A week ago, daily-deal service Bloomspot dropped the interesting announcement that it would roll out a “performance-based business model that takes responsibility for the profitability of its merchant partners.” The company will guarantee profitable spending levels from customers. Yes, you read that right — guarantee. In other words, Bloomspot is willing to structure its deals so that customers are not forced to eat it if they sell too many. Furthermore, Bloomspot made it clear that it sees the daily deals process as a data problem to be solved with fancy algorithms. The company clearly has technical chops. Much of the crew formerly worked in high-powered roles at Yahoo! on the technology development side of the house.
Our post on the Bloomspot news gave a nod to the long-term implications of this announcement. My two cents: This is a clear signal that the daily deals business will quickly morph into something else and that the balance of power has shifted to the merchants.Inundated by daily deal companies pitching their wares, merchants now understand that they can easily pick from any number of providers who can get their name in front of customers. The deals business, with the exception of some of the really high-end players, has been commoditized. I predicted this a while back when the rise of aggregators made it so much easier to sign up for a dozen deal sites and pick and choose the ones you actually wanted to buy from — a development that seriously watered down the relationship between the daily deal mailer and the customers.
By introducing the idea that, with better data tools, daily deals can be properly managed at a sustainable level for both the merchant and the deal company, Bloomspot is firing a shot across the bow of the really big sites who have long said that merchants benefit from the deals but not produced hard data around it. Early academic surveys implied that daily deal sites were not a slam dunk for merchants. Further, as the big national brands have realized they can run their own deal infrastructure through someone else’s white-label system, the focus for the daily deal startups has necessarily shifted back to the smaller brands that need distribution channels and ways to gain new customers.
A huge question remains about Bloomspot’s new strategy. Namely, will Mom-and-Pop customers grok the data-driven approach? This segment, while not tech unsavvy, remains far less apt than big brands to use data to drive ROI assessments of marketing campaigns. Bloomspot has certainly raised enough money — $40 million — to run with this strategy. Considering the growing questions about whether the initial iteration of the daily deals model can be profitable, a 2.0 model is a natural and necessary development.