In the last blog post we talked about the simplest and most effective form of marketing, word of mouth and referral, and the trend toward shopping online. It was only a matter of time before the oldest and most cutting edge methods of marketing were combined, and this is effectively what facebook and Google have done. They are combining referral and word of mouth marketing with an online environment – to launch an entire new platform that will allow us to shop online, and access great deals for making referrals to our friends. The only condition is that we must buy as a group.
History of Group Buying – Groupon
The concept behind the Facebook Deals and Google Offers may sound familiar. Groupon was a brand new business concept when it launched in 2009. Groupon is actually a social e-commerce buying service that is group based. It launched during a time when many other retailers were feeling the economic pinch, and Groupon was able to grow quite quickly. They started with $4.8 million of funding from New Enterprise Associates and funding from an investor to the tune of $1 million but reached profitability within a mere few months. How it works is that you sign up to the site, listing your email address and the city in which you live. Then, Groupon offers daily deals on a variety of services from many different retailers in your area. If enough people sign up for a particular offer (determined by the business provider), then the whole groups gets the daily deal. If there are not enough people to sign up, then no one gets the deal. Groupon collects payment from the members for the deal, takes their fee from the funds, and then passes on the rest of the money to the business. As you can see, it’s a bit of a win-win-win situation. The consumer gets a deal, Groupon takes a small cut and profits, and the business is able to see an increase in sales.
The incredible profitability (reportedly $2 billion in yearly revenue) and concept behind Groupon resulted in an acquisition offer of a reported $6 billion from Google. However, its three co-founders (CEO Andrew Mason, Eric Lefkofsky and Brad Keywell) turned it down. Google’s response then was to create its own platform to compete with Groupon – Google Offers. A few weeks ago, Google launched Google Offers in Portland, and eventually will roll out to New York, San Francisco and other cities during the US summer. The biggest selling point for Google Offers is that it will integrate seamlessly with Google Wallet, the company’s NFC-based payment system launching this summer. Instead of printing out a coupon or barcode, completed offers are put into a user’s Google Wallet, where they are automatically saved and redeemable. I will talk more about Google Wallet in the next blog post.
Buying as a Group on Facebook with Facebook Deals
Not to be left behind, Facebook also recently announced their competing platform, Facebook Deals. The new feature allows businesses to offer deals to fans and visitors through pages and Facebook Places. To setup the deal the business goes through a simple interface on the business page. It has been reported that Facebook Deals are available across four categories including loyalty, individual, friends and charity.
The loyalty offer offers customer rewards for repeat business, while the charity deal gives back to the charity of the business’ choice. Facebook users can take advantage of a discount for a particular product or service, but the main income earner is predicted to be the friends category. Like Groupon and Google Offers, when you make a purchase with friends and pay as a group, you all receive the discount.
Deals and Offers to Revolutionise Economy
There is no doubt that these new shopping platforms will revolutionise the way we shop, and the entire economy as a result. A lot of businesses will be placed in jeopardy as their business concept will be made redundant as a result. Last minute travel companies such as Wotif.com, will suddenly have competition for advertisers and customers, and traditional AdWords and SEO service providers will need to revise their business model, due to businesses preferring to advertise by offering deals via these platforms.
To keep up with these rapid changes in the internet marketing industry, my business, SponsoredLinX, has just launched a new arm that creates facebook marketing and advertising accounts for clients. This includes setting up facebook advertising, profile pages, facebook deals, and other areas that ultimately allow our clients to generate quality traffic and sales from social media.