Can Google compete in the daily deals space?

This article is posted by Mark Armitage, Director of Marketing Communications for Socialshopping.com. You’ll find his contact details at the bottom of the post.


Following their much-publicized (and ultimately unsuccessful) $6 billion bid to buy Groupon in November of last year, keen observers of the social commerce space anticipated that it was only a matter of time before Google came up with their own daily deals offering.  Sure enough, last week the news broke that Google is currently enlisting the support of small businesses and testing a “pre-paid offers/vouchers program”, currently known as Google Offers.  But does the online search and advertising giant really have what it takes to pull in enough customers and businesses to compete with the likes of Groupon, LivingSocial and the dozens of other daily deals sites out there?

Attracting consumers should be the easy part for Google. Groupon may have in excess of 50 million subscribers worldwide, but even by conservative estimates Google has over 60% of the total US search market and over 90% in many major European countries including the UK and France. Now imagine they choose to place simple ads for the new service on the search homepage, YouTube and… well, you get the idea. The bottom line is, if Google can get the product right, their reach and ability to draw customers should not be in question.

Google’s critics, though, may point to the fact that they have yet to successfully build a social product themselves. From Google Wave and Buzz in the past 2 years, to Jaiku and Google Lively for those with slightly longer memories, the company’s history is littered with attempts to enter the social space which for whatever reason have not really caught on. It can be argued that, in recent years at least, Google’s more successful ventures have come when, as in the case of YouTube, they have acquired companies and not tried to change too much about the core proposition.

A more practical problem for Google Offers may be in bringing small and local businesses on board. Their AdWords and AdSense businesses may help them pull in some companies, but these products are geared towards larger businesses, and they do not currently have the local sales army to compete with Groupon on the ground.

One part of Google’s existing business which may work in their favor, however, is Google Maps. Their Place Pages service, which allows businesses to add tags to their locations, is more geared towards local companies and appears to be making some headway in that direction, although little data exists to show just how successful it has been. Assuming they integrate Google Offers with Maps functionality, though, this could make for a more attractive proposition both for businesses and consumers. One can well imagine a user searching for a restaurant or service in a certain town or city, then being shown some alternatives which are running short-term offers and deciding to give them a try.

For all of both Google and Groupon’s financial might, another factor which may come into play increasingly is the actual revenue cut which they take from the companies running the offers. Groupon typically charges 40-50% of the coupon face value which, when you consider that substantial discounts which they have to offer to get the exposure in the first place, has led to plenty of dissatisfied former clients and cynicism amongst other business owners.  Would Google be willing to undercut them and take a smaller percentage in a bid to attract more business? Or will another platform come along and shake things up by offering a similar service for free?

On the other hand, LivingSocial’s recent success in offering $10 off any $20 purchase at Amazon (who have also invested $175m into the company) and Groupon’s ‘$25 off $50’ deal with Gap before it also prove that it is not only small businesses who are willing to offer substantial daily discounts in a bid to attract new customers. It would not be a surprise at all to see Google Offers partner with one or more similarly powerful retailer to create a stir when it launches, or even to place more emphasis on these kind of high-volume national offers longer-term. With their aforementioned dominance in the search and online advertising spaces, they are arguably better-positioned to ensure that such a deal receives enough promotion and runs without a hitch (despite selling $11m of coupons, the Gap offer also temporarily crashed the Groupon site).

Whatever shape Google’s daily deals offering takes when it does eventually launch, one thing which is certain is that it’s a risk they can afford to take. Let’s not forget that Groupon is a multi-million dollar advertiser for Google across AdWords, AdSense and YouTube, so in a way by competing with them and generating increased publicity around daily deals sites, it’s a win-win situation for Google.

Google’s move into the space is also likely to be good news for consumers, with a greater choice of discounts on different services than ever before. For local business owners, though, whilst these services may be a successful acquisition tool, many may keep a close eye on the small print of any deals and consider the demographics of the customers they attract before signing on the dotted line.

Mark Armitage is Director of Marketing Communications for Socialshopping.com, a new online shopping network and community which brings together thousands of shopping fans looking for the best tips and bargains both online and where they live.

Socialshopping offers an open technology platform which allows consumers and shops alike to create pages and share information about their favorite brands and products.

For more information, visit http://www.socialshopping.com or contact Mark directly at mark@socialshopping.com.


About Pat Kitano

Patrick Kitano works with brands in developing hyperlocal engagement solutions and is administrator of the Breaking News Network, a national hyperlocal network devoted to community service. He is the author of The Local Network on Street Fight, and is reachable via Twitter @pkitano and email pkitano@gmail.com.

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