Disclosure: Through my work at SoftTech VC we have a small position in Groupon, I have friends involved with LivingSocial, and friends at foursquare (and I am an active user). This post is based on my views alone and doesn’t include anything other than idle speculation or reasoning on my part.
Like a lot of people, I think the daily deals business is fascinating. But I’ve always wondered when we’d start to see location-based deals for both perishable inventory (empty dinner tables, unsold sports tickets, etc) and more traditional deals inventory that we typically see on the top services. I think it makes a ton of sense for Groupon and Living Social to get into “instant” deals that location-based and / or time sensitive. The business of sending out deals once per day by email or tweet puts a ceiling on growth – opening up the channel to location-based deals allows the deal companies to have much more inventory available at any point in time and to have a more persistent relationship with customers.
There’s one problem with realtime deals, though. In order for them to be effective, you need to have access to or be application that people open several times per day. In my opinion, there are likely very few applications that can clear that hurdle.
Right now there is a short list of applications that I believe are both location-aware and opened several times daily by a meaningful number of users. This is not a complete list (I’d welcome additions), but here are the ones that come to mind:
-Google Maps (no question in my mind this one qualifies)
-Twitter (for those who have location-enabled their tweets)
-Facebook (they report tens of millions of DAU for their smartphone apps)
-foursquare (not on the same scale as the applications above, but I suspect they have a meaningful number of DAU)
There must be others, but I can’t think of them at the moment. Maybe some of the news / content apps are location-aware and get a lot of usage, but I’m not sure that they would be ideal for what I’ll describe below. Ditto on the location-aware photo sharing apps. I think the list of apps that fit this funnel is small but I hope others can point to others that fit the bill.
If you’re a daily deals provider interested in an instant deals experience, you have one core question – how do you get people to open your application several times per day? You could obviously try to make your core application more engaging on a daily basis. And, anecdotally, I hear that people redeem a fair number of daily deal coupons using the mobile applications provided by those vendors. But that is a redemption experience, not an engagement experience. I don’t actually think it’s really easy to create an application that people enjoy so much that they want to open it every day and use it as a way to share their location.
As an aside, the reason the several-times-per day application open rate is necessary is that you need to a) have several opportunities to refresh the user’s location and b) you need to have several times to present location or time sensitive deals. The more opens and location shares per day, the more opportunities you have to reach that customer.
So, for anyone looking to experiment with real-time deals, you need a high activity platform. I can imagine it would be hard to partner with Facebook as they have a deals offering of their own. Ditto on Google with Google offers. Hence the opportunity for foursquare – they have have a good audience and are not working (at least as far as I know) on a daily deals platform of their own. So I think they’ll be successful as a key enabler of real-time deals / offers. And they don’t have to sign up / onboard every single local merchant to make this strategy work as they have the scarce commodity of frequent usage among those who use the application.
Thoughts? Leave a comment below. You can also follow me on Twitter on @chudson.