And while launching a deal offering and ensuring that it's a success takes time and resources, creating a residual revenue stream with deals and increasing repeat Web traffic is absolutely worth the short-term investment.
Consumers love deals, and daily deal site usage continues to grow. BIA/Kelsey estimated, as of March 2011, there were 178 cities with group-buying sites reaching 102 million U.S. consumers. And this number is expected to increase as more vertical niche players and hyper-local sites emerge to cater to individual needs.
Similarly, merchants are also embracing deals. Set to transform local advertising, deal commerce has already been accepted as a key ad vehicle for local merchants because of its largely risk-free pay-for-performance model. Deals complement other online and traditional programs and resonate well with merchants, as they only pay for an offer once a customer walks in their door.
Given the interest by both consumers and merchants, a lot is at stake for publishers and they must move quickly to serve and capture their audience with deals. Consumers will likely only subscribe to a finite number of deal services. By waiting, publishers will have missed the window for launching a daily deal service under their own brand. This could be a major misstep, as a deal commerce offering provides an ideal platform to encourage users to return to a publisher's Web site to consume core content offerings.
So, what should a publisher know before investing in a deal commerce platform? First off, this isn't a flash-in-the-pan moneymaker. A long-term commitment is required for success.
Publishers that typically fare best with a deal commerce platform receive more than 500,000 unique visitors monthly with a brand that carries credibility. This allows for a large enough subscriber base to generate a profit. Any vertical publisher -- e.g., science, cooking, finance -- can jump in the game and carve out a unique service that offers a variety of deals.
While the daily deals model is often replicated, it is not an effort publishers should embark on solo. It is paramount that publishers choose a deal platform partner carefully and consider a few key attributes:
1. A steady deal flow To create a national daily deal offering -- required for most publishers -- dozens of offers in dozens of markets are needed. Ensure that your partner has sales reps nationally and can supply a consistent number of deals.
2. Exceptional deal quality Deals should come from premium local merchants with valuable discounts for consumers and high-enough margins for publishers to generate a revenue stream.
3. A white-label platform A white-label platform helps offload some of the heavy lifting of a deal commerce platform and allows publisher deal pages and vouchers to be branded as their own. Brand affinity is what creates a sense of trust -- and ultimately, conversions -- from subscribers to buyers.
4. Ownership of email addresses and residual revenue A deal partner should allow publishers to retain customer ownership including email addresses and recurring revenue related to future purchases. Without this, there isn't much opportunity for a viable long-term revenue stream.
5. Flexibility to sell deals once established Once a publishers' deal platform is stable and has accumulated a larger subscriber base, a deal platform partner should provide its publisher with the ability to sell deals into the platform. This can be a valuable component to a publisher's existing advertising product arsenal.
Above all, remember that the space is crowded. Make sure your selected partner will be around long-term to ensure your investment pays the dividend you expect.