Why Local Search Is the Key to Groupon's Turnaround | Street Fight

Why Local Search Is the Key to Groupon’s Turnaround

Why Local Search Is the Key to Groupon’s Turnaround

groupon_logo

At Groupon, a future beyond daily deals may rest on the company’s ability to make sense of a technology that preceded it: search. As executives look to wean the company off an increasingly challenging email marketing strategy and reposition it as a marketplace that shoppers chose to visit, the Chicago-based company has invested considerably in building the infrastructure to compete for the hundreds of millions of local shoppers who pass through Google each day.

The bulk of the effort resides in an under-the-radar product called Pages. Beginning last year, the company began developing landing pages for merchants across the country, whether they or not they are Groupon customers. The pages include basic business information, selected reviews and a button that allows customers to request a deal from the businesses. As of last quarter, there were nearly a million of these pages, CEO Eric Lefkofsky said during an earnings call earlier this month.

These pages are the cornerstone of the firm’s search engine strategy that will likely play a critical role in determining whether the company can evolve beyond a daily deals provider. In order to build a functioning marketplace, the company needs both supply of goods and services to purchase and the requisite demand to convert a transaction. Even branded search sites — like Yelp, for instance — rely heavily on referrals, almost exclusively from Google search, to drive meaningful traffic.

A strong search position will allow the company to generate revenue from less profitable transactions than discounts. During the May earnings call, Lefkofsky said the company planned to begin offering “market-rate inventory” in an effort to “attract merchants who do not necessarily want to discount their inventory.”

On the surface, the project appears to be far behind. In an analysis of over 10,000 search terms in the U.S. provided pulled by Andrew Shotland from LocalSEOGuide, Groupon’s listings averaged just below 7th position in a sampling of 10,000 local Google searches in the U.S. compared to Yelp, which averaged 5th. What’s more, the keywords included in the Groupon dataset were far less competitive than those included in Yelp’s — in large part because they focused on specific businesses rather than categories.

Part of the problem for Groupon is that the effectiveness of a Google search results decreases exponentially as you move down the page. A study from Chitika found that users on average clicked on the first result four times as much as the fourth result on the page. By the time a result makes the second page, the link might as well be non-existent. Of the keywords surveyed, Groupon ranked 4th or higher less than 14% of the time whereas a Yelp listing appeared in the top stops for more than 42% of the keywords.

Groupon may be better off than others
As search plays a larger role in consumer’s local shopping decisions, the search market for brick-and-mortar and service business has intensified. However, a series of updates to Google’s search algorithm meant to promote better known brands may make Groupon’s effort more feasible than a few years ago, according to David Mihm, director of local Search at Moz.

“I am not quite as bearish on Groupon [breaking into search than I would be of] a company without any kind of brand whatsoever,” said Mihm. “To the extent that Groupon has already built a brand that has a lot of social mentions and people searching directly for its name, they are starting from the 30- or 40-yard line.”

Two critical updates to Google’s algorithm will impact Groupon’s chances. In the summer of 2013, the search giant released the Penguin update which among other things began to value branded sites — those with direct searches and strong user-generated content — over directories that built their businesses almost exclusively on search traffic.

“Three of four years ago, an old crusty website would outrank Groupon just by virtue of being an old website,” said Mihm. Groupon has a lot of advantages in this new paradigms, in that they have a lot of user generated content that helps pages stand out again the penguin algorithm. “

However, these updates do not explain the poor performance of the company’s existing pages. Instead, the company appears to have not yet put the full weight of its over 160 million unique visitors each month against the 900,000 listing pages, opting to continue to favor the existing deal pages within its site architecture. Mihm says the company could easily jump in the rankings if it decides to send direct traffic to the listing pages.

Groupon has said as much publicly. During an earnings call earlier this month, Rich Williams, VP of North America at Groupon, said that it was waiting for the supply of buyable inventory, both deals and market-rate inventory, to accelerate its consumer marketing.

“Our goal has been to get the team to laser focus on building out that supply piece of the business in the right places, so that we can start turning on that marketing engine in more and more locations,” said Williams. “We have to start solving that second piece as connecting supply to broader demand, where we have to bring our inventory to where people have local intent — and today that’s mostly in search.”

The biggest threat to Groupon may simply be the decline of open web search. The shift to mobile has led Google and other search companies to build their own content and commercial capabilities in an effort to make the experience more seamless to the consumer.

“The flipside of the equation is that Google is favoring its own local pack results,” said Mihm. Even if they’re ranking better among the non-Google links, their effective rank is being pushed down because they will always come behind Google’s own content.”

Steven Jacobs is Street Fight’s deputy editor.

1 thought on “Why Local Search Is the Key to Groupon’s Turnaround

  1. I used Groupon to promote some social media training in Sacramento this past winter and it was a flop. The classes filled because I promoted to my existing social media following, but my purpose was to gain exposure to a new audience, like Groupon claims it will provide. Unless your business is in one of their top categories like restaurants and spas, few will see your offer and the navigation will never lead them to you.

Leave a Reply

Your email address will not be published. Required fields are marked *

Name *

1 thought on “Why Local Search Is the Key to Groupon’s Turnaround

  1. I used Groupon to promote some social media training in Sacramento this past winter and it was a flop. The classes filled because I promoted to my existing social media following, but my purpose was to gain exposure to a new audience, like Groupon claims it will provide. Unless your business is in one of their top categories like restaurants and spas, few will see your offer and the navigation will never lead them to you.

Leave a Reply

Your email address will not be published. Required fields are marked *

Name *