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Why Did It Take So Long for Newspapers to Copy Groupon?

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Word leaked out today about a new service the New York Times (s nyt) is planning to launch soon called TimesLimited, which is expected to provide readers with special offers on travel and other lifestyle items via email. If you’re thinking this sounds more than a little like what companies like Groupon and LivingSocial do, you’d be right. It looks like a fairly straightforward copy of these services, and also of higher-end offerings like The Gilt Groupe. What took the New York Times so long? As usual, the traditional media industry seems late to this particular party, and may even have missed a chance to take part in the festivities altogether.

The NYT isn’t the first to come up with the idea of taking a marketing cue from Groupon: Just a few months ago, the Cox Media Group (s cox) launched what appeared to be a Groupon clone called DealSwarm, and the Minneapolis Star-Tribune has had a similar offering called Steals for some time now. In Canada, the TorStar Corp. chain — which publishes the Toronto Star newspaper and a series of regional weeklies — acquired a group-buying service called WagJag last year and has integrated it into its various publications. Other newspapers such as the McClatchy Group (s mni) have chosen to partner with Groupon instead of trying to create their own version.

As more than one Groupon observer has noted, the service isn’t exactly rocket science. It involves sending people email offers and discounts from companies and service providers, then charging a fee for connecting them with customers. After less than three years of focusing on this business, Chicago-based Groupon has grown to the point where it had annual revenues last year of almost $1 billion, and recently turned down a $6-billion offer from Google (s goog) because it’s planning to do an IPO. And as I noted last fall when Cox made its announcement, copying Groupon isn’t the answer to all a newspaper chain’s problems by any means, but at least it is a place to start.

To be fair to newspapers, not even web giants like Google and Yahoo (s yhoo) have managed to come up with something like Groupon, which is a big part of why Google wanted to acquire it. But if anyone was in a position to do so, it should have been the newspaper industry; after all, who else already has relationships with hundreds, or even thousands, of local merchants and businesses? The problem for newspapers was seeing those relationships in a different way: not just as a static provider of banner ads and full-page color spreads for the advertising salespeople to harvest on a semi-annual or quarterly basis, but as a resource the papers could connect directly to customers for a fee.

It seems so obvious, in part because newspapers like the New York Times have done somewhat similar things in the past, offering subscribers early access to theatre tickets or similar events, for example. The New York Times even started a wine club aimed at giving readers preferred access to new vintages and reviews. In many ways, Groupon and LivingSocial are just extensions of that kind of marketing effort. But newspapers missed the connection, just as they didn’t see the writing on the wall for classified advertising when Craigslist came along with its free model.

The problem now is that Groupon and LivingSocial have become such behemoths in the email-marketing business that they can offer a size and scale newspapers can’t hope to compete with. There’s arguably still an opportunity for the NYT to target its own niche readership for high-end offers, but it’s a much smaller opportunity than it might have been if the paper had launched TimesLimited a year or two ago.

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18 Responses to “Why Did It Take So Long for Newspapers to Copy Groupon?”

  1. Maybe somebody has not been attracted by Groupon, but you cannot deny Groupon is a really smart solution to local small business. If NYT wanna clone Groupon mode. I think it’s better for it to build a similar website just with Groupon clone website. My friend is trying to start his own business, and purchase Groupon clone from”joomabc”, it works very well.

  2. Jason Fitzpatrick

    Its weird it took them so long, but the fact that sales are dropping for paper newspapers means they urgently need to find new ways to make money to mantain the huge amount of employees they have and keep journalistic quality by focusing their business on their websites and online communities. Daily deals may very well make it.
    I’ve read a great article on this on this blog:

  3. Mathew,

    Respectfully, I don’t think the line of inquiry is valid. The question isn’t whether big companies can be more innovative than the marketplace (they can’t). When you’re actually running a business, you spend most of your time and energy trying to compete and make money.

    At any given time, there are a plethora of ideas inside and outside of your organization and your industry. The vast majority either won’t make money or won’t scale fast enough to expend resources on (i.e. the innovator’s dilemma). You can only pursue a few ideas at a time.

    That means, of course, that sometimes you’re going to be blindsided by something that emerges very quickly. The best you can do is react as wisely and as quickly as possible to a rapidly changing context.

    It seems to me that is what the NY times is doing. No one company can out-innovate the marketplace, nor should anyone try. Sometimes you’ll get lucky with an initiative, but usually you’re just trying to keep up.

    I know that doesn’t sound sexy, but it’s the reality of running a large scale business and being responsible for the welfare of people that work for you. VC’s can afford to bet on ten longshots in the hopes that a few will pay off big. Operational managers can’t.

    – Greg

    • Thanks for the comment, Greg — you are right, of course. Unfortunately, that’s also why most large newspapers will never do anything even remotely creative or groundbreaking or innovative. And I also think that while your defense of them is fair, any industry that is undergoing fundamental disruption the way newspapers are has to think differently if it wants to survive, let alone thrive.

      • True. Just for the record, I wasn’t exactly defending newspapers, I just don’t think that particular critique (that incumbent business is supposed to have all the answers) is valid.

        I’ve been pretty critical of newspapers on my myself. Like here for instance:

        However, I do think that what a lot of people miss is that newspapers have had a much harder time than other media. Their previous model depended heavily on classifieds which have been the focus of digital disruption. Hype notwithstanding, other media haven’t really been hit very hard at all, while newspapers have born the brunt.

        – Greg

  4. The fact that people are going to groupon for a “deal” shows how replaceable groupon is. If ANY other site has a better deal, guess what, I’m going there instead.

    I have ZERO loyalty to groupon. Groupon isn’t very impressive really. There are many copy cats out there that I have no problem soliciting as long as they have as good as or better offers.

    Alternatively, and what most likely is happening, is that the same type of demographic that goes on groupon will/is going onto all of the other deal sites as well – simultaneously…

    The groupon brand in itself isn’t that powerful, its just that its new and they advertise like crazy…

  5. Erica Zeidenberg

    Newspapers have been very old school and slow to change which is why they are in so much trouble. And Groupon is only making things worse for them — they are taking away more of the papers’ local advertisers and leaving even great losses in their wake. As you note, some papers are getting with this accountable advertising approach and using white-label software platforms to help them with the technology and analytics to make campaigns work. San Diego’s Analog Analytics is gaining customers fast and now provides this service to over 850 publishers and broadcasters, but it has been a slow slog for the company to get the business teams at the papers to see the light before it is too late.

    • Not really at all. A lot of papers embraced the web before it was mature enough to embrace them, and they got burned. There was no ad revenue, and not much traffic. They pulled back after the bubble burst and not as many reinvested.

      A lot of newspapers were way more forward thinking at the outset of the web than other media outlets. Local TV News has been much more of a luddite contingent in this space than newspapers.

      The NY Times, Matt’s example, is in general a very progressive digital outfit as far as “traditional” media is concerned. Their ad model is a little more conservative, but that’s probably because they don’t feel as much price pressure on their display business due to their premium brand.

      • Tim, I’m not sure I would agree that “a lot of papers embraced the web” before or during the bubble — some were on the web, but most were doing “shovel-ware” rather than really adapting to the medium. So of course it didn’t work for them, and then they abandoned it because it wasn’t immediately as profitable as a 100-year-old business. That’s a failure of vision.

      • There were a good amount of papers that really did give it their best prior to 2000-2001. The one I worked for, the Arizona Daily Star, had a completely separate structure from the paper (ISP + Digital Marketing Services + Content Business). Lots of ideas tried. Most unsuccessful or ahead of their time. I can’t take credit for those, if anything I was a harbinger of the coming downfall (hired in late 1999 as much of the original staff was departing). :)

        Starnet had its own online writing staff that produced original material. The bubble burst, the ISP was sold, and it moved to an attempt at a wholly ad-supported content business.

        Variations on the Star’s model were more common than you’d think. Shovel-ware was and still is present in a lot of locations, but some tried big experiments when there was capital to fund it.

        There is a common perception that the industry did nothing. If you look at the industry as a monolithic whole, sure. But across that vast body there were a good deal of thoroughly inspiring and unsuccessful experiments.

  6. I think the interesting question to try to answer is WHY are media companies always late to the party on these types of innovations? I guess it’s somewhat obvious.

    These are organizations that were able to go decades without coming up with anything new and still maintaining supremacy.

    The culture within many of these places isn’t pro-innovation or pro-experimentation. That stands in stark contrast to a start-up culture where everything and anything can usually be tried at least once. People often forget that Groupon started off as The example in this case, and in many others, points to the fact that start-ups are very focused on finding what works. If something doesn’t, they discard it quickly instead of hanging on to it out of nostalgia or personal attachment.

    So at all levels, it’s a problem of the culture inside news orgs. I’ve heard it said many times by people who have intimate knowledge of how these orgs work that they are the most change-averse and risk-averse organizational structures ever to be created.

    The question then becomes, if we are of a mindset to help save traditional media, how can we help those organizational structures change in order to adapt to the demands of today’s news environment? I’ve heard it said often that the change has to come from the top. In my somewhat limited experience, I’d say that’s sadly true. Why is it sad? It’s sad, because again, this is the opposite of how a start-up works where anyone can have a great idea and see it implemented or else be given a really great explanation for why it can’t be tried.

    So… how can people inside and outside of the industry work to change the culture that’s still crippling so many media companies?

  7. The NY Times is not “Newspapers” – this is the same type of false equivalence that was bandied about years ago under questions like “why didn’t newspapers invent google?”

    Newspapers are not an entity, they are an industry. Plenty of newspapers cloned or partnered with Groupon in the summer and spring of 2010. Sign on San Diego is a great example. They are making millions in their market due to an early start and decent execution. The newspaper I work for initiated a program in our market where Groupon and Living Social have yet to tread. We’re doing fine.

    • Thanks for the comment, Tim. And congratulations for getting on the daily deal train early (although arguably last year was not really that early) but plenty of newspapers are only just getting a clue now, not just the New York Times.

      • I wouldn’t call it early either (although we’re in the middle of the middle here in Iowa).The fact that some newspapers made adjustments early and some did not speaks to the fact that we’re not some hive mind that could have invented google or groupon if we had just thought about it hard enough. I think folks in the industry (or ex-industry folks like yourself) have a misconception that “if somehow we did something differently…” things would have turned out better. I’m not sure of that at all.

  8. I would not do that if I am the manger of the newspaper.

    The cost is much much higher than Groupon. Groupon can be nationalize but newspaper is just local.

    And if I want to start the local groupon business, I would just go to “JoomABC” to purchase a groupon clone and then put a ad on newspaper, it’s just too easy.

  9. Because Newspaper guys are more old fashion thinking and Internet guys they are always looking for something new. The thinking model is way different.
    But really interested to see what will be happen if newspaper do groupon! :)
    Compare the cost of internet than Groupon, newspaper is too high, and newspapers are just local, can’t be so national as Groupon.I would rather go to “JoomABC” to purchase a Groupon Clone and do the same thing in the local, just not as many readers as newspapers.

  10. Newspapers will never be Groupon. Plain and simple. Nor do i think they want to be. There are a lot of small business out there that are afraid of groupon and the kind of over attraction it can bring to their biz. That being said, it leaves room open for a great idea to be scaled down and re-packaged.

    Not to mention newspapers are content creators and publishers first and have been for over 100 years. It is not fair to compare newspapers and a conceptual group buying startup that has had a pretty good run so far. Lets see if the groupon name has staying power.