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Group Buying …..Still a Good Idea for Businesses?

Wangari Kamande is a Research Analyst at Social Media Group.

If you’re an avid group buyer, you are all too familiar with the lure of buying trips to those random vacation spots in the middle of winter as the deals role in on an early, gloomy Monday morning, or buying that dinner deal at 4pm in the afternoon when you could eat a sack of potatoes or better yet, that massage deal on Friday after a long work week and you just want to get pampered because you DESERVE IT!  These are the moments where I stare at my credit card as if it were a person and say to it, “Are you going to hurt me for buying this?” the answer is usually “most likely”…so I take a deep breath and let it slide…

So how is group buying working out lately?

State of the Industry in Canada

There are a number of group buying sites. I personally subscribe to Groupon and TeamBuy; other popular sites are: Dealfind, WagJag and LivingSocial. Here are some interesting facts from GroupBuying Canada:

  • Canadians spent approximately $400 million through daily deals sites in 2011
  • Group buying in Canada has a current market size of $415 million
  • There are about 140 daily deal / group buying sites in Canada and over 40 aggregators (more than the US on per capita basis)
  • In any given city or province, there are different leading sites e.g ,Tuango completely dominates in Montreal and the province of Quebec
  • Over 50% of all group buying sites have been launched from Toronto
  • The majority of deals and sales are also from Toronto
  • Niche sites are not as popular in Canada in comparison to the US where niche sites for golf, pets, kids, food are popular

Source: Canadian Coupon Saver

Given that the industry is ripe with opportunity, is it all fair game for small businesses?

Pros

  • The model appears to work best for attracting new customers as many discount seekers purchase what they would normally not try because they are getting a good deal.
  • Creates an awareness and provides exposure for businesses, especially small and medium sized ones.
  • While customer loyalty is not promised, if customers get a good experience they are likely to provide repeat business and thanks to the Internet and social media, word of mouth recommendation is limitless.

Cons

  • Customers are spoiled for choice, there is a new deal every day and customers are likely to go with the best deal of the day, so customer retention might be somewhat of a pipe dream.
  • Some small businesses are not always prepared to deal with the influx of customers as a result of the deal; this could harm your brand’s image in the eyes of customers and negate any positive results you hoped to gain.

According to dealassessor.com, the list of questions below are useful for businesses who are considering using group buying sites as a marketing or selling strategy:

  1. What are your goals and objectives that make group buying sites a good strategy for your company?
  2. Can your business afford it?
  3. Can your company meet the expense of offering products or services at a discounted rate?
  4. Do  you have a high profit margin?
  5. Can you up-sell or cross-sell other products and services for potential profit?

Outside of Canada, the industry in general appears to be facing some challenges. Recently there have been articles surrounding consumer fatigue on daily deals, according to a New York Times article, when Groupon reported its second-quarter results this week, it said that active customers grew just 3 percent, a significant slowdown from previous quarter-to-quarter customer growth rates. While traffic to Groupon was higher at the beginning of 2012 than last year, it was down almost 10 percent in May and June from the same months in 2011, according to comScore.

Further, groupbuyingcanada, has been reporting a number of acquisitions in this space with Teambuy purchasing Fabfind and Wagjag and Tuango just announced the acquisition of the assets of DealoftheDay from the Yellow Pages. While other Daily Deal providers seem to be shrinking or selling and investment firms and groups want nothing to do with the Daily Deal business, it seems that for Tuango and Wagjag that is all great news. They, unlike others, are growing and on a buying spree.

What do you think about the future of group buying sites?

Social Media Round Up for Jan 20th

Facebook Event Takeaway

During the Facebook Launch Event this Wednesday in San Francisco, Carl Sjogreen, Facebook’s Director of Platform Products, announced the improvements to their new Open Graph and Gestures platforms it introduced during the f8 Developer Conference last September.  With the new Open Graph, developers are able to create apps that allow users to add anything they want directly to their Timeline. Later on, they introduced 60 new now live apps that are tightly integrated to the new platform including some by well-known companies such as eBay, Foursquare, Airbnb, Foodily and LivingSocial.

Not familiar with the new Open Graph concept? Take a look at the video below:

SOPA and PIPA Outrage

Wikipedia, the most respected free encyclopedia website on the Internet, blocked their service  for 24 hours on Wednesday to raise awareness, for those outside of the technology community they claimed, of two proposed legislations regarding Internet censorship – Stop Online Piracy Act (SOPA) and Protect Internet Property Act (PIPA).

For those of you who are not yet familiar with the proposed legislations, here are the descriptions, as described by Wikipedia:

The Stop Online Piracy Act (SOPA) is a law (bill) of the United States of America proposed in 2011 to fight online trafficking in copyrighted intellectual property and counterfeit goods. Proposals include barring advertising networks and payment facilities from conducting business with allegedly infringing websites, barring search engines from linking to the sites, and requiring Internet service providers (ISP) to block access to the sites. The bill would criminalize streaming of content, with a maximum penalty of five years in prison.

The Protect IP Act (Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011 or PIPA), also known as Senate Bill 968 or S. 968, is a proposed law with the stated goal of giving the US government and copyright holders additional tools to curb access to “rogue websites dedicated to infringing or counterfeit goods”, especially those registered outside the U.S. The bill was introduced on May 12, 2011, by Senator Patrick Leahy (D-VT) and 11 bipartisan co-sponsors. The Congressional Budget Office estimated that implementation of the bill would cost the federal government $47 million through 2016, to cover enforcement costs and the hiring and training of 22 new special agents and 26 support staff. The Senate Judiciary Committee passed the bill, but Senator Ron Wyden (D-OR) placed a hold on.

Many tech companies like Google, Wikipedia, etc. state that the two bills, if passed by the United States Congress, would fundamentally hurt the Internet Industry.  For example, websites like Youtube, Vimeo, Flickr all seem likely to shut down if the bill becomes law, not to mention the developments of many emerging Internet and social media websites would be forced to stop, which would push technological innovations into the Dark Age according to one Mashable article published on Wednesday.

Content sharing website Reddit, as well as the famous tech blog Boing Boing, also joined forces and shut down their services for 24 hours. Many other websites added banner links, protest pages and published articles on the front page regarding the issue. One of the notable changes was Google covered its logo with a giant black ‘censor’ bar and wrote ‘Tell Congress: Please don’t censor the web!” below with a link to its online petition.

Facebook’s founder and CEO, Mark Zuckerberg, also commented on this issue by tweeting (for the first time in three years) and posted a longer statement on his Facebook page calling the bills “poorly thought out laws” that “get in the way of the internet’s development”.

Watch this infographic video (originally created by Fight for the Future and posted to their Vimeo Channel. Reddit put it up during the service shut down) regarding the SOPA and PIPA bills and the effect they would have on the Internet Industry.

PROTECT IP / SOPA Breaks The Internet from Fight for the Future on Vimeo.

The Effect of the Joint Force

The joint actions of the big players seem to work. The issue soon dominated the Internet and social media world. SOPA and PIPA related discussions exploded on Twitter, generating 2.4 million tweets in merely 16 hours on Wednesday according to Mashable. Around 1,500 protesters gathered outside the offices of Senators Chuck Schumer and Kirsten Gillibrand (senators who support SOPA and PIPA)  for the rally in NYC.

The official SOPA protest website, sopastrike.com, called the protest ‘The Largest Online Protest in History’ with an infograph showing the overall effect to date, and listed all the participating companies and organizations.

Click the image to view the entire infograph

The protest results that were reported on Thursday were quite amazing. According to PC World, more than 162 million people saw the protest message on Wikipedia asking ‘ if you could imagine a world without free knowledge’,  4.5 million people signed a petition,18 representatives have backed away from the proposed legislation, 25 senators now oppose PIPA (the Senate version of SOPA), two SOPA co-sponsors and several others dropped support for the House bill

Still think internet and social media aren’t that of a big deal in legislation? It might be time to reconsider more seriously.