Monday, April 19, 2010


Groupon - Group Buying Comes of Age?

I was reading Kara Swisher's BoomTown article today about how Groupon now has a valuation of over $1 billion and just raised $135 million in their most recent fund raising round from Digital Sky Technologies and Battery Ventures. I couldn't help thinking back to the roaring late 90's and some of the group shopping sites that predated Groupon. What did principals from companies like MobShop and Paul Allen's Mercata think of the obscene valuation Groupon has generated in 2010?

Luckily, I didn't need to go far to find out. Jim Rose, the founder and CEO of MobShop, is a former colleague, and knows a thing or two about trying to make a go of it in the group buying space. But, I didn't even have to send Jim an email to solicit his thoughts as Connie Loizos of peHUB had already beaten me to the punch. As I expected, Jim feels that Groupon is definitely overvalued and he pointed to two primary areas of contention he has with the Groupon model.

The Recession Economy
Jim rightly points out that Groupon's tremendous growth and extremely willing participation by its advertisers is likely significantly influenced by our recession economy. Profits have taken a back seat to simply keeping the doors open, and advertisers have fed very price conscious consumers a steady stream of unsustainable deals. Would Groupon grown like it has if we were still in the go-go era of 2005, when your crazy uncle's trailer property down by the river was worth $250k?

Supply and Demand
What will happen to all the deals Groupon advertisers are offering if we start seeing sustained growth in the economy and significantly stronger jobs data. If I am a plumber in Denver, flush with work, am I still going to be willing to offer a $10 service call offer that is 1/5th of what I would typically charge? Can Groupon continue to source a supply of significant discounts in a healthy, growing economy?

Jim has some valid points, and they certainly would make me pause if I was considering an investment in Groupon. However, Groupon has several and significant differences in its business model from its Dot Com era predecessors. While I have no doubt that MobShop and Mercata would have fared much better in today's established ecommerce environment, as sites like's have shown, there are still fundamental issues that would put it at a disadvantage to Groupon.

Get Local
The real difference maker with Groupon is that it is local. Local works, we know this and one has to look no further than Craigslist for validation. Sure, I might have considered buying a new Honda Civic via MobShop (they actually tested this) today if I thought it would save me money, but there is something simply inherently more appealing in seeing deals from stores and services I frequent on daily basis. This is especially true if they are really big deals.

The local aspect also gives you much greater supply. While you might not be able to entice Sony to blow out Vaio laptops on Groupon, you can certainly attract a lot of local service providers and vendors when you show them some hard data on how many customer they can acquire. A small local gym here in Seattle was recently featured on Groupon where they offered a blowout deal on a 30 day pass. A friend who is a trainer there told me they had over 1400 sales. This is not Bally's, this is a 6k square foot yoga and personal training gym. I have no idea how this will fare, but it shows you what can be done with Groupon and a local offer.

Well Socialized
MobShop didn't have Facebook and Twitter. Not even MySpace, remember them? Groupon has Facebook, Twitter and for us old folks, an email link. So, let us look at that gym example. I see the smoking gym deal and want some company as I sweat our the demons doing some hot yoga. I instantly post it on my Facebook account and Tweet it to my followers right from Groupon. Folks that I might barely know might be sweating next to me in hot yoga next week.

Local and social are a powerful combination. Is it a $1 billion + combination? That remains to be seen. Groupon is profitable though, which gives it at a significant leg up on just about every other web start up, in 2000 or 2010 for that matter.
Can local and social keep the advertisers active and offering killer deals to the Groupon masses, even if the economy improves?

Thursday, September 03, 2009


Honda Product Planners, Meet Social Media...

Car launches on Facebook. A no brainer right? Lots of exposure on the Internet, warm fuzzies clogging the Honda corporate Facebook page. Thousands of new FB friends forming a line to buy the latest out of Japan.

Honda apparently thought so, and tried to develop a lot of hoopla over the launch of their new 'cross-over' version of the venerable Accord sedan, the Crosstour. But, apparently the Crosstour is not living up to the designers aspirations and the feedback they received from their focus groups.

You see, unlike that full pager in AutoWeek, that 30 second spot during tonight's college football season kick-off, or even that search ad for the term "cross-over," social media is a two way medium. And sometimes, as more and more marketers are finding out, you aren't going to like what you hear. As this AutoBlog post demonstrates, Facebook can quickly become a PR nightmare.

First, the page has been inundated with negative comments about the styling of Honda's new pride and joy. This would have been bad enough, especially after Honda touted the FB launch for the car. Unfortunately, it also appears whomever is managing this page for Honda hasn't read social media marketing 101, and is dutifully engaging those with the negative comments with replies trying to defend the honor of the Crosstour, drawing further attention to an already unsavory situation.

But then, someone went and committed the ultimate sin of social media marketing. A Mr. Eddie Okubo chimes in with some niceties about the new Crosstour and how he would "...get this car in a heartbeat." Finally, some good feedback you might think. But apparently the looks of the new Crosstour are so offensive, one of the visitors found this comment to be a little fishy and perhaps...gasp, corporate! Sure enough, a Mr. Akitomo Sugawara thought so and did a little digging. Sure enough, in the second reply to Mr. Okubo comment (the first one also stated it sounded like he worked for Honda), Mr. Sugawara outed Mr. Okubo as a manager of product planning for Honda's light trucks division. He even posted a link to Mr. Okubo's Linkedin profile confirming the nice detective work.

So, what are the lessons from Honda's social media experiment? If you are launching a potentially controversial product with FB, you better think twice about the type of publicity you might actually receive. Are you prepared to highlight the positive responses you receive and ignore and/or spin the negative ones to your advantage?

The second lesson is never, never ever, think you will fool the Internet ladies and gentleman. Nobody likes to be played or to have the wool pulled over their eyes. And boy do they really hate it when corporate America tries to do this. It is quite simply the fastest and most effective way to destroy your social media program and your marketing credibility in general.

For Honda, perhaps next time they use social media higher upstream in the product life cycle. Maybe inviting select FB friends to preview upcoming Honda design elements via a collaborative online focus group?

Monday, July 27, 2009


What Is Old Is New Again

Chitika is making news today around the tech world by reporting their June study which shows Microsoft's Bing is realizing a 55% higher CTR for their paid search ads vs. Google (and 21% higher than Yahoo).

While this is definitely something to note and keep tabs on, it is amazing to see the media pick this up and run with it. Perhaps it is the Microsoft PR machine flexing it's might or just tech reporting that is more PR re-crafting than actual reporting. Where has the critical thought gone? Another topic to cover at a later date.

So, here is what we find at issue with this report:

1. We have no historical reference data to see any delta here between Bing and any previous iteration of the Micrsoft search engine

2. The sample time period encompasses a major brand relaunch with lots of advertising dollars and lots of new folks checking out Bing for the first time, hardly a strong control test

3. That a Microsoft search engine has a higher CTR on paid placements than Yahoo and Google is very old news

Point #3 above is the one we want to dwell on. We remember research going back at least as early as 2004 that basically echos the numbers that came out today in the Chitika report. MSN had the highest rate of clicks on paid ads, Yahoo was in the middle and Google was far 'behind' its rivals.

A lot of this comes down to gender, demographics, psychographics and the general user behavior style of a particular search engine. The other component is of course how the paid ads are displayed relative to the organic listings.

Look at this report on search engine user behavior developed by Harris Interactive in 2005.

"More than 50 percent of men said they know the difference between the two forms of search while about one-third of women said they can tell. Fifty-seven percent of men said they prefer natural listings while 32 percent of women said they don't prefer one over the other."

And here is a late 2007 article quoting a Hitwise study.

"A recent study carried out by Hitwise showed that 55% of Google users are male, whereas 58% of MSN users were female. Did you know that paid search listings are most likely to be clicked on my females and organic ads are most likely by males."

And a data chart from that article.

Click on Organic Ads: 56.9%
Clicked on Paid Ads: 43.1%

Click on Organic Ads: 65.4%
Clicked on Paid Ads: 34.6%

So, it is obvious that a higher paid search ad CTR has been a long running mark of the Microsoft search engines. The only news today seems to be that Bing hasn't changed anything.

And the big question is what does this mean, if anything, to a search marketer? Does MSN require a radically different approach as the CTR delta reported might suggest? Or, do search marketers just need to alter and or optimize their programs toward taking advantage of the higher female market share it provides? We think it is the latter.

Monday, June 29, 2009


Google Still Wins with an 0-3-1 Record

So, what does Microsoft have to do with Bing to get people to make the switch away from their Google habit? Give them money? Oh wait, they have already tried that.

Catalyst Group of New York just did a small (sample size) but very in-depth study of Bing v. Google as reported in this article on TechCrunch, the results are pretty interesting.

The 12 person study group rated Bing higher than Google in three of the four categories, and basically tied Google in the fourth. Relevance of results was that fourth category, and perhaps this is why why Google isn't sweating a study like this even though Bing dominated in visual design, organization and filter features.

Why? Because Google knows that you need to beat them in every category in order to really put the hurt on them. And you probably need to do it convincingly. So, even though Bing put up a 3-1-1 record, they still lost this series in the eyes of the panel group.

Relevance is incredibly important, and probably the biggest reason why anyone would consider switching search engines in the first place. Google didn't invent the search engine, they simply made relevance so much better than their competitors that people had to check it out. Once they used Google, they started to fall in love with simple user interface, the easy ability to filter and organize results, the whole package.

Bing has 3/4 of the package. Not enough to entice folks to go through the hassle of removing that Google toolbar that has occupied their browser for the last four years and then find and install a Bing toolbar. Not enough to get people to start saying "Google is your friend" on Internet forums. Not enough to kep Bing on the lips of millions of consumers around the world once the launch marketing budget runs out.

But this wasn't the most interesting piece of the study to us. The TechCrunch article as well as a number of other outlets that reported on this missed one telling bit of visual info that could prove a thorn in Bing's financial side.

If you look at the heat maps below from the Catalyst study, take a look at where the primary focus was on the Google map vs. the Bing map.

Lots of eyes on the top 1-3 paid search listings on Google, but for Bing the eyes are drawn to the organic results. We had noted what seemed to be a dip in CTR and overall traffic for our Adcenter clients since Bing was launched, but we were willing to accept that this might only be because of the number of new people testing the service instead of doing their daily search chores so to speak.

Now, after seeing these results, we aren't so convinced. Google is really good at making money from Adwords, and they know how to feature a high bid ad in order to get the highest CTR. Simple enough to copy for Microsoft with Bing. But, did they not get this memo, or is it a strategic decision made to sacrifice short-term Adcenter profitability to garner greater market share?

Our clients aren't to upset at this point, because they have seen a lift in organic results from Bing so far. And conversions resulting from free traffic are an ROI pleaser to say the least. But, what will this mean to Adcenter if it is a substantial impact? Is this an actual strategy or just indicative of the new Bing UI?

We will be watching this one to find out.

Thursday, May 07, 2009


The Alternative to Increasing Affiliate Commissions

Affiliates, from CJ to Linkshare and beyond all seemingly have one desire in common, increased payouts. And like coddling spoiled offspring, all too often advertisers are more than willing to give it to them.

How do you break this cycle as an advertiser and how do you keep core affiliates happy without increasing their commission rates?

Why is it important for an advertiser to say no to increased pay-outs? Simply put efficiency, because in the end, customer experience will make or break you as an advertiser. Affiliates are acquisition channels, pure and simple. They serve as a vessel by which a new customer is introduced to your brand or they reinforce what said consumer has already experienced.

Joe Consumer won't notice that you gave an affiliate a 2% commission increase. But he will certainly notice if he sees an attractive, timely offer, in a contextual setting that directs him to an optimized landing page.

Increased pay-outs are good for affiliates. Improving your program efficiency by optimizing offers, creative, and landing pages is good for affiliates, advertisers and the end consumer.

For a good volume affiliate, the type you would give a commission increase to in the first place, a nice bump in CTR and conversion rates is going to have a greater impact to their bottom line than a small commission increase. Let’s look at a hypothetical example and do some math.

The Scenario: Your average order size is $100 and your payout is 20%. Affiliate A generates 10,000 impressions, 1000 clicks (10% CTR), and 100 orders (10% conv. rate) per month for you, earning $2000 per month in commissions.

If you increased the payout for Affiliate A to 22%, they would then be earning $2200 per month. Your CPA for that particular affiliate would rise from $20 to $22.

If you optimized Affiliate A's creative and offers, and provided them a targeted landing page, you increase their CTR to 12% (1200 clicks) and conversion rate to 12% (144 orders). Their monthly commissions at the standard commission rate of 20% would then be $2880. Your CPA remains $20.

Sure, it takes quite a bit more work to go the later route and optimize your program efficiency, but in the end all parties end up winning. Your affiliates are happy because they are better able to monetize their site traffic and marketing efforts. Advertisers are happy because they are able to maintain margins and keep CPA in check. And most critically, your customers are happy with the whole experience and have a stronger perception of your brand.

Tuesday, January 27, 2009


Social Media: Aqusition vs. Product Marketing

The allure of social media, the irresistible force of marketing nirvana in 2009. Why have you forsaken so many with false promises of targeted customer acquisition, branding power, and revenue generation?

As Zachary Rodgers points out in his aptly named article on from 1/5/2009, Brands Struggled With Social Media in '08, all is not rosy out there for brand and direct marketers mining this channel for gold.

To save the effort of a click, the Cliff Notes are that even though some very powerful brands have dropped very large sums of money into social marketing initiatives, the payback has been underwhelming to say the least.

How many success stories have you experienced advertising with Facebook, MySpace, and YouTube? How about colleagues in the industry? The tests we have run and the stories we hear from others often begin with "lots of impressions" and end with "terrible ROI." For the companies that actually are concerned about things such as ROAS, revenue impact and brand image, there are mounting concerns about the applicability of social media as an acquisition channel.

Is the concept of social media and commercial integration flawed? Perhaps, but we think that too many marketers are looking at social media as an acquisition marketing medium, an opportunity to reach vast and untapped market. Sure, Google would love you to spend money on their ads that pop-up under YouTube videos. Facebook wants badly for you to advertise your contextually relevant product or service on member pages. But, if you have spent any time on either property, you know just how annoying those YouTube ads have become and just how invisible those Facebook ads have always been.

Instead of trying to integrate your brand into established social media properties, we believe the real opportunities (and actual measurable results) lie in integrating social media technologies into your own infrastructure, a product marketing approach. Integrate YouTube based product showcases into your site and show real life customers in action. Create a product review comment section where customers can Tweet about their new purchase as they use it in real-time. Implement the ability for like minded customers to develop a Facebook groups based on your service offerings.

Implementing social media applications into your web experience will strengthen user experience, create greater brand immersion, and ultimately improve your conversion rates and viral penetration.

Wednesday, November 05, 2008


Google Drops Yahoo Like a Bad Habit

So, the awkward couple that was Google-Yahoo has succumb to peer pressure (okay, regulatory pressure) and broke up. Well, actually Google broke up with Yahoo, but who cares right? Oh yeah, all those investors who could have sold to Microsoft at $33 a share probably care (Yahoo closed at $13.92 today).

How Mr. Yang and Co. were able to placate some very big time investors with a measly $500 million in forecast revenue from the Google partnership was an amazing sales job to begin with. Now, it has vaporized and Jerry must be thinking he should have stayed retired or at least checked his ego at the door when negotiating with Microsoft.

A mass email from Yahoo EVP Hillary Schneider a few minutes after reading about the break-up this afternoon demonstrated Yahoo’s lack of customer awareness on the subject. Why she or anyone else at Yahoo felt the need to reassure any advertisers after this news got out is perplexing. Most advertisers I had spoken with on the topic were hoping this would be the ultimate outcome. The last thing anyone wanted to see was a less competitive marketplace and a stronger Google.

Back in July of this year, I was treated to a convoluted presentation by a Yahoo SVP about how this partnership was all going to work out strategically and logistically for Yahoo, and what the impact it would have been to advertisers on their search platform. It was quite frustrating as I and others in attendance tried to get basic questions answered, but were either rebuffed in the guise of legal disclosure issues or simply by Yahoo admitting their plans were not yet flushed out.

There were two very clear things that emerged from this meeting however. 1) A lot of Yahoo internal people, both rank and file and executive level had serious questions of their own regarding the Google deal. 2). Yahoo executives either had no clue how they would actually implement the Google program or they knew the plans they had in place would not sit well with core advertisers.

In the end, it all comes down to what really was the core driver behind this partnership to begin with. Was it a jab at Microsoft for not meeting Yahoo ridiculous demands during the purchase negotiations? Perhaps it was a ploy to get them back to the bargaining table? The $500 million in forecasted annual revenue was nothing to sneeze at, but hardly anything that was going to move Yahoo stock price more than a couple of points in the positive direction.

For Google, the benefits were obvious; they got to stick it to two rivals at once and make more money and capture more market share in the process. It would have been a brilliant deal for them. However, once the federal regulators got involved, you could sense that the honchos at the Googleplex didn't feel the incremental revenue share volume was worth harming their brand with advertisers and making the jobs of their D.C. lobbyists more difficult. It was easy for them to pull the plug and tell Yahoo they needed some alone time.

Mr. Ballmer, the bidding is to you at $21 a share...


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