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Summary:

The rapid growth of Groupon has gotten the attention of newspaper chains, with Cox Media the latest to announce that it’s launching a similar social-shopping service called DealSwarm. But news publishers may be too late to this particular game, just as they were with Craigslist.

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Over the past year, Groupon has become a rocket-powered social shopping phenomenon. It’s one of the fastest-growing startups in decades, is valued at more than $1 billion, and expects to close the year with almost $500 million in revenue. This has gotten the attention of newspaper chains, which used to be the primary conduit between local advertisers and consumers. Cox Media Group is the latest to jump on the group-buying train, with the launch of a Groupon clone called DealSwarm. But news publishers may well be too late to this particular game, just as they failed to recognize the competitive threat that Craigslist represented.

Cox is launching its service in Atlanta; Austin, Texas; Dayton, Ohio; and Seattle initially, but says it plans to roll out in other major markets nationwide over the next year. The media group claims it will offer “outrageous online discounts of 50 percent or more on local dining, entertainment and other services from some of the most popular local businesses.” As with Groupon and other group-buying services, users register for alerts and are offered discounts by local retailers that only apply for a certain time period, or are only available if a certain number of users or customers sign up for them.

The media company doesn’t mention Groupon by name, but says its offering is different from “others in the group-buying space” because its local media properties have already established a relationship between readers, viewers and listeners of its newspapers and radio/TV stations and local retailers. Cox notes that all these media outlets will be promoting the deals in question so advertisers get more exposure. It makes a lot of sense — so much sense that it’s a wonder newspapers didn’t think of offering those services before, given their relationships with local advertisers.

The biggest problem for ventures like Cox’s, of course — and for similar efforts such as the Minneapolis Star-Tribune’s “Steals” offering — is that Groupon is already such a dominant force in a number of major markets, and is becoming the go-to brand name when it comes to group buying, not just in the U.S., but around the world as it has been acquiring competitors in other countries. Liz has even suggested that Groupon should use some of the $135-million in financing it recently locked up to start a “roll up” of local social-shopping or advertising-related services.

While Cox and others try to go it alone, some newspaper publishers such as McClatchy have decided they would rather partner directly with Groupon for group-buying offers instead of trying to reinvent the wheel. This arrangement presumably gives Groupon a large cut of the proceeds, but at least it maintains some of the existing relationship that newspapers have with their local advertisers (since they are the ones who broker the deals with Groupon). That relationship is one of the few weapons that many publishers have left with which to fight off a steady decline into irrelevance.

Post and thumbnail photos courtesy of Flickr user Lordcolus

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  1. People can follow in the footsteps of Groupon, but it requires a lot of research and legwork. It’s important to try not to copy Groupon exactly.

    A site for consumers to use to find deals and sales from all the sites out there is http://www.dailydealpool.com. They’ll send you a daily email with the best buys, ensuring you don’t miss out.

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    1. Nora, you’re a douche. The whole world can see that you work for Daily Deal Pool. Why don’t you pay GigaOm for your ad space instead of mucking up their comment board. I will make sure to never visit your site.

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  2. So you’re a local merchant seeking out new customers. You can (a) go to Groupon, which is well known and will deliver you customers — assuming you’ve ever heard of Groupon or (b) you can buy new customers using the >exact same< deal mechanic Groupon offers through the local newspaper's website (and probably it's print edition as well).

    What exactly does Groupon offer that the local newspaper/site does not offer? Absolutely nothing. Do I believe Groupon is vulnerable because of this? No, they have brand/scale/et al. But the notion that local newspaper sites can't clone Groupon and deliver the same goods to advertisers is silly.

    To make a Groupon clone work you need eyeballs and a sales force. There is no secret sauce of Groupon — as genius an idea as it is.

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    1. Mark,

      There is a secret sauce to everything that becomes popular. Even if you know the recipe it isn’t always easy to duplicate the experience.

      People must like the way Groupon’s UI and usage model work. Will the experience be so pleasant with the clones that newspapers offer? History doesn’t bode well for newspaper sites and usability. Will they be able to use social networks as effectively? Is the newpaper manager calling the shots even a social network user? C’mon. It ain’t that easy.

      But let’s say you can duplicate the experience exactly. You still have to compete with an incumbant and it isn’t always clear why certain services take off.

      I can build a Twitter clone in a weekend. Will it be a success? What is Twitter’s special sauce? Google can’t duplicate Twitter but some Newspaper company can duplicate Groupon?

      Naaa. It’s more complex than that.

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      1. Great Comments Matt,

        It is not just the UI, or the UX, or the technology, or the sales process that makes these companies work. What has these companies be successful is the way in which they get consumers engaged in processing transactions. This is a combination of numerous different things coming together to create the perfect opportunity for the end consumer.

        I have spent 3 years analyzing the Deal space and developing products, solutions, prototypes and technologies to hit this market. For two years we failed to hit the mark on many of these different fronts. Only in the last year, did we actually tap into the “Secret Sauce” and now we are signing up many large national publishers (Directory Companies, Search Companies, and Newspaper Partners) to help them get up to speed and implement these types of solutions.

        The challenge is not a technical one. The challenge for these companies is an integration, training and operational challenge. These huge publishers have an incredible opportunity in front of them, but most of them will miss it due to poor execution and the time it will take them to trial and error their systems.

        You have good insights on the challenges ahead for these Newspaper partners and you are 100% that it is not as simple as many think it is.

        All The Best.
        David

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      2. The secret sauce is keyword advertising, display advertising, Facebook advertising, and lots and lots of it.

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  3. Look, there is plenty of justified newspaper bashing to go around, but if you write an article saying they need to do more than just copy Groupon without so much as a hint about what else they should do, it seems a little silly.

    And as @Mark said, unless they have a better idea – and you don’t either apparently, copying them is actually a good idea. It is a hell of a lot better idea than just giving their audience email addresses over to Groupon which I believe is what the McClatchy’s of the world are doing.

    If newspapers send good deals to a large distribution list they will have a nice high margin business and they will maintain direct contact with their advertisers and their audience. Why is this a bad idea?

    Sorry for the bashing, but I was expecting a better alternative to copying Groupon, and I don’t see one here.

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  4. Cox is not the only major newspaper company that is making the move to the “Group Buying, Daily Deal” business model. Virtually every major Newspaper publisher is looking to launch or has launched a “Groupon Clone”.

    From a technology perspective the barrier to entry to be in the “Group Buying Daily Deal” space is quite low. As such, many smaller, more nimble organizations can provide the same service with a much lower cost and overhead. This creates significant problems for Newspaper organizations or Directory companies as it makes it difficult for them to compete.

    The advantage these companies have over the smaller Group Buying companies is their tremendous marketing reach and distribution as well as their large and able sales forces. Companies like Wantsa and a handful of others are currently training and consulting to Media Organizations on how they can take advantage of their resources and reach and begin to tap into entirely new revenue streams. Revenue streams that even Groupon and the major group buying companies have yet to expand into.

    The Daily Deal space is going to morph fast and furious over the coming year and you will begin to see all kinds of companies displaying deals in all different forms.

    The market will move towards being a consumer driven “Search” based system as opposed to an “Email List”. When consumers want a deal on something, they will be able to go and search for it by Keyword or Category through Newspapers and Directory Companies and Search Companies, and there will be deals and discounts that are relavant and meaningful to the consumers.

    That is when the real shift in the “Deal Space” will begin to alter what we know of as Online Advertising.

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  5. [...] Cox Media Group launched their Daily Deal product, DealSwarm, this past Tuesday. DealSwarm will act as both an independent Daily Deal service and as a white label product to be run on various news media sites owned by Cox.  While critics contend that Cox is entering the space too late, the media group is banking on the established relationships between local advertisers and consumers to make the service work. [Gigaom] [...]

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  6. [...] Related ResearchNavigating Google Instant – Tips for Search Marketers Four Reasons to Watch for Power Line Communications Social and Online Media Need Privacy Plan Now Can Anyone Really Compete With the iPad?  In terms of the competitive landscape, although Groupon is much larger than LivingSocial, it’s not clear that the market is a zero-sum game — LivingSocial and other competitors (some of whom Liz described in a recent piece on “Groupon Wannabees”) could carve out some local market share for themselves, particularly through partnerships like the one LivingSocial has with the Washington Post, where the newspaper uses its local reach to publicize the company’s latest deals to its readers. Rainey said that newspapers in particular need help grasping the idea of “cost per action” deals such as group buying, because they are so used to thinking of display advertising as the only option (Groupon has similar partnerships with some media outlets). [...]

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  7. I wouldn’t think that a newspaper has or can get a meaningful database and user-base that Groupon has. The demographic that uses and makes Groupon a success is vastly different than the demographic that reads a newspapers print product and to some extent the newspaper’s web product. Groupon has thousands and thousands of meaningful email address and mobile data for each market and each of these addresses is a user who is x% more likely to print or show their phone at the store for a discount than an average newspaper reader – i think that’s a key difference.

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