Three weeks into 2011, the most interesting series of stories about the business to consumer web is local offers. They are all over the place, in the (new and old) media as well as on the map.
Since an excellent summary and opinion piece by Ben Parr at Mashable is just a few hours old, I’ll build off that. Google attempted to acquire Groupon. Groupon decided it could command even more billions by IPO than by being acquired. Google decided to launch its own service, Google Offers.
Ben op-eds that “Google will be an instant player in this market,” but that it “has yet to prove that it can build a successful social product.” For its part, “Groupon is prepared for (and not scared of) Google’s entry in its market.”
The first point I’d like to add is that Google faces at least one more well-prepared local offers service, besides Groupon. LivingSocial was also prepared for this announcement, and made sure it was also in the news this week with its offer of a $20 Amazon certificate for $10. That deal, which turned out to be wildly popular, put LivingSocial in the news during “Google Offers in the offing” week.
That’s good for Amazon as an investor in LivingSocial. It’s probably not bad for Amazon as a retailer, since orders will tend to be for more than the $20 on the certificate.
The second point is that the prominence of the local offers services seems to undermine, yet again, arguments that the web leads to “the death of distance” and makes meatspace irrelevant. On the other hand, the three services I’ve mentioned are (or will be) national or international in scope, and the offer that got LivingSocial in the news this week features an international retailer/partner/investor.
Finally, this seems good for consumers, with Google providing an additional source of local offers. For local business, however, it may further increase the pressure to offer deals that are too good for consumers to miss, and too cheap for the business to come close to covering its costs.
Howdy Andrew,
You might find my paper on the Groupon business model interesting.
It reveals a novel economic theory underlying the business model.
Further, the theory is used to describe a strategy for Google to beat Groupon.
The following are shorter blog posts describing the above:
The Essence of Groupon: Price Discrimination Degree Transformation
http://www.ahmadalia.com/blog/2011/01/the-essence-of-groupon.html
Google’s Groupon Strategy: Algorithmic Price-Sensitivity Quotients
http://www.ahmadalia.com/blog/2011/01/google-groupon-strategy.html
The full link to the paper is:
http://www.ahmadalia.com/blog/2011/01/undressing-groupon.html