Is the Daily Deals Industry a Real Industry?

3
1218

DM CONFIDENTIAL – You might think that spending two days at a conference for an industry that isn’t an industry might make one depressed. Were our core business or aspirations to run a stand-alone daily deal site, that might be the case. Instead, after spending time listening to more people than we should and networking with just about any company that would talk to us, we came away feeling more optimistic about performance marketing than ever before. For us, there was something so déjà vu about the experience, something almost 2000 about interacting with the deal companies. For lack of a better term, as we thought about some of the current issues facing CPA networks and affiliates, being among the deal industry was almost an “ah-ha” moment.

We haven’t been proven wrong, but we haven’t been proven correct when thinking about the deal industry as a true industry. There just isn’t that buyer/seller dynamic you might find in the affiliate world — part of the reason being that the vast majority of merchants are local businesses. You aren’t going to have a vibrant show if the audience is supposed to consist of savvy marketers and hyperlocal businesses. That would be like putting marketers in a room full of yellow page listings. It would just be weird and overall unproductive. You might have a few successful matches, but the signal-to-noise ration would make it an undesirable experience for both involved.

Perhaps the chief reason why we like this space is that it not only reminds us of the internet a decade ago, but it also offers people two distinct ways to make money. First, let’s talk about why it reminds us of the internet a decade ago. The reason is all about access to eyeballs. A decade ago, there weren’t well-defined marketing channels. Fewer than five companies really understood display, and three of the top five used display as a means to generate an action elsewhere, namely via email. Display was no less difficult to master, but compared to today, it certainly was a more crude media instrument… not unlike daily deals. In other words, it was a decently high-volume channel that very few people understood.

It’s a pretty wild world, and it might not yet truly be an industry, but deals might just be the new paradigm for those in performance marketing. Here’s what one could do first: just get really good at local — know what types of deals work and with whom. In other words, become a local agency. If a hot merchant can sell at least 1,000 vouchers, that means you have a client with $20,000 in revenue. Assuming they run three times per year, that’s $60,000. Now, just add a few more clients. If you are not that ambitious, you might only take 10 clients. Still, that’s $600,000 in revenue. Getting 10 clients or $600k in top-line is not that hard in the deal space. More interesting than the 10 clients is being able to work with them to help them perfect their deal.

That’s one major opportunity — understand what works for a particular sector then scale it for other similar merchants. Figure out what works for a spa deal, for example, then aggregate a group of spas. You could wind up with not just 10 merchants at $60,000 per deal, but 20-plus merchants at $80,000 per deal. Before you know it, you have a million-dollar business that’s not much different than existing affiliate marketing, except your CPA networks are the deal sites where you act as the agent on behalf of the end merchant.

The second option for making money in the deal space also does not involve trying to scale a deal business. It doesn’t involve either of those which made the deal space such a hot sector — local businesses. This deal opportunity will remind veterans of 10 years ago. It’s not about services, but about product. For the veterans, think of the Iraqi playing cards or the remote-controlled cars that did all sorts of tricks, flipped over and all. Success in those areas was not about deliverability — it was also not about creative design and optimization. It was about product and digital distribution.

Product and distribution is exactly what we have today with so many of the deal sites. They are the new list owners sending out email ads. They might look exactly like the lists of years ago, but that’s really what they are. Each mailer is an ad, albeit one that seems like valuable content. More and more the focus is on sending out products not services. Were we to want to make money today, we wouldn’t try to do ARB on search or Facebook. We would focus on deal sites. We would find products and/or digital products and focus on distribution through the new email — deal sites. Whether actual products or local businesses, the unifying factor is an opportunity for anyone to master a new distribution channel, to become the expert. In one scenario, it means a focus on local businesses and deal sites. In the other, it means products and deal sites. In either scenario, it means some potentially decent gains without the exact same headaches.

3 COMMENTS

  1. I agree 100%. My main business is acing as an affiliate to financial companies for credit cards and loans and such. While at that conference I myself decided to start selling magazine subscriptions through these groups. It is insanely massive distribution needing access to high margin and easy-to-fulfill offers to run as remnant offers in local markets on days there is unsold advertising. It seems to me a phenomenal opportunity as the distribution is so robust.

    Unfortunately in the long run I fear this fad will run its course. Suggesting 2012 may become known as the “Year of the Unsubscribes” was one of the first panel discussions as you remember!

LEAVE A REPLY

Please enter your comment!
Please enter your name here