Can you believe how the time flies? Not two weeks have passed, and so it begins. Shameless plug time. The beauty about the shameless plug is its transparency. The problem with trying to be cute and sneak in a plug is that you will see right through that. That’s why when it comes to promotional pieces we like to tell you what we’re doing up front. Then, we’ll surprise you with our typical content so that you’ll ultimately find the plug not just relevant but useful.
The Great Performance Marketing Pivot
This week’s plug revolves around something near and dear to the vast majority of the performance marketing space, daily deals. As we pointed out last week, the modern day daily deal is not all that different from the other type of email submit that has for so long been a staple of every network and every run of network ad impression. One of the major differences with daily deals is the economics. Unlike the incentive promotion email submit where monetization happens from a handful of advertisers – 50 to 100, in the daily deal world, monetization happens from thousands spread out across lots of different markets. The favorable economics also mean that daily deal sites do not have to rely on reg paths or other consumer unfriendly ways to extract revenue. They might have to in the future, but for now users like getting these emails and a conversion event means tens of dollars to the deal provider.
We would have predicted that networks would clamor for a chance to promote the daily deal sites. Not only do they pay a lot per submit – two to three times what incentive promotion email submits can pay – they convert better too. Publishers are happier running them, it’s a seemingly win-win. What we wouldn’t have guessed though are the number of performance marketing companies that have decided to do more than run other people’s offers. They have decided to enter into the business themselves by creating their own brand of daily deal site. Equally, if not more intriguing, it isn’t who we would have guessed. We would have assumed The Useful would or Modern Ad would. Actually, we would assume, and it might still happen, that The Useful or Modern Ad would buy up a smaller player in the space. We thought they would have purchased a company with some of the local sales infrastructure but who lacked the customer acquisition dna.
The Useful and Modern Ad have yet to launch or purchase a daily deal site, but at least five other notable companies have started their own. In many ways it makes so much sense. For over a year now, we have been fascinated by the similarities between the daily deal space and lead generation / performance marketing. They are both aggregation businesses that scale the best through media buying. For many of the deal sites the growth is the hardest part. It requires a whole new skill set and a lot of cash to figure it out. Both of those have long been strengths of the networks – access to traffic and capital. Why not apply those strengths to an area where it fits and monetizes well? Plus, the now hottest industry is also a darling in the broader markets – investors like it, users like it, and you don’t need to be deceptive to succeed.
What makes this pivot so unique is that it requires resources and processes not typically associated with the average performance marketing company. It’s a lot like building up an ad network where you have to manage the chicken and egg of publishers and advertisers; except here, one side of the equation is a long-tail of spenders – local restaurants and service providers. It doesn’t quite take a feet on the street approach of the yellow pages, but it takes a much larger sales force than most of the networks are used to managing. They are more straightforward sales operations than the more business development ad sales that tends to occur today. The traffic side has its own hurdles, namely building up scale in specific markets. You can’t just do a Yahoo Mail banner buy and call it a day.
The good news for some of those in the performance marketing space who made the shift is that from what we hear, there are signs of success. That’s no small feat given that most of these ventures don’t have the venture war chest and most started later than some of the more successful "clones." Not to overuse the term "interesting," but if performance marketing firms can have success entering this space then it raises questions about what breeds success. It might turn out that success relies much more on the traffic than the sales. The real test comes not from how well these firms can do in one market, but their ability to enter into other markets as well. There is no barrier to entry for deal sites, but there could be a barrier to scale.
And now for the aforementioned shameless plug. What do LivingSocial, BuyWithMe, Google Offers, Gilt City, Zozi, Lookingo, Yipit, eBay, and Travelzoo all have in common? They will be at Daily Deal Summit – the first event specifically focused on the now multi-billion dollar arena of daily deals. This full day event takes place April 6, 2011 at the Grand Hyatt in NYC. What would a deal summit be without a deal for DMConfidential readers? DMConfidential readers can save $100 off the conference price. If there is one bad thing about this event, it is that space is limited. There will be only 300 sold. As a result, attendance is capped to three per company. Click here to reserve your spot and save $100.
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