Facebook announced yesterday that businesses can add deals and rewards for their customers who check in through Facebook Places. The impact on local advertising is huge:
1. Deals will be everywhere
The “Deal” becomes the currency of local advertising because it is performance based, efficient for reaching the customer and isn’t burdened with the CPM-based campaign costs of traditional commercial or banner advertising.
2. The merchant cost for placing a deal drops to zero
Any merchant can add their own deal to Facebook Places free – see the Facebook Deal video. Groupon introduced their self service Daily Deal system called Groupon Stores only two weeks ago, and charges 10% of coupon value, a deep discount from the 50% fee they have been charging for their Deal of the Day promotion. At zero cost, running a deal becomes a no-brainer for merchants. Note that Facebook states they can reject frivolous or low quality deals so it can create a value-laden brand that can’t be dismissed like those junk mail coupon books we always throw away.
3. Deals = instant gratification
Facebook Deals immediately rewards consumers based on where they are. No need to print out a coupon beforehand. Every mobile app – Foursquare, Yelp, Groupon – will be forced to follow suit with a similar instant rewards program in order to remain relevant.
4. The “Check-In” becomes the proxy for the “Like” button
Simply put, the better the merchant deal on Facebook Deals, the more Check-ins it receives. The more Check-ins, the more exposure the merchant receives. Again, Yelp, Groupon and Foursquare will need to incorporate Check-in deals within their product offerings, but they will have a hard time competing with Facebook’s massive database of users.
Expect a lot of market adaptation from these mobile players to create business models that can coincide with Facebook Deals or work together with Facebook. For example, FourSquare can’t really charge merchants to add Check-in deals now that it’s free on Facebook. They may need to partner with other local deals services, i.e. Groupon or LivingSocial, to help promote their deals within an affiliate arrangement based on FourSquare check-ins (see next point).
5. Deal exposure and syndication becomes the value-add premium
Imagine the day when every local business has a deal up. How do they stand out? Groupon has created two tiers of promotion for their merchants that takes cuts of 30% or 50% of coupon value based on campaign reach:
Facebook is well equipped with targeted Facebook Ads to assist merchants in promoting their deals for a premium. Expect seamless integration of Deals and Ads in future Facebook marketing. Expect Yelp and other local ad-based businesses to create a similar tiered advertising model.
6. Deals open up affiliate opportunities
Everybody craves a deal. But the Deals landscape is very fragmented (anybody who receives loads of coupons and deals in their inbox will attest to this) and will become even more so with new channels like Safeway.com Personalized Deals and mobile rewards apps rapidly coming online (see points 8 and 9).
Deal aggregation systems like TheDealMap that expose every deal on a map and Yipit that emails a list of local daily deals to subscribers are positioned as deals portals to the consumer. Online systems that can connect deals with customers will be rewarded.
7. Local media well positioned for deal syndication and affiliate relationships
Local media outlets – TV, radio, newspapers – have been watching advertising dollars inexorably move online over the past decade. They now have the opportunity to leverage their local consumer brands to connect deals advertisers with their readership. The most innovative media companies will set up their own deals platforms that replicate what Groupon Stores is offering at premium pricing, or just work with Groupon Stores and share revenues.
8. Retailers are setting up their own deals platforms
National chains have the advantage of leveraging their scale to provide services local merchants can’t compete with. My local Safeway knows what I purchase through my shopping card, and can promote deals for items I normally purchase. Simply by clicking the “Add” button, Safeway automatically gives me the discounted “personalized” price without printing coupons.
9. Expect new mobile apps that provide instant discounts at point of purchase
10. What about local businesses that don’t sell deep discount products?
Will Facebook allow accountants to provide discounted tax services? Probably. Retailers are only a small portion of the local merchant landscape. The new frontier for deals advertising lies in finding innovative and effective marketing methods for professionals, business to business services, and businesses that rely on lead generation, like real estate and auto sales.
We see a new trend in lead generation that connects buyer and seller one on one exclusively and transparently using variations of the Deals format. Most lead generation systems are based on subscription models or pay per lead that serve up leads amassed from capture sites. Consumers provide their contact information with no idea who will call them.
The new lead generation systems will provide an enticing “deal” from a specific company or business professional. More important, these deals are promoted or syndicated through appropriate channels that connect advertiser and customer. The key to the new lead gen system is functionality that allows the advertiser to transparently see who the lead is (it could be a Facebook friend already) and assess whether that lead is worth pursuing. If the lead is worthy, a fee is paid to the syndication channel where the lead was sourced. The new systems are performance based, and will contribute efficiency and far more certainty in the lead generation process in the same way the Daily Deal ensures every purchaser will be a customer for the advertiser.