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For Those Who Want the Deal Space to Die… Sorry

Written on
Aug 3, 2011 
Author
Jay Weintraub  |

JAY WEINTRAUB – Addressing the obvious unspoken question first – I have an absolute positive bias towards the deal space. I do run the daily deal conference, so were it to die as some of its more vocal critics would prefer, that would put a crimp in my plans for marketing technology event domination. It will die though… in its current iteration at least.

The deal space today is a direct marketing machine. That’s part of its problem and yet one of the reasons I love it so. The get email send offers has been referred to as the blunt instrument approach, so it will need to be fine tuned if it is to continue. Otherwise, it will turn into the yellow pages business — big but dying.

All of local advertising looks to drive people in stores. Discounting isn’t new. Local coupons aren’t new. Using the web to drive a local merchant thousands of customers on a performance basis is new. The scale and speed with which Groupon and now LivingSocial have achieved this warrants the attention the space has received.

As Jim Moran of Yipit told me, national brands may leverage the space, but influencing local dollars is what has people up at night. It’s why Online to Offline or O2O as Alex Rampell coined is, if not a trillion dollar industry, a multi-billion dollar one.

ROI

Here is what the big guys all get. Namely, that if they take a dollar out of a merchant’s pocket and don’t give them back $1+ back, they will fail in the long-term. This is where we are today. You can’t get merchants to spend more than a billion dollars with limited accountability and not have quesitons raised.

But, as a deal’s business, do you wait for the merchant’s level of sophistication to increase before taking their money, or do you take their money and try to balance their needs and your own?Google is a case study in the latter. If they let only savvy marketers spend money so that no one could lose money, they wouldn’t be where they are today.

If a company is taking advantage of merchants and/or creating a system where that is possible, that is unacceptable. But, it would not be unsurprising to hear of examples in our revenue driven world.

The Future of The Deal Space

The deal space is really a collection of spaces. It started with the just the web, or more specifically email. It was and still is primarily a broadcast approach with little targeting or specificity. Were it start any other way, though, we wouldn’t see such scale in one particular company.

The web deal space will be like search, dominated by a handful of players. Groupon and LivingSocial will stay the winners, but how large will they be of the total market when it continues to expand is up for the debate. A friend told me about a conversation he overheard where one executive outside the deal space predicted Groupon would be the MySpace of the sector. It’s not that the sector is all bad only that certain tactics are not sustainable.

Mobile, other connected devices, and unexplored touch points are  going to be different. As an example, Groupon’s email list and sales force don’t make it an odds on favorite to win mobile.

They are also why a company like American Express can so quickly and easily disrupt the ecosystem if they really chose to do so. I wish I could recall which executive I spoke to in order to give him credit, but he explained that mobile will not be a winner take all or most environment.

In mobile, we will see many niche apps becoming meaningful players. People aren’t necessarily looking for deals when on their phone. They are doing other behaviors that enable the showcasing of deals. It is why Foursquare and Twitter are (still) meaningful, and it’s also why Google should become the leader in this space.

Innovations in customer acquisition. That’s where the deal space falls. It’s not about daily, and it’s not about deals. It’s about connecting buyers and sellers in ways that leverage connected devices to create scale.

Cross-published at jayweintraub.com. LeadsCon East will take place at the Hilton New York from August 24-25 — register here. Daily Deal Summit West will be held September 22-23 in San Francisco — register here.





Jay Weintraub is the founder of LeadsCon and the Daily Deal Summit. The Internet marketing strategist and columnist has served stints at Advertising.com and Oversee.net. He is also a regular contributor to DM Confidential.

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