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.
A customer relationship based on price alone is sustainable and neither does it lead to stable margins especially for small businesses. As an additional touchpoint for businesses, these applications are going to have to deliver a lot more than just offers. Businesses are slowly realizing how the Groupons are not the answer to their customer problems and are increasing smarting up and looking to complete solutions (to solution to take over where the Groupons leave off).
Battery issues aside, would it be possible to build an app that runs in the background updating location and do a push a notification to user? To mitigate privacy issues and network calls, make it a local notification (aka alarm clock notification) that “rings” when user is x miles away checked against a data file that is downloaded y times a day.
If this is technically possible, the need for an engaging app is not in the critical path to reach users.
Side note : textPlus is pretty big too (number of users) and engaging app. 3rd largest message provider by volume behind Twitter. They focus community of users.
Whoisnear is also interesting – facebook and analogous mobile app (browser and iOS based). Grabs interest graph and allows users to search by interest – I think it has a more dating slant but does not seem to be a stretch to apply to retail discovery.
Engagement on the mobile phone can be boiled down to a land grab for real estate. If you think about what apps are on somebody’s home screen this is the list of opportunity.
For real time inventory you have to solve 3 issues simultaneously
1) Critical mass of relevant inventory tied to the correct redemption mechanism from merchants.
2) Enough user engagement to trigger interaction and conversion opportunities.
3) Matching / filtering the correct offer based on some user profile / criteria to add more value than Google Maps Search
As a side note here is an interesting list of phone home screen captures for 37 signals.
http://37signals.com/svn/posts/2913-the-home-screens-of-37signals
You get 20 slots on an iPhone but 4 are taken by core phone features. What does your phone look like? What will it look like in two years?
Given Google’s primary business is advertising, and Apple has their iAd platform, wouldn’t they be the companies best position to do location-based, real-time targeting, or at least broker the geodata necessary? Really the hurdle there is simply user permission, but Apple at least has never really cared much about that.
agreed… push, not pull, is the model here eventually.
Nice article Charles.
A bit of a digression but food costs make up a big portion of a restaurants cost structure, so their model is more variable cost than something like an airline or movie theater. I’m wondering if restaurants will be slower to adopt instant deals than people think. Would love to hear from some restaurant folks.
Nice post Charles.
We created a hyper-local and location-aware app Locally that is a neighborhood wall for neighbors to communicate, share & organize with anyone around them. We are experimenting and creating a buzz in some neighborhoods.
With regular and continuous engagement of locals, we may be in a position for locals to offer real-time deals themselves. Family and home businesses can offer deals too.
It’s difficult to find knowledgeable individuals with this topic, however, you could be seen as do you know what you’re talking about! Thanks
http://www.termometrodigital.eu/
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