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How Effective are Groupon Promotions for Businesses?

Just read How Effective Are Groupon Promotions for Businesses, which was a survey-based study of 150 businesses that ran and completed Groupon promotions between June 2009 and August 2010. (If you don't know what Groupon is, skip to the end.) Below are my key takeaways:

1. The key factor contributing to whether Groupon worked for the small businesses (as measured by profitability of the promotion) was employee satisfaction within the small business. (Happy employees is good businesses ... whoda thunk?!)
2. Restaurants appear particularly susceptible to negative outcomes; spas appear particularly susceptible to positive outcomes.
3. 42% of the business would not run Groupon promotions again, even though 66% of them thought it to be a profitable promotion.  ("There is widespread recognition among many business owners that social promotion users are not the relational customers that they had hoped for or the ones that are necessary for their business’ long-term success.")
4. Groupon competition will be tough. "Based on our study’s responses, the news for Groupon’s competitors appears to be decidedly bleak ... few respondents had positive things to say about other social promotion sites."
5. Social couponing is in its early days yet, with innovation likely necessary. "Although the majority of Groupon users are satisfied and intend to run another Groupon promotion, an industry in which two in five customers are hesitant after a first purchase, and where the customer base is a relatively limited pool of small businesses with strongly interconnected social networks that could quickly spread news of dissatisfactory results, may need to modify its overall strategy."

For those unfamiliar with the Groupon model, the study describes it succinctly:

Marketing circles have been abuzz in recent months with the sky-rocketing popularity of social promotion sites. At present, Groupon is perhaps the best known and certainly the largest one of these sites. It features a daily deal for each city it operates in, offering consumers a significant discount for a local business or event, such as $40 worth of sushi for $20, or a $175 facial at a spa for $59. Consumers buying the Groupon must pay its price upfront, and then have a certain amount of time, up to a year, to redeem it at the business. Groupon promotions have a social aspect. Each promotion is valid only if a certain minimum number of consumers – pre-specified by the business – purchase the deal.

Google's 7 Predictions for Display Advertising Market by 2015

Google'sVP of Product Mgmt (Neal Mohan) and Managing Director of Media/Platforms (Barry Salzman) presented at IAB's MIXX conference in NY this week, laying out 7 of their predictions for how the display advertising market will look by 2015. I caught it all via Twitter in real-time but MediaPost summarizes it best:

Google's Seven Predictions By 2015:

1) 50% of online ads will have video in them and be bought on a cost-per-view basis. Today, 24 hours of video content are uploaded to YouTube each minute. Google Tuesday officially launched two YouTube video formats, TrueView, based on a cost-per-view advertising model after dabbling in it for nearly a year. This means advertisers only pay when consumers chose to watch the advertisement. TrueView will roll out later this year.

2) 50% of all display advertising targeted to a specific audience will rely on real-time bidding.

3) Mobile will become the No. 1 screen for advertising. The mobile screen will become the first screen that consumers go to on a variety of mobile devices.

4) Five new metrics will emerge to measure the success of ad campaigns. They will become more successful and important. Some exist already: engagement and interaction rates in rich media, video view, and impact on Web search results. Others might include sentiment analysis to measure the viral influence and the tone of consumer chatter about the brand across the Internet. Or, measure foot traffic into the store through geo-based technology.

5) 75% of ads will become socially enabled. In the long term, all ads will become social as the industry moves to an always-on communication.

6) 50% of brand campaigns will run rich media in the ads, up from 6% during the last year.

7) Display advertising will become a $50 billion industry. Google advertisers have increased the amount they spend annually with the technology company about 75% during the last year.

UW Guest Lecture Deck - MKTG 555

Here is the deck I used for the University of Washington School of Business class  (MKTG 555 - Entrepreneurial Marketing and Management) I guest lectured at yesterday. It's part of their Center for Innovation and Entrepreneurship program, and I spoke about "marketing your small business across the new landscape of the Web -- Online Marketing v2.0".

UW Biz School Lecture - Fall 2009

View more presentations from Jordan Mitchell.

Entrepreneurial Online Marketing

For the 3rd time now, I guest lectured at the University of Washington -- at a class on Entrepreneurial Marketing taught by my good friend Deb Hagen. Whereas in previous classes I covered SEO, search engine marketing, social media marketing and online advertising in general, this time I focused mostly on online marketing. And I covered both "paid" online marketing (advertising) and "earned" online marketing (social media).

For the latter, I gave two local examples, plugging Seattle 2.0 and Meteor Solutions. Marcelo has done an outstanding job using social media and SEO techniques to expand the Seattle 2.0 audience, pageviews, etc. As for Meteor Solutions, I really like how Pete and Ben have teamed together to create a truly unique service for helping marketers measure the sharing of URLs across an online audience.

Anyway, here's the presentation I used in the classroom:

University of Washington Guest Lecture - Entrepreneurial Marketing

View more presentations from Jordan Mitchell.

Latest from the World of Online Advertising

Catching up on some blog posts and thought I'd note a few things that caught my eye:

• Roughly 8% of the total ad dollars in the US is spent online, while consumers spend about 30% of their time surfing the Web, according to MediaPost.
• About 85% of total ad dollars spent online in the UK is performance-driven, compared to 50% in the US.
• ValueClick launched ActiveAds, which allows marketers to display customized messages in ad creative w/out the need to develop and manage multiple creative units. Some launch though ... there is nothing on their Web site about this!
• eMarketer forecasts global ad spending on social networks to increase 17% in 2009 over 2008, revised down from their previous estimate of 32%. Increase in US only social network advertising is expected to be 10.2%, reaching $1.3B. MySpace and Facebook account for two-thirds of this in the US.
• According to Nielson Online, time spent on social networks and blogs grew 3x faster than the overall Internet rate, and are now the 4th most popular online category -- AHEAD of personal email (and behind search, portals and PC software).
• Read in eMarketer that 41% of US Internet users surveyed said they paid more attention to advertising that was personalized. And nearly the same proportion of respondents (39%) said they were more willing to click on such personalized ads.

Data Mining is the Future of Advertising

Loved this comment from the Chris DeWolfe (CEO of MySpace) in an interview with TechCrunch:

Michael Arrington: Thanks very much for your time. I know you are literally running to a session. What’s your session on?

Chris DeWolfe: It’s on data mining.

Michael Arrington: Data mining? That sounds really boring

Chris DeWolfe: No that’s actually the future of advertising.

Couldn't agree more. Nor could Neal, I'm sure!

Can Display Ads Outperform Search?

Fred's views of "predictions" match mine, as does his prediction. In this post (where the comment stream is even better than the post), Fred predicts:

display advertising will get so cheap and the tools to target it will get so good that it will be shown that it can outperform search

I wrote about this at the beginning of 2008 in my post CPM Rates Will Rise, They Have To (which means either I was exceptionally wrong or exceptionally astute), where I posited that high CPC rates (in SEM) and better targeting/technology will be the major forces behind a rebirth in display advertising. In any event, the comment thread in Fred's post was rich in opinion and dialogue, which led me to comment: 

CPM rates are already extremely low. I don't think remnant rates are going to fall much more. And an average CTR of .1% means that banner blindness can't get much worse either. In other words, I think we're at the bottom for eCPMs and CTR (for the majority of inventory out there), and as Fred points out, the tools will pave the way for a rebirth in display.

As I wrote last year, high CPC rates (SEM) and better targeting/technology will be the major forces behind a rebirth in display advertising. If you're a marketer seeing your bid rate for keywords exceeding $2 per click, the effective CPM rate you're paying is high. At .25% CTR, you're paying $5 CPM. At 1% CTR, it's $20 CPM. If you're paying $2 CPC rates , all you need is a measely .05% CTR to put $1 CPM inventory on par (which is what 83% of the inventory is selling for, and also 5-10x the price of most social media inventory these days)!

Display offers >25x more volume than search, and new targeting techniques for CPM ads will shift dollars back towards the display market -- assuming ad networks rise to meet the market opportunity. I think they will, slowly but surely. They have to, in order to grow their business.

I was very pleased to see his reference to the estimation that Google has over 1.3M advertisers -- I've been looking for that data. We've also seen at Others Online that display ads are the only advertising format to monetize social networks -- text ads don't work at all. So in order for display to make a big comeback, it has to cater to this long tail of advertisers. Which means to me there are three ingredients necessary to offering advertisers the performance of search:

1. Targeting - Advertisers must have access to deep and more standardized targeting. Proprietary categories/channels/audiences are arbitrary and non-standardized. Keywords are the lingua franca of SEM and SEO, and everyone knows what they mean. In the absense of a search query, the targeting can only be based on context (targeting content) or affinity (targeting the person).
2. Self-service buying - Long-tail advertisers want to dabble first with low $ amounts, and the friction needs to be taken out of the process -- they need to be able to place a buy in minutes, as they now do with AdWords.
3. Ad creation tools - Indeed, part of the friction is the design/dev of the ad creative. Tools must make this as easy as creating/optimizing text ads.

WideCircles is Comment Spam

About two weeks ago, I started seeing a sharp increase in comments on the Others Online blog. The comment (content) was different, the people were different, but the comments all took a similar form. Here's an example:

The advertising network business is going to go through a gut-wrenching shakeout,and its just about getting started.The problem ...<snip> ... according to those in the know are very fickle.
-----------------------------------
rosejenifar
Best DUI

Every post ended with the same dotted line, a name, then a term for SEO purposes. At first I thought it was just a couple people from the same company visiting our blog (word of mouth), then I received more comment spam, which I reported as such to TypePad.

Then we received a partner application form from WideCircles. I went to their site and thought "hmmm, social media marketing ... could be an interesting partner." Then I saw their examples and knew they had been the ones spamming our blog. Now their robots are spamming our partner application form too (I continue to receive completed partner applications from them).

Since they've done a great job with their own SEO, it's pretty tough to find a non-WideCircles site listed in a Google search, so I thought I'd write a post. Maybe it will be indexed soon and educate others.

Come on people, don't fund this sort of shady business by buying automated comment spam. Other people see right through it, and social media is NOT about fake comments -- it's about authentic comments.

The Power of "Mommy Bloggers"

Just read some interesting findings about moms who blog. They're not just blogging about their daily lives and personal experiences, they are sharing opinions and launching conversations about brands. As a result, they are increasingly building brand awareness and influencing consumer behavior.

From the report:

• 96% of moms value recommendations they find on Mom Blogs
• Over 78% of mommy bloggers now review products and services
• 94% of moms rely on other moms to make purchasing decisions
• More than 60% of mom bloggers consider making money important and want more connectivity with companies
• 37% of mommy bloggers have been contacted as resources for the press

Drop in Social Media eCPMs and Forecasts

Just read two separate data points regarding social networking advertising, and the struggle for advertisers to figure out how to make it work -- resulting of course in a hindrance on average eCPM rates earned by social media companies.

First I read that eMarketer has lowered their estimates for US social networking ad spend in 2008, from $1.6B to $1.4B. They claim the economy is partly to blame for this decrease, as companies cut experimental ad dollars first. As important, they claim that social networking sites are still trying to figure out what works. Net net, it's the same reason -- the ROI isn't there yet for advertisers.

Next, I read PubMatic's AdPrice Index for May which is real data (not a forecast). They found that eCPMs earned within the social networking category of sites dropped 47% , from $.37 in March to $.19 in April. Average eCPM for large Web sites (>100M pageviews/month) dropped from $.38 to $.18, and 95% of all Web sites with >1M page views per month earned less than $1 eCPM. (Keep in mind that PubMatic's data set is only remnant inventory, not direct sales.)

I've been talking a lot lately with social media companies, and they are indeed having a tough time monetizing their page views. Ironically it's such a rich source of information in terms of describing an audience and their affinities, yet it's so undervalued by advertisers. What they need are tools to help them harness that information and segment their audience into concise targeting parameters.