One of the more curious methods for getting ahead of the pack is the buying and selling of Facebook groups. Zoupon founder Adam Schwab says this occurs when a business approaches the administrator of a Facebook fan page, and then starts using that page to plug their deals.
“Facebook groups are like any mail list. They’re like a database. Jump On It uses them as a great communicator with their customers,” he says.
Currently, Jump On It offers coupons through a number of Facebook groups, including the “I Love Melbourne” and “I Love Sydney” groups, which have well over 100,000 members on each. The company isn’t shy about branding – the Jump On It name is clearly displayed in the profile picture.
But while Jump On It began late 2009 and the site itself launched in the middle of this year, the “I Love Melbourne” site has posts dating as far back as April 2009. At some point, Jump On It became involved and started offering deals.
Fabig says Jump On It made two of its Facebook pages but obtained control of a Melbourne-based page through a deal with its administrator.
“I Love Melbourne was run by a bloke. The site had started already, and we talked to him. This was at the time we were starting up the other sites as well. We spoke to him and at that time he worked for us for a while, and he was paid.”
Fabig also believes his company, the largest in the local group buying market, will stay strong by pushing as many deals as possible through both Jump On It and LivingSocial’s Australian platform.
“We think we are way ahead now, and with those two platforms we will maintain that position. The question is, how do we stay ahead? We think that offering multiple deals in your local area will keep us there.”
Schwab suggests buying a well-established page can reach well into the thousands of dollars. He says his own company, Zoupon, has done the same thing.
“We just approach them and ask. Of course, it depends on the group and the negotiations between the parties, and you can pay per member, but it differs from project to project.”
“So we used one called Secret Melbourne. We just kept it the same, and then we started to add Zoupon deals in there for Melbourne users. We kept the purpose of the group intact, it’s a great way to start plugging deals to your members.”
These players all say the same thing – group buying is a win for the business, a win for the customers, and a win for the operation selling coupons through the site. But is that always the case?
There are no large companies to be seen, at least so far. The largest company involved in a group-buying deal is arguably Gap, but Solomon says the focus is purely on SMEs.
“Most of the offers we run are for local, smaller businesses. Eight out of every $10 spent in the US is spent in a person’s local area. Ecommerce is a gigantic category, but this model focuses on those local businesses.”
The group-buying business model depends on small businesses walking away satisfied. If they stop offering deals, then these sites are left with nowhere to go.
Bagel House, a Sydney-based bagel business, says its own deal with Spreets performed particularly well and the company sold 300 vouchers in a single day. “We could classify it as a success,” the company said.
Viva Photography, a Melbourne photography studio, also said its Scoopon deal did very well. “A lot of people bought them,” the company said. “Our deal went pretty well.”
But while there are many customers who might say their deals have given them some much-needed exposure and a shot in the arm, there are also those who would say dealing with coupon sites isn’t a financial success.
Miki Kospantinovic, who owns Curves Restaurant in Melbourne, managed to sell over 2,000 coupons. But she admits the deal hasn’t given her any sort of financial benefit.
“We did a promotion giving away $85 worth of food and beverages for about $25. So that’s over a 75% discount. It’s not for the money, you’re doing it for exposure,” she says. “We’ve lost a little in the process.”
In fact, Cudo has already come up against this issue. The company was forced to recall an offer earlier this month after the merchant, a cupcake store, was unable to satisfy the huge amount of demand.
Julian from OurDeal says this is the problem that many companies will face. They’ll end up selling thousands of coupons and actually lose enough money that it could send them out of business.
“What I see happening is that companies may be a little too forward-facing. They may be too much about acquiring members, and turning all the taps on 100%. So you have a restaurant that sells 3,000 vouchers, and then can no longer survive.”
Holman says this a problem OurDeal has identified, and it already has a solution – capping deals.
“We’ve taken an approach to help out our businesses, so we have capped deals. They run at 100 or 150 only, or whatever the number is, so you don’t have a merchant that is absolutely slammed by our service. We think it sets us apart and is a good point of difference for our business customers.”
There are already problems beginning to appear with so many players. Leibovich says some of his sales team have encountered problems in signing up new business members.
“We started Scoopon with about three or four people walking the streets trying to source deals. And it does become slightly crowded with so many people in the market – you find that anyone you approach has been approach by 10 other people before.”
On the other hand, Spreets believe success in this sector is all about the database, rather than signing up as many businesses as possible.
“We already have a large database, and we have overtaken some of our rivals. We’re focusing on building the quality of our database, because you want to be sending to good people, not just bargain hunters.”
Cudo believes it will be able to maintain its image by keeping the amount of television advertisements high enough to maintain regular interest. On the other hand, OurDeal says the market will change, but not necessarily through natural attrition.
“I believe we’re going to see Groupon enter the local market, either through an acquisition or organically, and maybe two major players will be left.”
But Fabig says that won’t necessarily be the case. “I think they’ll have to buy a company. They are too far behind when it comes to user penetration and it’s going to be too hard to start from scratch again in a new country.”
Robert admits the company is looking at either an expansion or acquisition, but hasn’t decided on an entry point just yet.
“We look at markets all over the world and we’re evaluating when and where to go in. It’s just a matter of time. Now we’re evaluating the next 10 or 20 countries to go into.”
“But we think the Groupon brand is the meaningful part of the business, and we want to bring that with us whatever we do.”
If Groupon comes out here, it may do so through buying Scoopon – the company is currently in a trademark battle and wants Leibovich to hand over the company’s URLs. Or it may even consider Jump On it, which has a considerable following through its Facebook pages.
But while Robert says the company is still negotiating how to enter the market, it certainly knows already how to evolve the model. He argues personalisation is key, and if sites don’t evolve to make users feel welcome, they’ll die off.
“The next component with this is personalisation. We’re launching a deal a day, but in Chicago, for example, we might run 10. So you’re getting deals based on your region and buying patterns.”
“Getting more and more personalised and attracting new customers that way – that’s the huge difference between us and the companies popping up everywhere.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
