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 (s cox) 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.
[inline-pro-content] 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 (s mni) 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.
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