Three Reasons Why PayPal’s Daily Deals Could Put Groupon Out of Business

Editor’s note: The following is a guest post by Michael Essany.

Although PayPal is certainly showing up late to the daily deals party, the fashionably late arrival by the eBay-owned juggernaut payment platform could prove an instant game changer for the burgeoning daily deals industry.

Although few are of the mindset that PayPal will eventually bump Groupon and LivingSocial down a peg to become the most dominant force in daily deals, PayPal seems confident in its ability to do so. And the confidence isn’t so difficult to understand once you understand PayPal’s plan to make daily deals a more relevant, personalized, and convenient consumer experience.

1. Targeting Top Retailers

If you’re curious about how PayPal’s daily deals will differ from those of current titans in the field, PayPal is elevating the aim of daily deals chiefly to the level of big box retail shoppers who don’t have the time or interest to sift through discount opportunities at the small businesses they infrequently patronize.

By the company’s own admission, PayPal is already working with more than two-hundred top U.S.-based retailers, including behemoths like Target and Best Buy.

Consequently, getting a price break on ubiquitous consumer electronics and consumer staples will likely appear more attractive to PayPal’s 103 million members than a typical small-scale daily deal serving up a free appetizer during lunch hours at a neighborhood pizza joint.

2. Clearing the Coupon Clutter

Perhaps even more central to PayPal’s strategy than focusing on large retail partners is the company’s concentration on heavily-targeted mobile communications. That is, instead of flooding a user’s email inbox with haphazard hit-and-miss recommendations, PayPal can send targeted offers to consumers based on their current geographic location and proximity to participating retailers. Whenever a PayPal user approaches Target, for instance, an enticing, relevant daily deal based on that shopper’s known purchasing habits will hit their handset.

“The experience is going to be completely different than anyone else’s through and through,” PayPal President Scott Thompson said upon unveiling his company’s foray into daily deals. “We’ll only give you something that we think fits the category of unique and relevant. Everyone else is going to bombard you.”

3. Making the Most of Mobile

As Don Young, Jr. of Daily Deal Media reported on December 13th, Groupon and LivingSocial presently control the daily deal market by a commanding margin. Combined, the two goliaths enjoy a 73 percent market share. Needless to say, if PayPal’s aim is to simply become another provider of half-priced deals and other comparable discounts, eBay’s red-hot subsidiary would certainly go down in flames before long.

But, in the big picture, PayPal’s strategy may have more to do with the evolution of mobile technology than it does the growing consumer acceptance of digital coupons and any number of online discount opportunities.

The PayPal daily deal plan is buttressed by a commitment to skillfully utilize smartphone GPS features in conjunction with known customer shopping habits to make daily deals more relevant, attractive, and convenient than they have ever been from other providers.

In concept, PayPal’s plan appears to be solid and wholly underpinned by a laser-like focus on efficiency in the design and delivery of discount offerings. If this exceptional plan in theory becomes an equally exceptional reality in practice, Groupon could quickly find itself to be the top dog that became the lame duck of daily deals.

Source: BusinessWeek