Blog Post

How American Express could be the monster of local deals

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

The two obvious trends in local deals lately is public offerings, by Groupon and LivingSocial, and the rising competition from web giants like Google (s goog) and Facebook. But the more I see of American Express (s axp) in this space, the more I think it stands a chance to be the next major player to watch in this field.

The credit card company is 162 years old. But you wouldn’t know it by the way it’s been throwing itself into social media and activating local deals and discounts through emerging social channels. With its Smart Offers API, a platform that allows third-party deal services to build upon its payment system, it’s been able to partner with FoursquareSCVNGR and, most recently, Facebook to offer local deals to its members.

American Express has some 90 million card members worldwide, and its service is a simple and elegant way to offer a very robust and personalized deal service. While it only works for existing card members, it will have lot of reach with businesses. Altogether, if AmEx can execute, it could show many of the new deal companies how commerce, loyalty and offers are really done.

Here are some of the reasons I think so, which I expand on in a report for GigaOM Pro (subscription required):

Multiple Hats: With its unique make-up as a card issuer, merchant acquirer and payment network, AmEx has direct relationships with both consumers and merchants unlike other credit card companies, which work with acquiring banks. This allows it to appeal directly to both groups and enables it to quickly strike deals with third parties like Foursquare and Facebook.

Valuable Data: Because of its structure, it commands a vast amount of data that is valuable for merchants, helping them understand how effective their deals are, how people are spending money on their visits and how often they’re returning. It’s all helpful in “closing the loop” and helping businesses measure their return on investment and seeing how they need to tweak their outreach.

Linchpin: AmEx is well positioned to appeal to merchants and brands. It’s already established a relationship with companies big and small and it’s got a very easy way for them to implement deals. They not only get information but they don’t have to train staff to learn how to redeem coupons. That’s one catch that can hold up some deals; employees aren’t always ready to handle them.

Modest Cut: AmEx is also not looking to take a big 50 percent cut of deals like many services. American Express vice president of global marketing capabilities David Wolf told me that the deals are negotiated individually and small businesses using AmEx’s new self-serve product Go Social don’t pay anything. The company sees a revenue opportunity in providing advanced analytics or pay-for-performance campaigns down the road, but right now it’s primarily looking at just driving more sales and taking its usual transaction fees.

Consumer Brand: Consumers have a lot to like, too. AmEx deals are showing up on popular social services like Facebook and Foursquare, and their likes, interests and check-ins are helping determine what deals they see. That’s another big issue with some of these deal sites. Their discounts are often not relevant for a user, so many just ignore them. Also, consumers can take advantage of AmEx’s system with minimal effort. With AmEx, members are just using the cards they already have. And with the Facebook partnership, AmEx is offering not only deals but membership rewards and early access to events. This builds upon American Express’ existing work in building loyalty with its members.

Deal Army: Groupon and Living Social have thousands of sales people, which have helped fuel their growth but AmEx has thousands of client managers and representatives of its own spread across different areas — membership rewards, merchant services, global advertising and sponsorships — that all interface with millions of business clients. They’re all now being tasked with presenting these deal opportunities to businesses. That’s a formidable force that already has their foot in the door of businesses.

If AmEx makes this massive deal flow army a priority, it shouldn’t be hard to convince many existing partners to sign on. That should help with one concern I had about AmEx, what kind of deal volume it will be able to muster. It’s not only about getting personalized deals but also having enough offers overall to keep people interested and coming back regularly.

For more on why I think American Express could be a major player in the local deals space and also what challenges it faces, read my report at GigaOM Pro. (subscription required)

4 Responses to “How American Express could be the monster of local deals”

  1. Great article and couldn’t agree more. AMEX is really taking the proverbial bull by the horns with respective to targeted advertising, local deals, and social networking. As you pointed out, their access to a vast repository of purchasing information (about individual shoppers which is both valuable to the shopper, in terms of targeted meaningful coupons, and valuable to the merchant when aggregated) really sets them apart from pure-play providers like Groupon and LivingSocial. Although AMEX is not the first to take advantage of the collision between commerce and the social graph, they definitely seem to be the smartest about it and perhaps in the best position to really take advantage of it. I wrote about this here:


    • Ryan Kim

      Thanks Jason. Liked your post. Will be interesting to see how much of a priority this is for AmEx but I agree they are doing some smart work here.

  2. Douglas Crets

    Totally agree with you on many points. I wrote about this at Fast Company in two different ways. i think this local deals partnership will give AMEX a chance to make a marketing run at Visa. I’m not saying they will overtake the cards giant, but this is real agile marketing, with iteration and hyper locality. If it’s not too crass, I’d like to drop these links in here of the stories I did on this stuff.