Is Radio The Secret Weapon in the Daily Deals Space?

by Sep 28, 2011, 8:02 AM

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Despite positive long-term revenue projections for the daily deal space, the current headlines are ominous -- deal traffic cratered in July, Facebook pulled the plug on their deal program, Groupon piled up deep losses, etc. But this is still an immature category, and an interesting question is: What will happen when the biggest local revenue players enter the fray?

We are seeing this happening in fits and starts, from Cumulus' success in the radio space in Atlanta to burgeoning television programs like those by WKBW in Buffalo. When done right, the indications are that if broadcast media aggressively enter the deals fray, the potential is massive.

The question is whether it will be done right, since local media is more about potential than execution. As Perry Evans, CEO of Closely, a deal dashboard for merchants, stated at the BIA/Kelsey Deals3D conference: "The old guard have no idea what they're doing."

Banking on that assumption is dangerous, however, as local media bring all the weapons necessary into the deal battle -- weapons that dwarf what a pure-play can deliver even with a significant head start. Let's look at radio as an example.

Databases of Significant Size

Pure-play daily deal companies face significant challenges -- perhaps none more daunting than compiling a list of users who opt-in for deals. There are literally dozens of companies with significant venture capital behind them that would kill for what radio already has in its back pocket: databases of fans in the tens or even hundreds of thousands.

Not all will opt into a deal program, but a successful deal program doesn't need a huge number of people. Converting even 10% of their database into an opt-in for a deal program immediately makes radio a major player in the market.

Large Existing Local Sales Teams

The other half of the challenge for pure-play deal companies is actually selling deals. Supporting a large local sales staff across the entire United States is an expensive and formidable task. Radio has them on the streets in every market of the country. Even Groupon has not penetrated many of the smaller markets where radio has seasoned sales teams.

Massive Reach and Brand Loyalty

Living Social recently started running a significant amount of radio advertising. It is paying for just a small piece of what a radio station can inherently bring to bear on moving deals: its brand. Don't get me wrong -- a radio station that utilizes its airwaves to promote a deal has a major impact. One estimate I heard earlier this week was that mentioning deals on the radio led to a 30% increase in deals sold. That's huge.

But go deeper and you can see the truly spectacular asset that a radio brand can bring to this space at every level. If the morning show mentions a deal-of-the-day, how much easier is that to sell for the salesperson going into a client who listens to that program? How would you like to be Groupon going in to sell the same merchant, only to be told, "I already did a deal with my local rock station. Their morning show is going to mention my deal every morning at 8:30!" And beyond making sales easier, how many more deals will you sell if the morning show does a daily deal endorsement every morning?

Secret Weapons

One of the truly powerful things about a local media company embracing a deals program is they have an armory of weapons that can make the program successful. We discussed some of the obvious ones above, but think of all the little things that a media company can do that Groupon cannot. The possibilities are vast. Here are just a few:

Implicit Targeting. One of the things that radio specifically has is built-in demographic targeting. A classic rock station isn't going to have a database full of soccer moms. As a result, merchants have a greater likelihood of knowing that their deals will be targeted to the right audience when sold by a radio deal platform.

Own a spa and have a new pure-play deal provider selling you a deal platform? You have no idea if it is going to be reaching your core female customer base. If you get the same pitch from a hot AC station, you know you have a much better chance of reaching those customers.

Spot arbitrage. Provide remnant weekend or overnight inventory as an added value to close a merchant on a deal. Deal revenue can be massive with the right deals, so much so that the return on adding low-value spots can lead to a better ROI than if you provided those spots as free added value for bigger high value spot buys.

Package deals. Sometimes a compromise on one part of a deal (small decrease in spot rate) can lead to a huge return in another (a big commitment for high dollar/value deals). The key is putting together the right package and knowing what kind of return you can get from each piece.

Promotional tie-ins. Add a deal to a personality-driven promotion in a way that closes a merchant on a high-value deal.

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