Self-service hyperlocal advertising platform Tenka was founded when Google vets Nhon Ma and Tim Zhou, who had previously focused on display advertising, saw a “huge opportunity” in leveraging data to enhance the value of daily deals. The idea was to make Groupon-like offers more relevant, more personalized — and more local — by empowering merchants to create their own offers and distributing those offers via location-based services and social media platforms.
Ma spoke with Street Fight recently about how Tenka works, where the service fits into the daily deals ecosystem, and how insights from the advertising world will inform online deals.
How does Tenka work?
If I were a merchant, I could just go onto the Tenka site and create a deal — create 50% off, or even a free deal. We believe our deals are better of those of daily deal sites because they can actually be free. So, once you create a deal on our site, it’s propagated on social networks by the people picking up the deal.
When you grab the deal as a Tenka user, you have a choice to broadcast it onto your Facebook wall. Once you go redeem the deal at the physical location using your smartphone, that triggers a broadcast to your wall. You can opt out of that if you want to, but for the free deals it’s automatically broadcast to your wall.
From a merchant perspective we wanted to get into a situation where you had local advocates of your place. People go to your place, they redeem your deal, and then they tell their friends about that. This is a way to get word-of-mouth advertising and see it happening. So, that’s the social component right there. We want to get merchants a deal and their branding onto the newsfeed of Facebook. We believe that’s the most engaging inventory out there in the digital world, and merchants right now don’t have the tools to get into that newsfeed.
When you have a deal on your smartphone, you can send that to your friends as well. Then there’s a local mobile discovery piece as well [where you can find deals near you.] But to get “nearby me” functionality working well you need a critical mass of deals on every single block. You need a self-service platform to make that happen. So, the mobile component is the other deal channel that we have on our smartphone. You essentially open up the “Nearby Me” feature and you’re able to see what other things are around you right now.
The [daily deals] industry is definitely going to be moved more towards what we’re seeing in the display advertising space which is leveraging data to make sense of “This deal works for this person because he or she is in this location.”
So, if you were in downtown New York right now, there’s over 150 [Tenka] deals in that area, but you just essentially open up the mobile phone and everyone sees those deals around them.
How do you establish relationships with merchants?
We have a lot of inbound leads that just come on and create their own deals, and then we call them back and make sure the copy of the deal makes sense. So, we do have one customer-support person that manages all of that, but we have over 500 merchants on the system already. The relationship that we have is minimal at this point because they are dealing with everything they need to do, they want to get the deal in and get it propagated as much as possible to a local audience. So, we manage that.
In our merchant app there’s a create-a-deal feature where you can actually go in there, create a deal, and there’s also a console where we show them everyone who redeemed their deal, and also those who “pocketed” the deal — the folks that grabbed it and put it into their Tenka “pocket.” That’s an indication of potential leads for the merchant.
Can merchants get contact info for these leads?
We’re working on developing those features out right now. Right now it’s bare bones, very preliminary; just showing their Facebook picture and their names. We have a lot of requests saying: “There’s 2,000 people that grabbed this deal. Can I get their email addresses?” So we’re developing features to bridge that gap so that merchants can actually do interesting things to reengage the people who grab those deals.
There have been a million deal sites in the wake of Groupon, each promising something slightly different or taking a specific niche. Is Tenka a niche site or do you see yourself competing with bigger players?
The bigger players… they are the prepaid model. It’s email-based, so just from a sheer economics standpoint they only have one chance to maximize profits of that single email. So, if you’re Groupon or LivingSocial, you’re going to send out an email blast to 100,000 subscribers, but that email deal is going to have to be a pricey deal. You’re going to get… typically a Brazilian wax which is $50 and up and higher priced deals and services too. Those guys are catering towards higher priced deals which make sense for their model. There’s a high merchant acquisition cost they need to cover, but also that’s more profitable for them.
We feel we hit the long tail of the merchant community who can’t get onto these email blasts just because their price points are all lower, and because they can’t handle the type of traffic that a LivingSocial or Groupon would send their way. We own a niche. We’re catering to the long tail community of merchants, and that’s really the only way we can get to be hyperlocal.
What are the advantages of merchants using a DIY service for deals?
If you have a do-it-yourself model, the acquisition costs for the merchants are lower in general. But also the most important piece is the quality of consumer that ultimately comes to the other merchants. In our case, our model is primarily social recommendation-based.
So, the users that come onto Tenka, these aren’t the guys who opted in to daily deal sites. So, the difference is quality consumers that we actually drive to the merchant. If you take a look at the big guys, these are the guys who have subscribers who explicitly say, “I want to subscribe to the daily deal sites.” So, it’s a different quality of a consumer.
What other trends are you seeing in the deals space?
I think the trend is definitely going to move towards a platform that leverages the social and mobile aspect in terms of what we’re doing — but the other piece is personalization. So, for us, given that we’re so deeply integrated into social media and the concept of whatever you put into your “pocket,” we infer interest as a result of that. We build dynamic interest graphs of every single one of our users.
So, when you go onto the Tenka site, there is a top deal recommendation deal feed that we personalize for each individual based on your interest graph, and also your location as well. The industry is definitely going to be moved more towards what we’re seeing in the display advertising space which is leveraging data to make sense of “This deal works for this person because he or she is in this location,” and they’ll present this person with spa treatments and stuff like that.
At the end of the day, this is an ad business, so I think a lot of the insights and things that happen in digital advertising space will definitely move over to the deals space. That being said, the merchant side is going to be the same thing as well, kind of a do-it-yourself mechanism where you set it to leave it and then you get minimal analytics to figure out what makes the most sense for the merchant, but still keep it very elementary.
Is there a level of tech savvy that merchants have to get over in order to understand Tenka’s value?
If you can write an email, you can create a Tenka deal. It’s that easy. The hurdle for merchants is that they are so busy all day, every day to do something, that a lot of them don’t have time. So the key is making it as easy as possible, and you can create a deal within five minutes.
Every single merchant wants to do marketing somehow, some way. First thing they think about is handing out fliers — printing something out and putting it in a store window, decals, and 50% off, 10% off. In the time in which you can do that, you can create a Tenka deal and get that to a more relevant audience faster. I think it’s going to take a bit of time, but as more and more merchants get onto email, I think that merchants will become tech savvy. Especially because a lot of the merchants are on Facebook as well, I think it’s just going to be more natural for them.
Granted, there will be merchants who are old-school folks who are 50 and older, which would be harder to get on board, but they have younger staff that can educate them on what’s happening on digital media and how they can take advantage of this.
This interview has been edited for length and clarity.