The success of companies like Groupon and LivingSocial in creating the $5-billion-a-year group-buying market has created considerable debate about the future of the space. Most of the discussion has focused on the entry of additional players into the market--specifically, will revenues continue to be concentrated among a select few, or will they shift to other players? Do customers have loyalty to any particular "brand" (e.g., Groupon) of deals platform, or are they merely loyal to the best price? And which company exactly will grab the pole position moving forward?
For clues, it helps to recall the evolution of the online display advertising market. In the early stages of online advertising, 90% of the market was controlled by two major players--Yahoo! and AOL. This is very similar to the current state of the group-buying market, one in which Groupon and LivingSocial hold an ostensibly commanding share.
As supporting technology and infrastructure emerged in the mid-’90s to help lower barriers to entry to the online advertising market, we saw the distribution of advertising revenues shift from those dominant players to newly empowered content creators, such as magazines and newspapers. Advertisers quickly learned that those "publishers" (including media companies, blogs, and social media sites) were a very effective space to place ads given their brand loyalty and deep understanding of their audiences. Consequently, advertising spending from companies followed audience distribution among publishers.
In examining the contemporary evolution of the group-buying market, we can identify similar trends. Since the rise of a few branded leaders, companies like ours have begun offering “white-label” platforms to allow publishers to enter the group-buying business. These platforms have lowered the barriers to entry, facilitating publisher participation (e.g., NY Times TimesLimited and Thrillist Rewards). As with online advertising, it’s a natural evolution for the publishers themselves: They curate content on a daily basis for their loyal audiences; they understand them implicitly. Who better to best determine the deals they'll purchase?
For merchants looking to choose a group-buying partner, it's an equally compelling proposition. For example, if I'm a microbrewer that caters to men ages 18 to 34, rather than simply rolling the dice and exposing my brand/product to a diverse set of demographics through one of the geofocused branded services, wouldn't I prefer to focus my efforts on an audience that's likely to explore the world of boutique beers (e.g., Thrillist’s readership) and, in the process, work with a team from that publication to determine the best marketing strategy to position my product to their readers?
With access to the tools and expertise required to succeed in a competitive market, it stands to reason that publishers are again in the driver’s seat, this time in the world of group buying and social commerce.
For marketers, the implications also are profound. Today, marketers do their best to leverage publishers’ deep and authoritative relationships with their targeted audiences through online display ads, which are both passive and have extremely low engagement metrics. Properly run, publisher-driven group-buying services represent a powerful, active mechanism for marketers to efficiently reach these audiences, deepen brand engagement, and ultimately drive better conversions.