The “daily deals” concept as pioneered by Groupon and LivingSocial (and countless clones) has certainly seen a dramatic trajectory in the past couple of years, culminating with Groupon’s recent IPO. “Horizontal” deals companies have built up huge email lists and a handful have built businesses worth billions in a very short amount of time.
But one of the side effects of Groupon’s success has been that just about every local online publisher out there has seized on the idea that they too can run deals that target their niche local (and hyperlocal) audiences. This trend has resulted in a number of white label deals and marketing companies that have popped up to provide turnkey platforms for publishers that want to run their own branded deals.
One of the largest of these platforms is NimbleCommerce, which counts Dow Jones, GolfNow, AOL Patch, Philly.com, WeddingChannel (TheKnot), Restaurant.com and YellowPages Canada among its clients. Street Fight recently caught up with Prashant Nedungadi, the company’s founder and CEO, to talk about where he sees the deals space heading and what local merchants should be thinking about as they approach online marketing.
Where does Nimble Commerce fit into the publishing/deals ecosystem?
We try to come at it from the position that there are a lot of publishers creating great content for consumers — and how can we help them monetize it better? Deals is a powerful monetization program that every local publisher should be offering. However, we believe that deals are only one of the marketing solutions that publishers will need to effectively connect their merchants with consumers.
Our goal is to become a local commerce and marketing solution for publishers. With us, publishers not only get a powerful platform, but also get access to a network of high quality sourcing partners, affiliates and local marketing solutions, all of which are integrated into the platform.
People talk a lot about the problematic issues with deals — that they’re not particularly good business for the merchant, and deal-seeking customers often don’t come back. How do you see deals evolving to address these kinds of problems?
I think the deals program is just one type of marketing program. The model has been purely performance based till now, with the publisher keeping a certain percentage of the value. The problem with this model is that the merchant may look at this as a margin issue, rather than looking at this as marketing expense. Many don’t look at the exposure that they get on a premium publisher site for an entire day and the intrinsic value of such an exposure. As a result, I think the pricing models will start evolving in the coming year to address this.
As an example, if a publisher is taking 40% of the price of a deals sold, today, they may change that to price it on a flat fee (or CPM) for a full page listing on their site (which is what a daily deal is), which includes an ad unit and emails to their user base. On top of that, they may take a smaller percentage (5-10%) for the deal sold. This way, they are pricing eyeballs differently from buyers and aligning the pricing model to value.
We’ve done a series of interviews with local merchants, and a lot of them seem to either not have time to deal with marketing, or they don’t understand the different options available to them. How do you get beyond that barrier?
The way to look at it is performance marketing is the new way of marketing. The problem with performance marketing is you only get to see the downside: “Oh my goodness, I’m paying you 50% of the take, which goes against my margins.” On the other hand, if I spend $2000 to be within the yellow pages each month, people don’t complain about that, because they look at it as marketing expense.
At the end of the day, you have to look at: “I’ve spent so many dollars, how much am I paying for every customer that comes to my door?” The way to look at it is not just what is the cost of each customer buying my deal, but also what is the cost to create awareness for my establishment.
Do you think there is room for a deals product for smaller, hyperlocal, neighborhood-sized blogs?
In smaller neighborhoods, it is easier for a neighborhood size blog to succeed vs. a Groupon, because they have feet on the street and relationships with the merchants. In smaller neighborhoods, the community also tends to be loyal to neighborhood publishers. We have a number of clients who have done very well in small cities. As an example, DealGarden runs a deal site in Topeka, Kansas and neighborhood communities and are larger than Groupon with an extremely loyal following.
You have said that a lot of deals sites are going to go out of business — do you mean they’re going to be consolidated into other bigger companies?
There will be some consolidation, but it is increasingly harder to have a standalone nationwide deal program without a significant investment. I believe, however, that publishers focusing on local markets (like local newspapers), vertical services and existing national brands (like Patch), who have the reach offering deals will emerge as winners in this space.
This interview has been edited for length and clarity.