Living Social Looking to Change its Business Model

In a recent interview with the Washington Business Journal, LivingSocial CEO  Tim O’Shaughnessy said, “We don’t view ourselves as a daily deals business, we view ourselves as a local commerce business”.  According to the author, O'Shaughnessy's comment hints at a possible shift in the LivingSocial business model.

O'Shaughnessy envisions a future where LivingSocial becomes an online seller of goods and services beyond just its daily deals.

The story points out that Amazon (a LivingSocial investor) is seeing tremendous growth outside of its books, movie and music sales.  Could Living Social soon become a competitor in this space...or a partner?

With free and geo-targeted "special offer" sites like Foursquare starting to gain some momentum as a self managed retail resource, and QR codes providing greater reach for retailers hoping to promote discounts at little to no cost, perhaps O'Shaughnessy is weighing a shift in LivingSocial's business model more as a mitigation strategy than a growth opportunity. 

There are a growing number of LivingSocial competitors popping up every day with new and unique competitive advantages that chip away at the huge market share that LivingSocial and Groupon now control.  Take recently launched Recoup for example.  Recoup has a daily deal model similar to LivingSocial's but with a more philanthropic mission.  Every purchase made on Recoup benefits a charitable agency of the consumer's choice.  The businesses that are selling on Recoup can also contribute a portion of each sale to a charitable cause.  Additionally, Recoup doesn't charge businesses up front unlike LivingSocial and Groupon.  In today's very socially conscious consumer culture and skeptical business culture, Recoup may be well positioned to take a measurable bite out of its high priced competitors.

O'Shaughnessy's comments are interesting.  What will be even more interesting is what is to follow.

Why are you paying to distribute digital coupons?

I've been reading a lot of stories lately about the popularity of online coupon sites like Living Social and Groupon.  As a consumer, I can see why these sites have value.  Who wouldn't want to get substantial discounts at local and national retailers, restaurants, theaters and other businesses?

But do online coupon sites have value for the advertiser?  According to some articles, small businesses that have used the sites are questioning the benefits of offering big discounts in the hopes of converting prospects into customers, when the costs are so high, and their level of control is so low.  Living Social and Groupon charge a huge fee for posting discounts on their sites.  To generate a measurable return, businesses need to start with large margins and/or hope that a significant percentage of consumers who redeem the offers will return at some point ready to pay full price.  The retailer also needs to hope that the coupon offer doesn't alienate the business' loyal customers who are already paying full price and are not being rewarded for doing so.

As a business, one of the competitive advantages of using location based social media platforms like Foursquare or Places is that a retailer can offer digital coupons, at no cost, to anyone who happens to be near one of its locations.  Additionally, the retailer controls the amount of time the discount is offered, how many coupons it wishes to distribute and whether or not it wants to require the user to "check in" multiple times before he or she can access the coupon, thereby significantly increasing the possibility of repeat business. 

While coupon sites like Groupon may presently have more members worldwide (35 million), they don't offer the geographic convenience of geo-based sites like Foursquare.  Granted, Foursquare offers aren't delivered directly to the consumers email inbox, but by simply logging onto a geo-site through a smart phone, a consumer can immediately identify any retailer in his/her vicinity that is offering a special. Therefore, any perceived inconvenience with redeeming the coupon is mitigated by the retailer's proximity to the user.  And there is no 24 hour wait for the coupon download.  It pops up on a smart phone ready to use.  Additionally, if the consumer wants to share his or her experience with friends, they can easily do so on geo-sites; a benefit that sites like Groupon and Living Social don't provide.

So if you're interested in distributing digital coupons to drive new business, don't be misled.  Big coupon sites like Groupon, WOW and Living Social aren't your only options.  Nor are they necessarily your best options. It's only a matter of time before burgeoning platforms like Foursquare or Places become the preferred digital coupon distribution channel for small businesses...and probably even large ones.

Foursquare, Places, Gowalla… Geo-marketing: Are you there yet?

For years, we’ve been hearing the business and real estate mantra: ”Location, location, location”.

For marketers this is truer today than it has ever been, but not for the reasons you might think. Geo-marketing through platforms like Foursquare and Facebook Places is the next trend in super-targeting for marketers.

By identifying where customers and/or prospects are during the day, marketers can get a better idea of consumer interests and patterns that will give them a competitive advantage in the battle to increase customer loyalty.

I have recently been studying geo-marketing more and more as Goodwill of Greater Washington considers whether it would enhance our present marketing strategy.  DC Goodwill is already developing another Goodwill first: an iPhone web app designed to allow donors to locate the nearest Goodwill retail store, donation center or donation bin through geo-coding, while also allowing the user to more easily communicate with us via our blogs and social media sites. The more value we can provide to our shoppers and the more convenient we can make the donation process, the more likely we are to build customer and donor loyalty.  Geo-marketing might allow us to take this a step further.

Imagine the loyalty programs that can be created if we begin incentivizing donors for giving their used goods to Goodwill (and checking in when they do so) versus another charitable agency; or provide them with incentives for every 10 visits to our retail stores. How about cross promotional opportunities with partners to incentivize visits to each partner’s locations?

Certainly these types of promotional and customer loyalty programs are available now through more traditional means, but geo-marketing significantly reduces the cost of execution and management, while also allowing us to track the geographic and shopping habits of our customers.

Don’t get me wrong, while I view this burgeoning trend favorably, it does have its challenges. First of all, one doesn’t actually need to be in the location at the time they are checking in. They only need to be nearby. Second this is one way communication, so I wouldn't eliminate other forms of social media and/or market research in favor of geo-marketing exclusively.

Much like the web, this too will require some experimentation before a solid and measurable strategy evolves. However, it is still another means of engaging consumers and converting them into loyal customers and advocates, which in and of itself provides a tangible benefit to any business on the leading edge.

Facebook is empowered by “Places” – "Who. What. When. And now Where."

Few days ago, when manually updating apps on my Iphone, I found Facebook got a new feature called “Places”. So now, after buying FriendFeed, lauching a new real-time search engine, which declared a battle to Google in social search, Facebook has now expanded its power into location-based services (LBS). It is time to welcome a “Where” on Facebook, after the recent “When”. People who know search and LBS believe that there’s gold in real-time and social data, as well as geolocation and behavioral data. Then it seems Facebook is racing in a very fast pace to these latest trends and technologies, in order to consolidate its leading position in the world’s social network and technology map.

From now on, people can easily share their locations, tag friends who are with them at the location through “Places” from their mobile devices. At first, Facebook Places will be integrated with popular LBS poviders such as Foursquare, Gowalla, Booyah and Yelp by pushing the check-ins from these LBS providers’ apps to Facebook Places. Some providers are planning to launch location-based social games, which built on Facebook Places and based on interacting with people and sharing real-time posts at real-world locations; allowing users to socialize, meet new friends and track popularity. 

As Facebook has a large base of members of nearly half a billion, it is definitely a high proportion of their users will, intentionally or not, use the location sharing through “Places”. Although Facebook has just jumped on this location-based market, "Places" is now a threat to other LBS providers as it is taking the advantage thanks to Facebook current user base. It is predicted that “Places” won’t take long to become the mainstream.

In my opinion, the secret super power of "Places" didn’t lie in the concept or technique but in the local business location-based advertising market. Because as well as trying to attract users, Facebook is also trying to attract local businesses to build Facebook Place pages, and associate their Facebook presence with a location. It helps the Facebook advertising engine working more effectively by targeting audience using profile data, searching information and now, users’ geolocation. It opens opportunities on developing Facebook social games and apps using the location-based feature, but it also presents challenges in terms of privacy protection and requires Facebook to be careful in updating more rules to its current privacy setting.

All in all, it is seen that the social media giant has done many things to strengthen its power, expand its reach and certainly, to make more money. While waiting for the “Places” full functioning version coming to other market after testing in the US, this topic on location game is broadly opening for your personal opinion and discussion.

The Underwater Iceberg of Location-Based Mobile Services

Last time I have mentioned about the concept of location and geo-fence as one of the expected trends in mobile marketing this year. It becomes hotter with more competitors, including established services, emerging businesses and big online companies. All of them are joining the geo-location battle.

Currently there are two most popular location-based mobile apps, Foursquare and Gowalla, working as both a social network and a game, built on GPS function and user-generated contents. Basically, they two all allow users to share their location with friends. So, when you walk into a bar or restaurant or mall, you probably "check-in" on your cell phone, and your friends will see where you are. You get rewarded for frequent check-in activities. That’s quite simple!

Just in case you really still have no idea about what they are, or for further information, here are the summaries of FourSquare and Gowalla on CrunchBase

What are their differences?



Here is a brief comparison done by Mashable:

What do users get? 

• Connecting with friends, knowing where they were and getting tips from other people for each location

• The fun of earning badges and various perks from the places where they check in.

• Accessibily to your check-in history, giving you a snapshot of “What, Where, When, Who”

Let’s talk business!

The clever part here is that you get points for checking-in. But the really cleverer part is more about business. These geo-social networks are certainly capturing marketers’ attention. Through smartphones that signal someone’s location, stores and brands like Starbucks, Tasti-D-Lite, Macy’s and Pepsi are getting live information about when and where people are shopping. Some companies are turning Foursquare or Gowalla into a virtual loyalty-card program, while others are creating their own location applications, customers discounts or other rewards for shopping.

So basically, Foursquare and Gowalla are rolling out free analytics programs that will give participating businesses detailed information on who is checking-in to their locations, and give them the ability to communicate with the visitors. That’s what set these services apart.

The risky side

While some may find interested in sharing their location, the concept of automatic geo-location a little hard to accept, especially in terms of privacy concerns, Are people ready to share their personal locative information? Probaly. Or not really.

A recent poll on some reasons more people aren’t using check-in services revealed privacy and security concerns as a number-one reason.

The future

• Giants get into the game with motivation of the true value which comes from targeted advertising based on locality. The only question for these businesses to answer now is whether or not location-based rewards are the killer feature or if location can stand alone.

1. Facebook has been actively testing multiple location products and considering various implementations of some form of location feature.


2. Twitter has announced their official plans for location. “Twitter Places”, the product enables users to “tag Tweets with specific places Additionally, the product integrates with Foursquare and Gowalla. However, Twitter isn’t implementing a badges service right now. 

• Database of consumer behaviors and lifestyle can be built from location-based services. For instance, insurance companies can start tracking this data to have a more accurate way of determining risk and rates.

• Companies and retailers will have more creative approaches, incentives and campaigns to encourage consumers using these check-in services.

The Latest Hits in Mobile Marketing

The mobile market is exploding. Cell phone penetration has been surpassing cable TVs and home PCs in many countries. Mobile marketing expenditures are expected to exceed $2 billion in 2010. Thirty-eight percent of youth already claim that mobile is more important to them than their wallet! Click-through rates on mobile ads are even higher than online. Mobile advertising is beginning to show a track record of results, both on click-through and in leading to purchase.

So marketers surely see the potential of mobile marketing. But what are the latest hits and take-aways for them to get on the current market? Here come four highlighted trends to think of

1. Smartphone market's growth

Smartphone ownership increased to 17% of mobile users in 2009, according to Comscore. Smartphone penetration is estimated to reach 50% of the market by the middle of 2011

• Smartphones change mobile users behaviours, leading to more entertaining usage (music, games) and mobile web activities (internet, email). As a result, mobile web will reach more people and mobile sites will be significantly invested in the upcoming years. 


• Smartphone owners continue to be predominantly male, most likely between the ages of 25 and 34


• Mobile platforms for smartphones are enhanced with social media apps, such as Twitter and Facebook, which just announced a 54% increase in mobile use in the past six months. 

2. Change in SMS campaign tactics

There is a lot of potential with SMS campaigns and a number of companies have shown real success with them. 

• Previous SMS campaigns shown that the key to success is to integrate the SMS campaign into the rest of the marketing campaign; highlight the shortcode across other forms of advertising. SMS is highly measurable, so the results should be tracked and campaigns should be modified over time


• SMS campaigns are now built not simply based on one-way messaging but consumer-created content and active participation. 


• CRM databases tend to be linked into mobile marketing. Retailers can apply this into their SMS campaigns.


• Mobile coupons through SMS become popular

3. Increasing mobile apps

Mobile apps differ from standard WAP banner ads, location-based text ads and mobile video by engaging consumers and immersing them into a branded environment in which users will be more receptive to brand messages in a far more interactive and viral platform. Mobile app downloads across all handsets are estimated to climb from over 7 billion downloads in 2009 to almost 50 billion in 2012. Advertising contributed almost 12% of the overall apps revenue in 2009 and is expected to more than double to over 28%. Games are most downloaded apps, coming next Entertainment and Social Networking

• Supply will exceed demand in mobile apps. Discovery of apps is now an issue with the massive increasing number of apps. Launching a new app becomes a challenge and requires more innovations and investment. Apps markets are evolving differently worldwide, indicating a need for creating different apps business models instead of a "one size fits all" approach.


• The battle of the app stores becomes more intense. In 2009 the number of app stores leapt from 8 to 38 and is expected to further increase in 2010. It signifies a battle for survival of the fittest among app stores worldwide, with app revenue and growth opportunities growing significantly.


• Apple still dominates the app market. Though Blackberry has a huge number of handsets,  low awareness of the app store and complicated app installation are a pain for them. 


• Most of the current mobile marketing campaigns request a mobile app development.

4. Geographic and behavioral targeting

Targeting people based on location and using behaviours is the biggest opportunity for marketers in mobile. Location and behaviour data will begin to be mined as a rich new source of insights that marketers can harness to improve the effectiveness of their efforts. By knowing the location of the phone, SMS campaigns can be directly targeted. 

• Foursquare, a geo-social network, allowing people to share location with friend, is capturing marketer’s attention. 


• Geo-fence, a virtual field around any location that is used to trigger a mobile marketing message to a user when they enter or exit the area, is forecasted to become part of marketers' vocabulary.


• Retailers and businesses are offering coupons, promotions and sales for consumers checking in through location-triggered application on their mobile phones.


• The evolution of search is also moving to mobile platforms with more emphasis on the local and social, as well as behavioral targeting. Mobile search will continue to grow in 2010 and beyond. More localization and businesses will be expected to relate to mobile search. 

All in all, three key drivers of mobile marketing in 2010 and perhaps in upcoming years have been predicted as Location, Relevancy and Immediacy. Advertisers will be increasingly drawn to mobile's unique opportunity to reach and engage consumers with immediate and location-specific content at the most relevant content to different consumer groups. And privacy is another critical issue for advertisers to consider in order to protect personal identification information.