This past July when posting The art of a successful daily deal I stated “I don’t believe more than a dozen or so providers will be in existence long-term; some will go public, some will succeed vertically, and a few aggregators will strike profitable, large long-term deals. 

Now, some new concerns are now emerging within the “daily deals” business, as reported by Sunday’s New York Times. Apparently some are questioning the entire premise of the industry. And from the merchants’ point of view, the popularity of coupon sites are feeding a relentless bargain-hunting mentality among customers. This, along with unrealistic expectations, poorly-crafted deals and growing consumer “deal fatigue” is certainly reason to be concerned, but keep in mind; we’re in the VERY early stages of this new marketing format.

There will be a shake-out – but the model will evolve and succeed.

We need to remember that this is all about commerce; the purchasing of goods and services, at a local level. Business owners want customers, not necessarily clicks, impressions or “likes”. The providers that are in-tune with the challenges of SMB’s and local commerce will be successful, and the Advertisers that structure the best offers (which they can execute without delay) will win.

What do you think the daily deals model will evolve into?  

To achieve a high-level of online visibility and internet marketing success, local businesses need to consider multiple factors…  

2011 will mark the year that this new digital marketing model exploded, and if you’re a local business owner you can probably relate as you field weekly calls from Groupon, Living Social and others. 

Since Groupon launched in late 2008, more than 400 additional companies have entered 80+ U.S. markets, including pure-plays, aggregators, publishers and retailers. In fact, the daily deals market will generate over $3 billion in 2011, and this is predicted to double by 2013.

Despite some mixed early results, local businesses are increasingly attracted to the “no risk” propositions of daily deals, and are already starting to shift existing marketing budgets.

The latest research released last week from Opus provided some timely information on the daily deals space, including: 

• The daily deals model appeals to both consumers and merchants, though challenges exist in sustaining that appeal. Deals also sit at the center of three powerful digital marketing trends: local, social and mobile.

• There are two types of daily deals: specific item/service promotions and dollar deals. Dollar promotions may be “safer” in some respects, but item deals appear to perform better overall for merchants.

• Though they’re typically not being communicated to business owners, a number of daily deal best practices are starting to emerge.

• Just over 50% of deals are profitable for merchants and up to 48% of merchants indicate an intention to offer another daily deal.  

• Merchants and consumers show limited awareness of or loyalty to particular deal providers. Yet winners will necessarily emerge.

 This is a land grab, and a huge game-changer within local Internet marketing. 

Ultimately, I don’t believe more than a dozen or so providers will be in existence long-term; some will go public, some will succeed vertically, and a few aggregators will strike profitable, large long-term deals. Faulty deals that create dissatisfied advertisers will quickly burn the marketplace as well as the vendors brand. 

The most successful providers however will succeed by focusing on distribution, favorable pay-out terms, competitive margings (commissions), levergeing social, penetrating local/mobile, and most importantly by implementing “best practices“. By that, I mean setting proper expectations with the advertiser, insuring that proper inventory exists (in-stock products or service appointments), and that the details of the offer itself will drive a postitive R.O.I. 

This is new, unexplored territory for Advertisers, so the responsibility of insuring that the deal makes financial and practical sense rests with the provider (and Sales Rep). The latest example of this NOT happening is detailed here. The goals and objectives of the advertiser must be understood before a proper deal can be structured and executed.  

And  finally, at the end of the day, we need to remember that this is about commerce; the purchasing of goods and services, usually at a local level. Business owners want customers, not necessarily clicks, impressions or “likes”. The providers that are in-tune with the challenges of SMB’s and local commerce will be successful, and the Advertisers that structure the best offers (which they can execute without delay) will win.

Also, the ultimate goal is to engage clients/customers, and increase business, right? Too many forget about this and never offer that all-important “call to action” – a coupon, discount, or special deal.

Here’s a moving company on Facebook, not a bad example:

Increasingly, I’m finding local businesses active on Twitter as well; at least in the major metros and categories.  Here are a few screenshots of NY, CT and MA bases businesses:

One of the best examples of creative Social Media marketing I’ve seen to date is from Intel (not a typical local business example, but well worth your time). It’s very well done: http://www.intel.com/museumofme/r/index.htm

Sites like Weforia and Groupon link local buyers and businesses with special deals and discounts.

From the News-Press, Ft. Meyer’s FL.:

Websites like Groupon.com and Weforia.com help link buyers and local business by facilitating collective buying at those stores at a highly discounted price.

Business owners can offer the online deals at 50 to 90 percent off, set how many people need to purchase the deal for it to happen, and set a timeline of one to three days on average before it expires. Businesses split the revenue of deals bought with each merchant at a pre-agreed-upon percentage.

Weforia.com, a yellowbook product launched in late September, offers deals in Fort Myers, Boston and Phoenix. Groupon, a Chicago-based company, has built a following over the past two years, but launched its service in Fort Myers and Naples in November.

Fort Myers isn’t too big or too small and the businesses are the right match for Weforia.com, said Mike Wilson, general manager and vice president of digital media at yellowbook.

While yellowbook has a strong sales team in the area, the types of businesses offering experiences, recreation and adventure coupled with a population that’s savvy with emerging technology and trends made Fort Myers a great fit, Wilson said.

Dustin Etheredge, a Chicago resident originally from Fort Myers, has been using Groupon.com at home, but started scoping out offers in Southwest Florida six weeks ago to have activities and outings during his vacation.

Etheredge bought seven deals and used three alone on Wednesday: his massage at Alive and Well, $20-worth of lunch at The Edison Restaurant for $10 and $10 worth of ice cream at Love Boat Ice Cream for $5.

“It’s fun on a layaway program,” Etheredge said. “A lot of business owners don’t like giving up the revenue, but I would not have gone to any of them had it not been for the groupon.”

Wilson said Weforia.com gives business owners a chance to engage with potential customers.

Nasser Naura, owner of the Smoothie King franchise on Fowler Street, is always looking for new ways to attract customers.

His 32-ounce smoothie for $1 — usually priced at $7 — was the first deal featured in Fort Myers on Weforia.com.

Naura said he’s had more results with Weforia than other advertising efforts and says he can keep track of how many people bought deals and has a list of their e-mail addresses on file to send them future offers.

By getting 65 people to purchase the deal, he has a chance to show customers what else the store has to offer and educate them about the product, he said.

“Their job is to bring the customer in and our job is to keep the customer,” he said. “And that’s what we excel at.”

I say “reluctantly” because this cancellation was not due to a new e-reader, iPad, or because I’m an internet marketing guy that felt this was my obligation. Actually, my recent vacation-hold was screwed-up again, and I had yellowing papers sitting in my driveway for a week. I was annoyed, as this acts as a nice “we’re not home” notice to the thousands that drive past my home every day.  In retrospect, this has become my own experiment in whether or not a full transition to electronic media is a realistic option for me…

My first observation was the Subscription Dept’s reaction. After calling and requesting the cancellation, the Customer Service Rep essentially followed his script, asked why, and apologized. Surprisingly, they let me go quite without much of a fight. The only response I received after mentioning that I can now “read it online for free” was “you won’t get the coupons”. I replied by saying there are many online coupon sites – to which he said “but they’re hard to use, and don’t work very well”.  I suggested they call me back in several weeks and I may reconsider (I’m still waiting).

Granted, group buying sites like Groupon and Weforia don’t yet serve my home-town or county (north of NYC), so his statement is somewhat valid I guess. But don’t publishers have more ammunition than “losing the coupons”, especially to their male subscribers?  

I’m sure the majority of publisher’s revenue is ad-based, not subscription; but with a continued erosion of subscribers (as well as other factors) I’d think that ad revenues would continue their slide. Or, perhaps they’re now hitting bottom. According to MarketWatch, print-ad spending fell 7.6% in the second quarter of 2010, to $5.69 billion, after plunges of 42.3%, 40.4%, 37.9%, 31.7% and 14.4% in the last five quarters. Their online-ad spending rose by 14% to $743.9 million, following a 5% improvement in the first quarter and declines during each quarter of 2009.

The online version of my local paper is actually impressive; organized well, blogging, video etc. It’s also free. I can get much more content than the RSS feeds (which I access constantly via smartphone) – but I’m not sure if 100% of their content is online either. My personal feeling is that I wouldn’t pay monthly subscription fees to access the online version (I purchase Wall St. Journal print version mid-week, and don’t subscribe online). I would however, consider a “pay as you go/pay-per issue” model – I’m not aware of anyone that offers this option. By the way, there’s a creative ad for Newsday’s online edition posted on Screenwerk today.

My biggest challenge to online editions is this; the content and stories are not as easy to “glance over”, or read. There’s something about opening up the full spread of the paper version that can’t be replaced – but this is something that probably doesn’t exist with younger generations.  Some of the pop-up ads are too intrusive, and of course paper is more portable and manageable than my laptop. Then again – when online I can access it anytime, anywhere.

One last (critical) factor; my wife just complained that there’s no newspaper to start fires in the fireplace, and she’s asking about the lack of coupons around the house. I may be back sooner than planned…

Click here for this Ad-ology market research report.