The Ultimate Guide: How Media Companies Should Offer Daily Deals

UPDATE 8/25: This piece was re-published on Business Insider.

Groupon launched less than two years ago, and is on pace to make $300 to $500 million in revenue this year. How? They simply went out and created a distribution list of over 9 million subscribers in local areas and negotiated deals on their behalf. They are an unstoppable Goliath at this point. Right? Maybe not.

If you think about what makes Groupon truly successful you come across two things:  they have 9 million people on their email list and their users trust Groupon to recommend great deals.

Hmm, big audience and authority. You know who else has big audience and loads of authority in their city / vertical: local / vertical focused newspapers, magazines and online properties. Plus, the authority works both ways as small businesses know who the media companies are and are more likely to be comfortable offering a deal with them than a new daily deal site. In fact, I bet what keeps Groupon up at night isn’t LivingSocial or the now 120+ other daily deal sites, it’s the media companies with authority and an established audience.

Some media companies have already started experimenting with daily deals including the Washington Post, SF Gate, BuzzFeed, Zagat, Open Table, Yelp, Gilt Groupe, and many more. I’ve also personally talked to 10 media companies in the last three weeks all of which are in the final stages of releasing experimental daily deal services.

During these meetings we have shared a lot of insights we have gathered as the leading daily deal aggregator, Yipit.  But, since we can’t meet with everyone, I thought I’d share our insights in this post.

#1. Daily Deals are a reward to your audience, *not* an advertisement

Creating a daily deal for your audience isn’t just a monetization strategy, it truly is an awesome service you’re doing on their behalf. It’s imperative that you position it this way to your audience and think of it this way internally.

The best way to explain this is with a simple analogy. I’m going to a wedding in Colorado and the bride recognized that a bunch of us lived in New York. She negotiated a deal with United for a group fare. Everyone loved it because she provided us an awesome service. In theory, this is exactly what you are offering. In this analogy, the bride is you, the wedding guests are your audience, the plane ticket is the common consumption your audience has and the cheaper flight is the daily deal.

Groupon does this because the service is a group coupon and their users understand that they are only getting this deal because Groupon has grouped them all together. If your audience doesn’t clearly understand why they are getting this deal from you, then will assume it’s an ad. You need to explain that you know they are all consuming similar goods and services and that you went out and negotiated an awesome deal for those goods and services on their behalf. If you don’t buy into this, please stop and re-read this section. This won’t work unless you fully understand this point.

#2.  How to Introduce the Daily Deal to Your Audience

You need to hit the following points when you introduce your daily deal product to your community (either via a dedicated email or a landing page):

• Our community is now X thousand people strong
• We know a lot of you like to buy Y and Z
• So, we’ve decided to go to all the best vendors of Y and Z and negotiate a discount on your behalf (you could even run a contest for people to submit goods, business or services they would like you to negotiate on their behalf)
• These discounts will only be available for a short period of time and there may be limited qualities
• We recommend you sign-up for our email so that you don’t miss out

#3.  Use Your Authority

When it comes to influencing consumers to buy a deal, there’s a bunch of psychological factors that you need to hit including social proof, scarcity, liking, and more.  One of the most important ones for you is authority.  In the daily deal market, there are two types of authority:

• Is this a good deal?  Most media companies don’t have the authority to say what is and isn’t a good deal.  Groupon is working hard to build that and your product will build it over time.  In the meanwhile, that’s why it’s important for you to explain to your users why they are receiving this deal.  If you don’t, they won’t trust you and are much less likely to buy it.
• Is this a good business / service?  This is your bread and butter.  You have been recommending goods and services to your communities for a long time and they trust you.  It’s important that when you present one of these businesses, that you highlight that your editorial team / community has picked them (and list any past mentions of the business by your publication).  If you don’t do this, you’ll lose much of the authority power you have.

Also use your authority with small businesses and vendors. They should be more willing to offer you a deal than to a local daily deal site.

#4.  Give Your Audience a Sense of Exclusivity

Exclusivity is an important factor in motivating people to buy deals. Think how much better “private sale” sounds than “sale”. This can be as simple as position the deal for your community and allowing users to share that deal with their friends. This works best for media companies that have a base of subscribers that have opted into your product like print subscribers. You can also create a sense of exclusivity by providing a better discount on the deal for your print / best online users which leads me to point #5.

#5.  Daily Deals Can Be More than Revenue

In addition to having come up with a much better way to monetize your audience than lowly banner ads, you can use the daily deal as a way to accomplish more of your core goals:

• Expand your audience.  You can offer an additional discount to your core users (print subscribers, online super users, etc.).  This will motivate people to become better users of your service.  You can also allow your core users to share the deal with up to 3 other people; a great way to market the product and reward your best users at the same time.
• Convert your audience into retained users.  Most users never create an account on the media sites they visit — there’s no real reason to.  Except, now there is:  the daily deal.  Your visitors will be motivated to convert into users because you now provide a big reward:  you’ll help them save money.

#6.  Partnering is Tricky

A whole new industry is rising up to help media companies offer daily deals.  You have a bunch of options, some good and some bad.

• Worst option.  Just embed a service like Groupon on your site.  They pay you for every Groupon subscriber you send them and/or every deal your users buy.  Most of you are actually already doing this even though you don’t realize it (go look at your website and you’ll see ads for Groupon, LivingSocial all over it).  You’re essentially selling your subscribers to Groupon, your competitor, at a really low rate.  Please stop doing this.
• Bad option.  Offer a co-branded daily deal services partnering with an existing daily deal service.  You don’t need to do this and you’re helping your eventual competitors. If you irrationally go down this route, *please* don’t give the daily deal service your email list.  You should be the only one that owns it.
• Good option.  Use a white-labeled daily deal service that will set you up with a hosted technology solution and can also sell the deals on your behalf.  This is good option for you to experiment with the concept without giving away your subscribers. The danger here is that you do the “lazy” option which is what most media companies have done so far.  They simply put up the deal on their site and send it out to their email subscribers.  You need to work really hard on the marketing message behind the product.  You also need to make sure your editorial team has plenty of input on what deals are being negotiated.
• Another good option.  Do the technology and sales yourself.  The technology is *really* simple.  The hard part is evaluating whether your existing sales team can pull this off.  Also, you may need to hire a product manager to oversee the product if there’s no one within the company that can do it.
• Another good option.  Do a talent acquisition of one of the existing small daily deal sites (there are over 120+ of them). Use their team to build out your product.

I know this is a lot.  So, if you have more questions, please don’t hesitate to contact me at vin at yipit dot com and I’d be happy to talk to you about your best strategy.

Lastly, we’re not consultants or selling anything, we just want to see as many high quality daily deal services as possible because it’s good for Yipit and it’s good for us as consumers.