How to do better than Groupon in building local advertising market share

This year’s hottest buzzword in online news publishing – on the business side – has been Groupon. Business managers at start-ups and legacy media websites alike have been pushing the concept of “group coupon” services, such as Groupon’s, as the next great potential savior for publishing online.

Personally, I don’t think online publishing needs a savior. Despite what some folks at journalism conferences might have you believe, online news publishing is doing just fine, thank you. Newspaper companies might be missing their fat, monopoly-era profit margins but plenty of smaller publishers have found ways to stay in the black.

That said, every one of us would like to find new sources of revenue for our publications. That’s why so many of us are taking a long look at Groupon and similar services. Now, I’ve only used Groupon as a consumer, not as an advertiser nor as a publisher. But, based on my experience as a consumer, here are a few ways that I believe an entrepreneur could improve upon Groupon.

Better targeting

I don’t drink, so every Groupon offer I get for discount wine, beer and bar drink specials goes straight into my trash folder. Why waste the bandwidth sending this stuff to me? Many consumers click the link to unsubscribe if they get too many of these badly matched offers, reducing the market pool for the service.

Sure, Groupon’s got millions of users and won’t miss those who opt out because they don’t want stuff such as liquor deals. But if you’re trying to compete with Groupon, this is an area where you can do better.

Based on the offers I’ve been getting in my in box, Groupon’s target demographic seems to be relatively young, urban or suburban singles – or at least married consumers without kids. Lots of the aforementioned liquor offers, along with spa, sports, fitness and restaurant deals. I’m not seeing deals targeting parents in need of products and services for their children. Nor am I seeing ads targeting older readers, including retirees.

An entrepreneur who employs a local sales force to sell across demographics Groupon’s missing could yield a larger market share – if that business backs up its sales effort by collecting good demographic information from its audience. Ask about age, family, needs and interests when a new user signs up. That way, you won’t waste their time – and risk an unsubscribe – by sending a non-drinker wine offers. Or by sending a childless reader an offer for a day care trial.

Viral distribution through social media

If you’re going to take on Groupon, you’re going to need to find a way to get more consumers in your market taking up your offers than are taking up Groupon’s. As any start-up online publisher knows, the most cost-effective way to spread the word about anything online is to get your readers to do your promotion for you.

Make it easy for your readers to redistribute your offers to their friends and family who might be interested in the deal, too. After all, if you’re trying to target better than Groupon, who knows better if a deal will appeal to someone than a friend or family member?

Any offer should include one-click forwarding, Facebook liking and retreating, plus an invitation to send it along to someone else in the community who might be interested. And when those friends and family members respond, they should be invited (or required) to sign up for the service with their preferences, too.

Reward process for successful distributors

But simply making referrals easy won’t be enough to establish a successful viral marketing campaign for your coupon service. You’ll need to provide an incentive and reward for readers who redistribute deals, too.

Obviously, such a system should reward users only for coupon purchases by their referrals, instead of bulk-forwarding offers. And to further discourage spamming, the reward shouldn’t be cash, points or anything else that accumulates indefinitely. The highest reward could be based on achieving a high percentage of sales to referrals, though this would require some pretty heavy tracking on the publisher’s end.

I’d reward consumers for buying a certain number of deals within a certain time period, and for referring a certain number of sales. The reward could be access to additional deals, or an extra discount on selected “regular” deals. (Creating a named “club” for people who reach this level and get the extra offers would help reinforce the reward, as well.)

Get creative. You always should be looking for ways to reward your most faithful advocates, whether it be those who promote coupon deals, submit great blogs or comments, or refer new readers to your website.

Don’t forget to consider what makes Groupon-like services appeal to local businesses, either. There’s no up-front cost to merchants, with a guaranteed number of takers if a deal goes through. A certain percentage of those customers won’t redeem their coupons, either, offsetting the cost of the discount to those who do. And those who delay redeeming their coupons after buying them essentially provide free cash-flow to participating merchants. Ultimately, though, having too high a percentage of customers who don’t redeem their coupons on time threatens the market pool for group coupon services. A smart publisher secures the long-term viability of this type of service by emphasizing deals that build relationships over quick sales that might not be redeemed.

The point is… there’s no need for any news publisher to be afraid of something such as Groupon. Every great idea can be improved upon. And, more importantly, every great execution of an idea could be executed even better. Always be looking for opportunities to do better than your competition. Only when you stop trying to beat the competition are you certain to fall behind them.

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If you’d like to go more in-depth learning about how to build a successful online news publishing business, be sure to apply for the 2011 KDMC News Entrepreneur Boot Camp. It’s a free, intensive training session in digital entrepreneurship, led by faculty from USC’s Marshall School of Business and Annenberg School for Communication and Journalism. Here’s more information and how to apply.

Finally, happy holidays to everyone from OJR. We’ll be taking our annual vacation for the next week, returning with new articles the first week of January. Happy New Year!

About Robert Niles

Robert Niles is the former editor of OJR, and no longer associated with the site. You may find him now at


  1. says:

    Congratulations on a great article! I completely agree with you — Groupon can be “out-Groupon’d”, to be sure! Even if embattled, entrenched media companies — such as newspapers — have the bandwidth and unique resources to dominate a broad swath of local social commerce opportunity … if they have the foresight to see that opportunity. Indeed, “social commerce” should have emerged from the online new media departments of local/regional publishers 5, even 10, years-ago, but senior management was too often so narrow in it’s “1.0” definition of what “classified” advertising was supposed to mean.

  2. says:

    As a Marketing Consultant at Groupons rival competitor, I can say that this marketing truly works and everything the Mr.Niles said about incentivizing the purchaser to share the deal is true. We give the deal for free if they refer three. @AaronLujan

  3. says:

    Groupon should hire you as they truly need someone with your level insight and understanding to help them create a program that is a win-win for all and not a Groupon takes all. The Groupon program does have the legs to sustain over the long term and I agree with your comments. Just picking the low hanging fruit today. They are leaving a much bigger opportunity for the Groupon clones to capitalize on. Again, thankyou for your overview.

  4. Smart point of view.


  5. Thanks for your posting. My team at The Santa Fe New Mexican – the oldest newspaper company in the West – launched a group-buying site in October under the name “Splurge”. Feel free to visit the site at

    The group buying space is an amazing economic segment. I do wonder whether it will have legs in the long-run. But while consumers are open to the idea, I’d recommend any local media company take a long, hard look at their market to determine the viability of launching such a business before someone else does.

    There are some real – not perceptual – advantages that local media has when competing with Groupon or Living Social (the Coke and Pepsi of this business segment). First, you already have established, personal relationships and credibility with local businesses. Leverage those relationships to bring in clients. These relationships will help you with getting from merchants the most important thing you need – a great offer.

    Know that the nationals are often just calling-in to your market and will never sit across the table from your potential clients. You’re better than that, you can shake a hand, or hold a hand when a client is just learning about this kind of business. Furthermore, you know your market better than someone half the country away.

    In our market, we have something that the nationals can’t offer – a newspaper and well-visited web site where we can help local businesses brand themselves without an upfront cost. Your local media clients already know the value of the exposure you can offer – and they know it works. Groupon and Living Social can send out emails, but you have local media on your side and you have the potential to reach deal buyers that the big nationals might never reach.

    Groupon and Living Social are phenomenal companies. And they are creating new markets that local media publishers can work themselves into.

    In our market, when a local merchant signs up to offer a “Splurge” this is what we give them at no up-front cost.

    – A 600×100 px top-position banner ad on our headlines newsletter that goes out daily to 9,000 people.
    – Email blast to Splurge-specific customers who have opted in to receive deals.
    – A 300×600 px ad that publishes run of site promoting the current deal (including logos of the merchant)
    – A standing homepage widget that describes the day’s deal for the duration of the deal.
    – Distribution on a Splurge-centric facebook page, and a separate Splurge-centric twitter page.
    – A six-column ad promoting that day’s deal and merchant each day the deal runs. This ad runs A4 each day so readers know where to find it each day.
    – 1×1 ads throughout the newspaper telling folks to look at the deal online.
    – We also pay the credit card processing fees and deposit money electronically in merchant accounts.

    – Yes, we do referral incentives. Get three folks to buy the deal, we’ll refund yours.
    – We’re developing new incentives right now.

    By the way, if you’re planning a trip to Santa Fe, visit today (Dec. 30) and pay $49 for a 2-hour hot tub soak at a downtown spa. You see, we know our market and know that not only do locals want to enjoy the amenities of a tourist destination, people planning to visit for vacation also want to buy before they come.

  6. says:

    Great points, Robert! I’ve used Groupon as a revenue stream through affiliates, and I’ve teamed up with sites similar to Groupon to sell advertising, but it hadn’t occurred to me to improve on Groupon itself. I’m always looking for additional revenue streams, so thank you.