Local Becomes The Next Social
Sometimes a technology can spend years searching for an application. That's what happened to mobile couponing. It took nearly seven years, but the advertising industry finally began catching up with the technology this week. Soon, these coupon deals could end up in organic search results or specific sections on Google, Bing and Yahoo geared specifically to deals. The smart merchants already tie deals to paid-search campaigns.
Signpost unveiled a self-service coupon platform based on yield management. Citysearch introduced a daily deal service for mobile that targets coupons to consumers opting into an Android and iPhone application. ReachLocal announced the acquisition of DealOn, which offers publishers a white-label platform for daily deals.
Along with the DealOn acquisition, ReachLocal reported earnings that Piper Jaffray analyst Gene Munster called "disappointing." Nonetheless, Munster believes 2011 will become the breakout year for online local advertising. With ReachLocal's entrance into the daily deals space, the firm reiterates its choice as the company as its top small cap stock pick.
The acquisition was important enough to overshadow FY11 revenue guidance that came in 4% below the Street, although the quarter's performance came in ahead of expectations, according to the Piper Jaffray report. ReachLocal reported Q4 revenue of $80.6 million and a loss of $0.13 per share vs. the Street at $80.2 million and a loss of $0.16.
Munster explains in the note that ReachLocal met the 1% upside the firm expected. ReachLocal guided FY11 revenue to between $380 million and $400 million, compared to the Street at $406.5 million and EBITDA to $6 million and $8 million, including a $5 to $6 million impact from the DealOn acquisition.
He also points out that ReachLocal plans to use Bizzy, a CRM tool that connects local businesses with consumers, offering personalized deals, which could eventually use the site as a platform to distribute coupon deals on its own.
Horizon Media recently aggregated information on the growth of social couponing sites. Interestingly, wealthier households are more likely to use coupons. The Harris Interactive study found that men increasingly use coupons. About half of all adult males, 51%, have used a coupon in the past six months. Men use coupons because of the increase in coupons found online and on mobile phones.
Groupon and LivingSocial controlled roughly 90% of the daily deal market in 2010, but new offerings like DealOn, Tippr, BuyWithMe and KGB Deals, as well as upcoming offerings from Facebook and Google will take large chunks, according to Horizon Media.
Horizon Media believes the coupon industry will mature into more niche sites that target customers by demographic, lifestyle or interests such as health and beauty or travel. Which site do you use?