DealOn, a group buying company that launched in late 2009, was always meant to be more than just a Groupon clone. The site offered deals, but it also had plans for a white label deals solution for publishers as well as an “offer exchange” which sought to “empower the deals ecosystem,” according to Rich Razgaitis, who was the company’s CEO until it was acquired by ReachLocal last year.
Today the company has been rebranded as ReachDeals, and is even more focused on the supply side and merchant relationships he says. Here he talks to Street Fight about some of the challenges faced by deals sites, how ReachLocal’s ongoing relationships have created synergy, and the growing importance of mobile for deals.
A big criticism of daily deals is that many are “one and done.” People come when there’s a deal, but not when there isn’t, so the merchant doesn’t get the customer acquisition that they are looking for. How do you see that problem evolving out?
We’ve been talking about this internally and with our merchants and partners for over a year, before it became a popular topic. The reason is simple: our DNA is focused on driving value to not only the consumer, but also the merchant — helping build their business through marketing or new people that walk in the door.
So, as part of that, I think the fundamental premise that simply applies in the deals space and applies in every other form of marketing is that audience matters, right? So, whether it’s advertising in a magazine or a radio spot, or a coupon, or in editorial content that’s being presented, or deals — who that thing is aimed at makes a difference, and is a long-term value of the merchant. So, one of the things we really focus on is to try to marry the merchant audience and the merchant objectives with what we’re bringing in the door.
What do you think are some of the advantages of being a smaller deals sites as opposed to a Groupon or a LivingSocial?
Groupon clearly has a powerful presence in the marketplace. I think whether you’re reading postings online or talking to merchants, merchants generally have fairly powerful feelings about Groupon and they are often polarized. So, our objective is not to compete with Groupon. We are not trying to out-Groupon Groupon. In fact, what we’re trying to do is work with publishers and empower them so that they can have a presence in the space.
Certainly having a proliferation of deal sites — and certainly having a lot of people talking to the merchants — adds a degree of complexity and some noise to the marketplace. At the same time, for a company like ReachLocal, where we have tremendous assets, great resources, great relationships for years in the digital space representing SMBs, it helps our value proposition.
In effect, we offer merchants a place of business. We’re representing a whole syndicate of publishers so it can be everyone from news sites to daily deals sites to financial destination sites to general media sites. So, they are buying a mutual fund and they are getting a mutual fund of daily deal sites as well as a variety of other publishers.
How do you see the evolution of mobile deals and how important do you think mobile is to the space?
I’ll go further upstream to another question, which is, “How does deal commerce space evolve over time?” I think if you look at the fundamentals of a deal, certainly this is a marketing vehicle that went from very traditional advertising for hundreds of years to digital advertising display to pay-per-performance — pay-per click, pay-per-lead — to the next iteration which is pay-for-the-customer-that-walks-in-my-door. That, in many ways, is marketing nirvana. You just have to make sure that you’re getting the right customer.
I think then what happens is that what a deal looks like certainly starts to bifurcate into different strata. So, there might be different deals offered to people that are long-term customers or first-time customers. So, as the deals commerce business evolves over the next couple of years, I think the offering of what types of deals to whom over the next couple of years will start to change.
Then I think that fits into a mobile strategy. Clearly the world is moving to mobile. Clearly that’s going to be a key catalyst. Certainly it’s moving to hyperlocal and all those things we’re only on the forefront of. At the same time, you just can’t apply one principle to all scenarios, so I think it’s going to take some figuring out. I think it’s going to take some massaging. I think we’re going to have to have different deal products that are offered to consumers at a certain point in time so that at the end of the day it’s adding value to merchants.
How do you combine targeting and knowledge of the consumer with specific deals?
There’s two pieces to this answer. One is this certainly evolves over time. There’s nobody in the space right now that has been able to figure out this whole targeting and delivering the exact right deals to the exact right customer at the exact right time. We’re working with publishers though that have that customer affinity as well as that customer knowledge so they can do that and that will happen over time.
I think right now if you look at the space and what happens we’re partly making that decision based on the types of publishers with whom we will choose to work based upon the makeup of their audience and based on the deals we will syndicate to that publisher simply based on their demographics.
Part of that is done in very conventional and traditional ways. Quite frankly, perhaps more expensively than done in a traditional way. At the same time, I think there’s’ a whole evolution of this over time and we’re working with partners today that if it’s public we’re working with Facebook with one of the partners that are sourcing and providing deals for Facebook in five markets across the U.S. and there are companies clearly like Facebook that are brilliant in its ability to identify the right consumer, right opportunity, and marry those two up. That’s what is going to happen over time.
This interview has been edited for length and clarity.