The Boston Globe has launched its own branded group-buying service yesterday named Boston Deals. The Groupon-like daily deals site is powered by Group Commerce, the same company that is also working with the Globe's owner, the New York Times own group-buying service, TimesLimited.
“We’re eager to offer Boston.com shoppers the power of group buying,” Lisa DeSisto, chief advertising officer for The Boston Globe and general manager for Boston.com said in the company's announcement. “Boston Deals is fun, exciting and built around the quality products and services relevant to greater Boston consumers.”
Group Commerce, the company powering the new program, recently announced that it had secured an additional $10 million in funding from Spark Capital, Carmel Ventures, Lerer Media Ventures, as well as Bob Pittman, chairman of media and entertainment platforms at Clear Channel. The comapny was founded by former Google and DoubleClick executives and has so far picked up Thrillist, DailyCandy and Meredith as clients, in addition to The New York Times Company.
The move by the Globe is an obvious attempt to both cash in on the group buying phenomenon, as well as attempt to compete with such major players as Groupon and Living Social. The concept behind Group Commerce is that more targeted deals, ones more consistent with the target audience will be successful for both the provider – in this case the Boston Globe – and the businesses making the offers to consumers.
The idea is an answer to at least some of the objections people have to the group-buying concept: that merchants lose because they have to too deeply discount the offers, that too much of the money goes to the company that powers the group-buying system, that buyers may grow tired of buying offers they never end up using, etc. etc.
For me, the company I most have sympathy with is Group Commerce. As someone who has been on the other side, the newspaper management, team, I know the two pitfalls that can arise after the company has made a deal with the daily newspaper to create a group-buying program: the program is not supported with sales, and the paper eventually marginalizes their new venture.
Sales: Groupon employs a massive sales force that generates its $760+ million in revenue. In fact, I would call Groupon a sales force with a product stuck on it. Newspapers, on the other hand, are not known for creating aggressive telemarketing operations anywhere near the scale of what these new companies are creating. Newspaper execs have scoff at that assertion, but it would only be a sign of their own naïveté.
As a former classified manager, I know that the vast majority of any phone room used to be devoted to incoming calls, with only select teams doing outbound calling. Those teams were then broken up into contract sales (often recruitment, for instance) and a small group calling small businesses and consumers.
At a magazine start-up I worked at in Chicago that employed a massive telemarketing operation, a group of inside sales reps could generate $200,000 to $600,000 of display ad revenue selling a magazine that had yet to publish its first issue, had no audit, no circulation, no media kit, nothing. Within four weeks a magazine could go from concept to first issue, all that was needed on the back end was the ... well, the magazine – which, as far as management was concerned, was the least important part of the production process, sales was everything.
To succeed at group-buying enterprises, newspaper executives will need to understand how they competition works, what makes them a success. The good news is that there is practically no barrier to entry into this new market (which is why the people running Groupon may have made the biggest business error of this era by not selling out when they could).
Like most business concepts that require huge sales efforts, a fatigue factor is almost inevitable: fatigue on the part of the businesses and buyers, and fatigue on the part of the companies providing the services. Will The Boston Globe still promote and invest in their Boston Deals program two years from now? Will we continue to see medium rectangle ads on Boston.com promoting Boston Deals, or will it be like TimesLimited, simply another small text link found under services.
As if to underscore the number of players entering the group-buying business, BuyWithMe announced today that it had acquired Groop Scoop, a local San Francisco group buying service.
“Our acquisition of Groop Swoop enables us to expand our merchant offerings in the San Francisco area, ensuring consumers in that area have more, top quality deals to choose from,” said Jim Crowley, CEO of BuyWithMe, Inc.
BuyWithMe had just recently announced a similar acquisition in Chicago, picking up DealADayOnline.