Death of daily deals and dawn of value

02 Sep

The daily deals are dead

The daily deal sites are zombies

Daily deals are down and rightly so! I can not confirm this by looking at just 1 data point from Experian Hitwise,but I have a feeling this is going to happen sooner rather than later. My family owns a couple of small businesses, and I have first hand experience on how daily deals done the wrong way could kill the bottom line.

Given the current deflationary pricing pressures and the advent of cost-saving disruptive technologies, deals are an obvious choice as a marketing tool for small businesses. However, the prevailing “daily” deals platforms have exploited small businesses, with their draconian terms, instead of delivering meaningful value. This is what precisely Trolion likes to change. It is our belief that for every dollar in commission we charge businesses, we need to add at least one dollar in value to that business, if not two. In this spirit, Trolion developed an advanced marketing and BI platform called Rush49, which has the right business model and technology to genuinely serve both merchants and consumers.

We foresee the commodification of deals industry and in such an environment only the cost-leadership models thrive, but with only one exception. If the competitor, despite not having a low cost model, has a big bank balance, and that balance could be used to destroy competition. Rush49 has a lot of differentiating factors like DIY,advanced analytics and AI tools, to thrive in the industry, but I wouldn’t like Groupon to have an IPO, given its bankrupt business model, and hope to see it quietly fade away into oblivion. The stock market doesn’t need another Enron now.

Talking about differentiating factors, Rush49 has been working on these advanced tools for almost an year now and will be having the beta version roll out very soon. Deals business is just a tip of the local commerce “iceberg” as we believe the bigger mission for Trolion is to match Internet consumers with local merchants (separate signal from noise) in real time, and facilitate the complete end-to-end shopping experience (discovery, purchase, reservation, redemption and reviews).

Also in the same vein, last week saw the announcement of a daily deals platform Group Commerce buy Socialight. This platform on the surface seems like a god-sent-gift to cash-strapped publishers but it isn’t! The platform can only push deals to the subscribers but once the deal fatigue sets in (which is already happening) the platform is useless! Also, I seriously doubt if it has the option to manage user preferences, tastes, merchant DIY tools and a redemption technology. This might still work for some sites with niche audience but main stream news papers won’t be able to add much value. While the platform is “white label”, the deal sourcing is not and still requires an expensive salesforce. Daily deals might save the day for these big publishers commodification sets in the deal industry, I do not see how they can compete! Publishers interests might be best served in the long term by remaining as affiliates and/or by serving display ads. This could benefit their editorial independence too.

Talking about startups in general, the “momentum” of certain platforms reminds me of what Dave Binetti (lean startup evangelist) said about the 3 false prophets that make great news on TechCrunch but could potentially kill them,
1) Product
2) Funding
3) Vanity metrics

I would add a couple more items to the above list- “customers” and “revenues”. No business can survive without “customers” or “revenues”, but I feel that they themselves do not validate a repeatable and scalable model. It is our goal at Trolion to create a scalable startup and only one thing matters to us, “IP AND SWITCHING COSTS”. The latest patent fights between tech majors more than prove our hypothesis. Also, the term “switching costs”, in a broad sense means social components, preferences, usage history, loyalty status and (most importantly) brand affinity that can help retain customers in the long term.

Intellectual Property

Intellectual Property

And as a first step, in what looks like a marathon to me, Rush49 is going to validate the customer with a minimum viable product, and bring a semblance of fairness to local deals in LA. Stay tuned for innovative online attribution to offline local commerce.

p.s: I have made some big statements in this blog without substantiating them. Rush49 is currently in stealth mode, but I will throw more light on the product soon. And, I sincerely hope that our platform will speak louder than anything I can possibly say!

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Posted by on September 2, 2011 in Uncategorized


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