talked about daily pipeline meetings in each regional office where Groupon managers and reps take a look at their specific market needs, and listen to where reps are in the process of securing deals with local businesses that fit those categories. Following the meeting, reps reach out to CRMs to finalize lists of businesses in those categories and then reach out to strike a deal.
BIA/Kelsey estimates that 54% of Groupon’s deals are for restaurants, something that Truka doesn’t see changing since consumers love to dine out. But he did say that Groupon is moving beyond its initial deals focused just on fun things to do locally, and branching out to local services that people need and get excited about.
Truka said that while many local businesses have heard of Groupon, most don’t know how the process works. Groupon’s reps work with business owners to structure the right kind of deal for their business, one that takes into account the volume of business and dollar discount that they can handle. Truka said that Groupon also helps manage redemption. Recentlly, the company launched iPhone and Android apps that allow merchants to scan Groupon barcodes and track redemption in an online merchant center.
BIA/Kelsey estimates that daily deals revenue will grow from $873 million in 2010 to $4.2 billion in 2015, so there is enormous opportunity for Groupon to continue to grow. But with so many competitors entering the space, it will be interesting how its future plays out.
This afternoon the BIA/Kelsey team gave an update on the daily deals forecast, which Peter Krasilovsky, VP and program director, projected will reach up to $6 billion in annual deal revenues by 2015.
Despite some media scrutiny of the daily deal space, BIA/Kelsey remains confident that the biggest successes are yet to come, stating in today’s presentation “the deal a day industry is poised for strong growth.” Mark Fratrik, VP and chief economist, attributes this to 1) an increasing focus on providing consumers with more personalized and geo-targeted opportunities, 2) businesses’ likelihood to move resources from other advertising vehicles toward this as a marketing option; and 3) the expansion and subdivision of sites, which will also help to combat consumer fatigue some providers are experiencing.
Yipit estimates there are around 600 companies in this space today. With the barriers to entry so low, we’re probably going to see this figure continue to rise for a number of reasons:
As we’ve regularly blogged this year, traditional Yellow Pages companies are already embracing this model to reinforce existing advertising relationships. Sales representatives can use group buying as a point of entry to a local business advertiser, and advise on a strategy behind it that will continue to deliver results long after the deal has passed.
BIA/Kelsey’s Charles Laughlin interviewed Todd Rose, VP, Business Development, AT&T Interactive, who is part of the team rolling out AT&T’s Deal of the Day offering. AT&T initially launched daily deals in three markets – Atlanta, Dallas and Los Angeles – and hopes to expand to 10 this quarter.
Rose said that the unique advantage of AT&T’s offering over pure-play competitors like Groupon and LivingSocial is its sales management infrastructure, which allows AT&T to easily roll out products nationally. He said AT&T’s challenge is not access to merchants, but to customers – something the company is trying to overcome now through e-mail, referral marketing and other efforts.
Rose described the company’s initial success in its three starter markets, which are all returning healthy margins and now have significant backlogs of deals. AT&T is currently reviewing the success of its first deals – conversion rates, etc. – which Rose said are encouraging. The company is currently using sales reps dedicated only to deals, but will test whether deals can be sold as part of a traditional rep’s comprehensive portfolio of local offerings.
Additional highlights from the conversation include:
Many of us watched with great interest last year when Google tried to acquire Groupon, the popular daily deals site. After that deal didn’t move forward, Google created its own location-based daily deals service, Google Offers, which beta launched in April.
This week, Google is taking its daily deals efforts to the next level with its widely-reported acquisition of The Dealmap, a start-up that aggregates discounts from about 450 daily deals sites, organizes them by location, and displays them for users on its website and mobile app. Since it launched in May 2010, The Dealmap has racked up an impressive user count of more than two million.
While the specifics of how Google will leverage The Dealmap acquisition are not immediately clear, what is apparent is that the daily deals space is seen by many in our industry as a key avenue for future growth. Recent evidence ranges from AT&T’s YP.com’s Daily Deals debut in July, Facebook’s Daily Deals in May, and Yellow Pages Group and Yellowbook last year – just to name a few.
Our industry isn’t indulging in speculation, but basing their strategies on sound research. Our latest State of Local Search study found that daily deals yield extremely high levels of satisfaction and repeat customers.
We’ll all be keeping a close eye on how this exciting segment of our business continues to evolve.
In our “Locals Only” column on Search Engine Land this month, I discuss two platforms that really caught my attention with the release of our “State of Local Search” study last week: mobile and online coupons.
As I note in the article, mobile and online are growing by leaps and bounds as ways for consumers to find local business information. I also provide key takeaways from the data that can help inform local businesses on how they can leverage these platforms to attract new customers.
Here are some of the stories making news in the local search space this week.
Sensis Enters Exclusive Partnership with Yelp
Sensis, the Australian Yellow Pages company, announced a partnership with Yelp that will integrate Sensis’ Yellow Pages local business listing data into Yelp and leverage Sensis’ local sales force to launch and embed yelp.com.au into the Australian market. The partnership will also enable Sensis to syndicate Yelp content, ratings and reviews to yellowpages.com.au, Yellow Pages mobile and the Yellow Pages iPhone application. This is the latest in a growing trend of innovative partnerships between Yellow Pages companies and local search sites.
AT&T’s Daily Deals Offering Launches
Screenwerk reports that AT&T’s YP.com has launched its Deal of the Day offering in Atlanta, Dallas/Ft. Worth, and Los Angeles. Those who sign up can receive deals online, via mobile, and by e-mail. AT&T joins a variety of local search companies, including Facebook, Yellow Pages Group, Yellowbook and SuperPages, in providing a daily deals and/or coupon offering connect advertisers and consumers.
Dex One Launches Reputation Management Service
Dex One introduced a reputation management offering to help customers better manage and protect their online presence. The service allows advertisers to monitor their business listings, reviews and mentions on major search engines, directories and social media platforms. An online dashboard displays graphs, charts, and consumer content related to a business, and offers ways to manage and improve visibility and reputation in four key areas: competition, reviews, social media and visibility.
Google+ Surpasses 10 Million Users
Google+, the new social networking service from Google that is receiving widespread media attention, announced that it had attracted more than 10 million registered users. But there was initial concern about the site’s ability to keep users interested after Experian Hitwise, an online measurement firm, reported the site attracted a small 1.8 million total estimated visits last week. We’ll definitely be keeping a close eye on Google+ and how we can leverage this new platform for local search.
Today we’re releasing new data from comScore that shows more people are turning to online and mobile platforms to find local business information.
This is welcome news for local search companies, which are investing with full-force in new ways to improve our approaches to digital and mobile search – both in terms of the advertising opportunities they offer local business clients and the experiences they provide consumers accessing.
Online Local Search Shows Strong Growth and Consumer Satisfaction
This year’s “State of Local Search” study found that local searches now account for 13% of all core search activity on top web search portals as of March 2011.
Internet Yellow Pages (IYPs) and Local Search Sites:
Interestingly, the study determined that portal searches are more likely to conduct local searches as part of broad information gathering, while primary IYP searches more often conduct local searches to look for contact information with specific products and services in mind.
More than half of local business searchers choosing portal or IYP sites said they were highly satisfied and found success in their search experience – an indication of how well our industry is doing creating consumer-friendly offerings.
Additionally, online daily deal offers and discounts emerged as an additional customer acquisition channel for local businesses. The study found that primary IYP searchers were less likely to report purchasing online daily deal coupons for local businesses than business searchers on other sites (27 percent vs. 38 percent).
Mobile Search Skyrockets
Mobile local search also showed unprecedented growth this year. In January 2011, 77.1 million mobile subscribers accessed local content on a mobile device, up 34% from the previous year. The study found that local content users now account for 33% of mobile subscribers.
Top findings also include:
comScore’s data illustrate the ongoing shift of consumers towards digital and mobile platforms for local business information. Our industry’s rapid embrace of these platforms, particularly in the past year through new partnership agreements, mobile app launches and other initiatives, will enable local businesses to connect with consumers in these increasingly popular locations.
Listen in on Webinar: July 20 at 2pm EDT
comScore and the Local Search Association will be presenting additional findings on usage and conumser experiences with online and mobile local business search activity from this study in a complimentary webinar, July 20th at 2pm EDT. Click here to register for the webinar.
We heard all about the exciting opportunities that local deals present for local search providers and their advertisers at last month’s “Search Starts Here” conference. This week, a major player announced plans to join an increasingly crowded field with its own take on the daily deals phenomenon.
As major media outlets including Bloomberg and The Wall Street Journal are reporting, AT&T’s YP.com will launch a local deals offering – “Deal of the Day” – in about a month in Los Angeles, Atlanta and Dallas-Fort Worth. The company, which is now offering a $10 credit for consumers who register for the offering before May 22, said it plans to expand the daily deals site to other cities and offer it on mobile devices. Its website also says that it will offer national deals.
It’s amazing how quickly daily deals sites have caught on among local businesses and consumers. BIA/Kelsey projected in March that consumer spending on local deal sites will likely grow from $873 million to $3.9 billion in the U.S. by 2015, representing a 35% compound annual growth rate.
I look forward to learning more about AT&T’s unique offering and watching others in our industry launch or expand their own daily deals initiatives. Definitely a lot more to come on this.
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