‘Google Offers’ To Mark the Beginning of the Daily Deal Oligopoly

Editor’s note: The following is a guest post by Matthew Moskowitz, Marketing Director of 8coupons.com.

Looks like being spurned by Groupon has ignited the competitive juices at Google who has decided to enter the daily space with the upcoming launch of ‘Google Offers’. It’s another big win for bargain-hunters who can expect to see even more 50% off-ish deals at local businesses… but what will be the effect on the daily deal industry as a whole?

Google has key pieces in place that will make them extremely dangerous and will accelerate the industry into a pure oligopoly.

Personalization - Most daily deal companies (and aggregators) are all working towards the day where they can send ultra-targeted relevant offers to each individual person. It’s proven to be a difficult challenge, where whoever can get there first, will surely gain a significant advantage over their competitors. We think Google has a huge leg up in this area, as they will be able to analyze and leverage the search patterns of their users (Google has a dominant search market share) to customize deals.  Along these same lines, Gmail makes up approximately 15% of the email client space with many of us are already accustomed to seeing highly targeted contextual ads on the right side of our screen. Google will be able leverage the same technologies to offer the right people the right deals, creating more email sign-ups and more transactions.

Efficiencies - Anyone who searches the web has certainly run across a Groupon or LivingSocial ad. It actually seems as if they are on every single website. These ads are a crucial customer acquisition strategy based on a simple mathematical formula. If it costs Groupon $10 in ad-spend to gain a customer, but that customer will make Groupon $20 over his or her lifetime, well then it’s a no-brainer. Almost arbitrage, but not quite. The side-effect of this has been the increased cost of the ads, as several companies are now bidding for that online real-estate. Owning the ad network, and having access to all of this information will allow Google Offers to run their own display advertising at times when the cost of the advertising is at it’s lowest based on the current bid prices.  They can acquire customers at the most efficient and cheapest way possible.

Oligopoly - We’ve heard others call this the ‘Golden Age’ of the daily deal space with new companies springing up on a daily basis. Whether it’s a direct Groupon Clone,  a secondary market site, a white label provider, or an aggregator, no one can argue the space has seen its share of innovations over the past year. However, just like 2010 can be summarized by the fact that we aggregate over 250 daily sites, 2011 will be the year that the big boys begin to take charge and separate themselves from the pack. The first sign occurred a few weeks ago when Facebook entered the space with their deals product, and was quickly followed by the news of Amazon’s investment in Living Social. Google officially entering the space only reinforces this notion. Maybe I’m a cynic but I can’t fathom a new entrepreneur trying to compete head to head with Facebook, Groupon, Amazon, Living Social, and now Google in the daily deal space. I also expect some of the current fledgling daily deal companies to sell themselves to a larger one, consolidate with one or some of their peers, or even throw in the towel altogether. Google’s entrance marks the beginning of the road to a daily deal Oligopoly.