Daily deal duel: Google takes on Groupon in Chicago today
chicagobusiness.com
November 9, 2011 -- (Crain's) -- Google Inc. is going head-to-head with Groupon Inc. in Chicago starting today.
Google Offers, the Internet search giant's daily-deal program, comes to town with a half-off deal for food and drink at Goose Island Brewery.
The launch continues Google's incursion into the daily-deals business that started six months ago in Portland, Ore., after Groupon rejected a reported $5.8-billion buyout from the Mountain View, Calif.-based company. Chicago is Google's 18th market and Google lists more than 20 others "coming soon" on its website.
Many analysts see Google and Amazon.com as the biggest long-term threats to Groupon's dominance of the daily-deals space it pioneered three years ago.
For now, Groupon, which went public last week after popularizing the online deal-of-the-day business, remains the industry giant. Its reach dwarfs Google's in most cities. It also is in many more locations; it operates in 175 cities in North America alone.
LivingSocial.com, the No. 2 daily-deal site, launched in Chicago in March 2010. Amazon.com, a biginvestor in LivingSocial, launched its own AmazonLocal deals in Chicago in July.
Google's ramp-up will only make it harder for Groupon to turn a profit, however. The growing competition will put more pressure on Groupon to take a smaller cut from deals and provide more generous terms to merchants.
Google sees daily deals as a way to broaden its advertising offerings to local companies beyond keyword search, especially as Internet use and advertising increasingly moves to mobile phones.
Along with Chicago, Google is adding Atlanta, Houston, Los Angeles and New York's Brooklyn borough.
While tens of millions of people use Google for its search engine, email and other web services, they have to sign up for its Offers service, which puts it at a disadvantage to Groupon, which already has a big subscriber base. But users can customize the pitches by opting in or out of two dozen categories such as music, day spas or home and garden.
Groupon announced a similar feature Wednesday that it was introduced in Chicago two weeks ago..
A Google exec says the company waited to come to Chicago until it felt it could get a handle on the twin challenges of population and geography — and not because of any trepidation about entering Groupon's home turf.
“It's less a competitive issue and more about the characteristics of the city — sprawl and population — like Atlanta and L.A.,” says Eric Rosenblum, director of product management for Google Offers.
Google is taking a slightly different approach to daily deals, offering its own deals alongside offers from more than a dozen other companies such as Gilt City, kgbdeals and Tippr. So far this feature only is available in San Francisco.
“We believe the key is that people want good deals — they don't want spam,” Mr. Rosenblum says. “The key is getting really good at targeting. But you've got to have a lot of deals. You get merchants by having users. You get users by having deals that are more relevant.”
Google faces an uphill battle. In Portland, where Google Offers launched in June, Google deals pulled in about 10% of the revenue enjoyed by Groupon, according to New York-based deal aggregator Yipit.
Boyd Coffee Co. in Portland, Ore., did a Google Offer on Halloween that drew about 100 customers, compared with a Groupon deal in February that brought in about 1,000 buyers.
“Groupon has bigger market penetration here,” says Alissa Barron Stranzl, online marketing manager for the coffee distributor. “They've been around longer. But we thought Google might have a different audience. They were fairly similar. Both worked well for us.”
Google's ubiquitous brand is a powerful lure to merchants.
“We'd been approached before, but with Google we thought we'd try it,” says Juan Meza, a manager at Juan in a Million, a Mexican restaurant that was Google Offers' launch customer in Austin, Texas. It sold 700 deals during a three-day run.
“I liked what they offered. Google's such a big company. Groupon offered us a better deal. I know both companies but felt more comfortable with Google.”
Businesses also are able to play the competition to their advantage.
Ms. Stranzl declines to reveal the terms of the different deals, citing a confidentiality agreement in the contracts but her advice to would-be partners is this: “Read the fine print and ask if there's anything you can negotiate.” |
