Commentary

For Google, Daily Deals Space Is About Waiting Out The Storm

The family is just back from San Francisco, a trip that got extended by that little hurricane back East. Still, while we were remarkably free of earthquakes like the kind you had back here, for those of us in the social media biz, the Bay Area certainly is an epicenter. On a swing down to Palo Alto to take a stroll through Stanford's Rodin Sculpture Garden, we stopped for a sushi lunch at a place that had a roll named after every "local" business of the techno era: Google, Facebook, LinkedIn, Cisco, Symantec, Apple ...  it seemed likely that Mark Zuckerberg was about to show up for a Bento Box, or had just consumed one and gone back to the office. 

Being in Palo Alto was also a reminder of just how much Klout (!) is concentrated in the surrounding area, which brings me to what I hope is not too clumsy of a Segway (oops, segue -- Segway tours are huge out there!). And that's why Google is expanding its local Google Offers service (at least occasionally) to its home page, while others, including Facebook, are scaling back their plans.  

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The headlines make it hard to figure out just what's going on with the daily deals/group buying market. On the one hand, Groupon is going public! On the other hand, its business is deteriorating in some of its older markets! Google breaks with tradition by putting a Google Offer on its home page! Yelp cuts the staff of its daily deals unit! What gives?

What gives is that there is a market here; the main question is its size. Google figures it doesn't hurt to invest in it now, while at the same time sitting back and watching a multitude of players drop out. It's beyond obvious that a shakeout is coming. Right now, I'd wager that it's a much safer bet to invest in Vermont's infrastructure than it is to invest in Groupon. As has been said countless times, the business model is too easy to reproduce, and the category so inundated, that it probably can't support so many players. (On the other hand, it's harder to reproduce great skiing, fall foliage, and red-barn-infused rural charm.)

But attach daily deals and group buying to a powerhouse like Google, and you've got a different proposition. It's easy to see how this all connects - Google's automated solutions, already aimed at small advertisers, combined with mobile OS Android, combined with +1 and other sharing utilities (including Facebook "Likes"), provides quite a lot of bang for the advertiser buck. Google's first home page deal, offering a huge discount on tickets to the American Museum of Natural History, was served yesterday in the New York area only; so far it has resulted in more than 13,600 purchases, and untold amounts of brand awareness. (I'm not sure the Museum really needs brand awareness, but for some companies that benefit alone will be reason to do business with Google.)  

Now, to paraphrase David Byrne, you may ask yourself, "If that's the case, why isn't Facebook staying in the game?" Well, it is, sort of, since it only killed its Deals product, but not Check-In Deals. But I'd also posit that Google, while always gamely moving forward, has its business model pretty well figured out and the infrastructure more or less in place to rule in daily deals; Facebook is still working out its kinks. Thus, the daily deals/group-buying category is Google's to win. Its primary job is to learn from what the category is doing now and wait around for others to fall by the wayside -- to wait for the daily deals storm to pass.

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