Deals are fading for many publishers. Group Commerce Inc., for instance, is just the latest company to cut back on its support of local deals. But for local businesses, deals remain potent building blocks for a wide range of promotional sales formats.

SignPost, Local Offer Network, Boomtime, Analog Analytics and Second Street Media now incorporate a range of local offer formats. These can include deals, coupons, gift certificates and contests. So is San Diego-based Deal Current, which is specifically focusing on coupons to move beyond deals: both traditional, flat rate coupons, and performance-based coupons.

While deals remain attractive for their games- like excitement – especially in high margin categories — coupons are preferable to deals in many instances. They don’t churn as much and aren’t as time pressured – coupon customers tend to stick with the channel for years on end, and tend to add to their budgets as results are proven. They also work everywhere, unlike mobile-limited channels such as Groupon Now; and they don’t require businesses to share revenue.

Deal Current’s innovation with coupons is offering a performance-based option. It enables publishers to work with advertisers with no upfront costs. As President Patrick Dillon notes, “It is like AdSense, but better because you don’t prefund the account.”

Dillon notes that a performance-based model incents publishers to circulate the coupons around the Web with SEO and aggregators. A performance based coupon, in fact, might look and perform like a text ad, but will cost 40 percent less than comparable online ad choices.

While performance based coupons have advantages, Deal Current is decidedly agnostic which promotional platform is ultimately used. Its model calls for businesses to pay a minimum monthly fee to access the system. They can then choose to use deals, traditional flat rate coupons or performance based coupons. A publisher basically needs to gross $3,571 a month from its deals to earn back the minimum fee (before revenue splits).

The company has been testing the model in San Diego with eight publishers since April of 2012. The model is now ready to be rolled out nationally. It’s a way for publishers to add $80,000 a year in revenues in a single market, suggests Dillon.

Deal Current President Patrick Dillon has joined the growing roster of innovators speaking at BIA/Kelsey’s upcoming event March 18-20 in Boston: “Leading in Local: The National Impact.”

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In true McLaughlin Group style, Greg Sterling moderated the final session at Deals 3D — “Deals: The Next Stage” — more as a rapid-fire roundtable than a traditional panel. He dished, they debated. So, consistent to the theme, here are samples of how Closely’s Perry Evans, Wantsa’s David Strebinger and Deal Current’s Jimmy Hendricks see the next 12 to 18 months in deals shaping up.

Where are deal provider/merchant margins headed? Is compression inevitable?

Evans: “Deals, offers and specials are on a collision course, morphing into a seamless stream of promotions. Merchants won’t pay 50 percent to get people to walk across the street.” Margins will only remain at a reasonable ratio for deal providers that create a solution that “businesses feel can become an everyday tool.” The numbers: 15 percent to 20 percent to market to your own network; 25 percent to 30 percent for high-quality lead generation.

Hendricks: The bigger question is “what else can we offer so that we’re not relying on one leg?” This could include email management and other marketing platforms, both of which could move group buying companies from touting a one-off trick to taking a more central position in the merchant CRM dashboard. The number: Presuming this occurs, then 20 percent to 25 percent is fair.

Strebinger: Speaking of bigger questions, Strebinger asked “20 percent of what? The market can’t work off of percentages the way it has. It has to move toward a marketplace where publishers get paid based on the actual result for the merchant [a.k.a. cost per acquisition, varying by business segment].” Call this the “fair market value,” or true performance, model.

What, if anything, creates merchant loyalty to deals providers?

Evans: “At the end of the day, it’s the merchant’s proposition that breaks through.” In other words, the fight to be affiliated with better brands is raging.

Hendricks: “Loyalty is to the merchant, not the deals company.” This is especially so with big-box deals companies — Groupon, LivingSocial, et al, that are marketing across multiple industries with little perceptible differentiation. The brands that break through will be those that “offer integrated services — two or three different products and analytics that convert customers into repeat visitors.” The outlook could be better for niche sites with targeted audiences that trust in the value they deliver.

Groupon’s Forecast — Sunny or Stormy?

Strebinger: Stormy. “It’s very difficult for any first mover to pick the exact perfect platform. Groupon doesn’t think the way that LivingSocial or Google thinks in terms of how to make things more relevant or social.” It’s the fundamental difference between “innovation and replication.” He thinks Groupon is doing the latter.

Evans: Potentially sunny, with this disclaimer/recommendation: “Groupon post-IPO should buy OpenTable, Yelp and Foursquare so it’s not just a one-trick pony.” Its “huge checkbook” will open doors to strategic acquisitions that could diversify the brand.

There are 500+ deals sites (and that may be conservative). When will we see consolidation, and how much?

Hendricks: Consolidation will also mean diversification. Larger players “won’t just buy deals site for email lists, but will look for content buys and lifestyle buys.” With that being said, “lots of small-to-medium players that serve a purpose in small, niche markets will do very well.”

Strebinger: “Private equity firms, venture capital groups and public companies are all looking at roll-ups. The number will be “cut in half in the next 18 months.”

Evans: Don’t forget about the potential consolidation of the enormous group buying sales engine. “There’s a whole new sales force being created on the back of this industry.”

The post Deals 3D: The Deals Horizon — What’s Next? appeared first on BIA/Kelsey - Local Media Watch.

The interrelationship of daily deals with TV and radio stations and newspapers intrigues us with potential. While not a big factor, traditional media companies can parlay their brand name, promotional power, sales forces and Web sites to reach new merchants that never would have otherwise advertised with them.

Second Street Media, Tippr, TownHog and a host of others are among daily deal white-label companies focusing on broadcasters. San Diego-based Deal Current has also been working with broadcasters such as the Journal Broadcast Group among the 66 markets that it is operating in. Now, via a partnership formed with Triton Digital Media’s Loyalty Division, it will be in position to power some of Triton’s 700+ radio clients.

Triton and Deal Current are pitching a package where broadcasters and marketers can keep most of the deal revenues between themselves, with just 5 percent of revenues assigned for sales, tech and administration (plus processing fees, which are roughly 3 percent). The daily deals package is an optional part of Triton’s “StickyFish” program, which includes loyalty features such as contests, surveys, games and other content.

Triton Loyalty President Chris Bell tells us that Triton and Deal Current can afford to take a smaller chunk from commissions because it already has the relationships in place with the stations. “There is going to be a lot of pressure on margins,” he says.

Bell says Triton and Deal Current’s role with the stations primarily taps their technology and expertise for selling deals and sending out e-mails. While the stations are not contractually obligated, it is certainly in their interest to also promote the deals on air, and extensions such as their Web site and social media, he adds.

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Since its origin as an exclusively online newspaper drawing together the work of dozens of community blogs and contributors, The Sacramento Press has since diversified well beyond its pure publisher roots, complementing its core with a local advertising network, a daily deals platform and an emerging social media consulting practice. As a result, cofounders Ben Ilfeld and Geoff Samek are rebranding the company as Macer Media (“macer” is Latin for “lean”). Ilfeld told BIA/Kelsey that it is a natural “evolutionary step” as Macer takes on the broader challenge of “building tools to support local and hyperlocal media ecosystems.” 

The Sacramento Press, the Sacramento Local Online Ad Network (SLOAN), Deal Ticket and social media services will all keep their current names, but will lump together under the Macer Media umbrella. Macer also unveiled formal plans to scale the SLOAN concept to the Bay Area in an initiative it is calling BAPP (Bay Area Publisher Partnership).

Ilfeld said the outgrowth of BAPP is a natural complement to SLOAN that allows the organization to expand its sales force to focus on “regional plays” with larger advertisers and agencies. Though an official number was not given, Ilfeld confirmed that more than 10 local publishers are partnering with BAPP from the outset. His ultimate goal is to “scale across California, region by region.”

SLOAN debuted at the beginning of 2010. Ilfeld noted that it is not yet profitable, but he is buoyed by the fact that the network is beginning to roll up larger campaigns ($2,000 to $4,000 per month) and attract a higher grade of advertiser (regional autos, grocery franchises and the NBA’s Sacramento Kings). SLOAN partners with vertical ad network platform Adify to supply a back-end system that allows for multiple levels of ad targeting (ZIP code, keyword, demo) and enables particular blog partners to opt in or out of particular campaigns.

A new wrinkle to SLOAN, introduced in August, is Deal Ticket, which is Macer Media’s iteration of the booming deal-a-day concept. San Diego-based Deal Current provides the white label for a simple widget to be implemented across network sites. Ilfeld and his team report 3,468 deal sales from more than 60 merchants since launch. The greatest successes have occurred with smaller businesses. In fact, he stressed that Deal Ticket is often offered up as an entry-level product for SMBs. They can then move upstream to sponsorships or other ad products in Macer’s portfolio.

The fastest growing arm of the business, however, is Macer’s consultative social media practice, which conspires with both SMBs and regional agencies to help brands build, tighten and burnish their social presence. With agencies, the work is often more specialized (tweaking existing social assets or running one piece of a multifaceted campaign). Macer CFO Anil Sinha shared that October social media revenues were $14,452, almost 24 percent higher than all of the second quarter (see the graph below for a comparison of advertising sales on The Sacramento Press with non-advertising revenues from social media, Deal Ticket, SLOAN, etc.).

The notion of a media company repurposing itself from publisher to all-purpose advertising and services provider is nothing new. Canada’s Yellow Pages Group recently acquired a number of side businesses to unveil a digital advertising and marketing unit. However, the notion of a local, nontraditional publisher expanding and scaling as Macer Media has charts a path for similar community start-ups to follow.

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