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How the daily deal guys can leverage mobile

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The daily deal space seems to get larger by the day: Groupon, which recently filed for an IPO, has been joined by heavyweights such as Facebook and Google, and an ever-expanding field of startups is also vying for a piece of the pie. And while the market for email coupons is already saturated, our appetite for mobile data continues to grow. This means that the next step in the daily deal space will be moving into the much broader world of mobile, where on-the-go discounts have enormous potential to reach an ever-greater number of people.

Mobile is a very different game than email discounts, though: Our phones are always with us, so they’re much more personal, and they provide marketers with tools like downloadable apps and location data. Coupon distributors will have to be mindful of four important areas as they expand into the brave new world.

Unwanted ads. As Groupon has demonstrated, consumers are happy to receive one deal a day via email on their computers and then occasionally buy it to use weeks, or even months, later. But because phones are more personal, our tolerance for daily ads on them is much smaller. For example, a study from Ipsos Observer earlier this year found that consumers disliked ads on their phones more than on any other media format. So instead of pushing one or two ads a day at scheduled intervals — like Groupon, LivingSocial and other email distributors do — mobile deals should be delivered to consumers when they’re specifically looking for something or when they voluntarily disclose their location to see what’s nearby.

Location and search. GPS and geofencing enable marketers to target consumers within a certain proximity of a store, but sending an automated offer based solely on location isn’t enough. That’s why the tired “Starbucks scenario” of offering discounts to anyone who passes in front of a storefront has never taken off. Instead, location-based discount offers should be sent when users check in at a specific venue or when they search for something on their phones. (Forrester’s Augie Ray cited a lack of geotargeted advertising last year in a Starbucks campaign for Foursquare users.) And the offers should take into account the context of those activities: I’m unlikely to bite on discounted cocktails, for instance, if I check in at the library at noon.

Local ad networks. Because context will play a crucial role in mobile marketing, discount distributors will need to forge relationships with a huge number of advertisers. Those ad networks must include not only nationwide chains but also mom-and-pop stores in major markets. That’s a huge undertaking, of course, but it’s one that eBay’s WHERE is already making progress on. And as Business Insider’s Dan Frommer recently noted, it’s a strategy that Groupon appears to be pursuing with its rumored negotiations with Foursquare.

App functionality. Groupon has the right idea here with Groupon Now, an app that has been deployed in several cities. It features just two buttons: “I’m hungry” and “I’m bored.” Search results are delivered based on location, and offers generally are good only for a few hours during that day. But Groupon Now’s functionality is just a fraction of what we could see in the next few years. Search topics could be far more specific (for example, “Thai restaurants” or “kids’ movies”). They could also take into account location histories, delivering results based not just on where the user is but where he lives or works. And instead of requiring users to type a search query, an app could perform searches based on barcode information (like ShopSavvy does) or even an uploaded image (which Google, Microsoft and a host of others are pursuing).

Groupon and LivingSocial have dominated the market for regularly scheduled email discounts, but things could change quickly as these companies expand into mobile, which is a much more complex world. Because the market for mobile discounts is still almost entirely untapped, smaller players and newcomers have an opportunity to compete with their larger counterparts as the space gets legs. Those who best understand how to bring real value to users on their phones by presenting highly targeted offers could alter the landscape dramatically.

Question of the week

How can daily deals make a significant push in the mobile space?