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Tuesday, March 13, 2012
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Daily Deals and the Radio Industry


It's not enough to say I'm tired of hearing how Bill Maher and Ed Schultz should be chastised for insulting comments just as much as Rush Limbaugh is. This "after-the-fact" equalization of a radio industry miscue doesn't work, except in the minds of Dittoheads. Where does it end? "I'll see your Maher, and raise you a Ted Nugent comment on Hillary"? (Sean Hannity deflects Nugent's comments here.)

The ruckus isn't over. The petitions are still being signed. Meanwhile, the subject of this nasty story decided to take yesterday off under the guise of... well, those in the industry know exactly why! There is no true "guise," just a need to exit while the "crazies" simmer down.

We'll also take a break on this topic and catch up on another step being taken by the radio industry that's likely to generate another "whoa, didn't see that one coming."

"Whatever efforts are being put into it now won't mean anything but lost time later (think 'HD Radio promotions')." Anyone keeping up on the push by Cumulus to break into the deals craze? Anyone know if Clear Channel's involvement in this rather late copying of online deals is making a difference? These are open questions with no answer at the moment, but let me outline why I think this will end up like the Broadcast.com bust of the late 1990s.


Here's quick background: Groupon and Living Social are what started this couponing craze. Together they comprise about 70% of North America's "deals," according to a September 2011 eCommerce Bytes article. Other players are Amazon, Travelzoo, Google Offers, and about 400 other small companies wordwide. Saying the space is crowded doesn't quite do as much justice as saying "quickly, the space got really crowded."

One curious item relative to the radio industry is that on October 19 2011, DailyDealMedia ran a story stating this: "Clear Channel Radio, the leading media company in America has a greater reach than any radio or television outlet, announced an exclusive agreement naming LivingSocial as the sole daily deal provider on more than 500 Clear Channel radio stations in 90 cities nationwide."

On December 6 2011, a story containing these words appeared in the same online publication: "Clear Channel Communications will soon begin to feature and advertise SweetJack." As you may know, "SweetJack" is the Cumulus Media copying of Groupon's idea. So much for that "exclusive agreement" with Living Social. I don't have an update for you as to how this is working out between the three companies, won't even guess because the upside to this couponing craze is nearly over. Whatever efforts are being put into it now won't mean anything but lost time later (think "HD Radio promotions").

In researching this topic it was quite easy to find negative stories about both consumer and merchant experience. There are a few positive reports, which are much harder to come by. Where the problems lie, though, are in areas you may not immediately think about if you participate in "deals" on either side - as a merchant or consumer.

From merchants come stories of failing to be paid promptly, and overwhelming/underwhelming results. Keep in mind that the selling sites are the ones who get paid first, handing over the merchant's portion of the sale at a later time. Some merchants have been met with response far exceeding expectations, which put huge fiscal drains on the advertising company. As for "response," much depends on the "deal."

One complaint issued by consumers is on finding out their coupons no longer are being honored by merchants, for a number of reasons. In my opinion, there's not enough of this to be an issue to consider in a well-run campaign. The question that we will consider, instead, is how many campaigns can be run, concurrently, by a single-deals company in a city. It's too early to put a definitive statement behind SweetJack's success (or failure), but look through their Atlanta, GA catalog of offerings and make your own assumption.

Portfolio.com carries a story supporting daily deals. Reading through it and trying to put the math together, it just doesn't seem to work. Example: The merchant wins if they convert a deals customer into repeat business. In a recent Foresee study, 40% of daily deal customers are already customers of the business, with 26% being infrequent customers. And, where my eye squints just a bit is the near boast that 56% of deals customers say that they'd be back. So 66% have already been customers of the business, and 56% of these say they'll return? Take a moment to put your head around that before moving on.

The math is complicated if you're trying to come up with an "is this worth it" response. I'm doubting there will be many radio industry account reps who step potential advertisers through the mathematics of these daily deals, or if there are many who will bother to do the full equation themselves.

What we'll soon know, though, is how effective a campaign will be because, after the fact, a radio station's Daily Deals customers will provide valuable accountability data.

After the check is signed, the deal purchased, and the consumer comes into establishment, the business owner will be able to calculate how much it cost vs. how much was brought in. This is where I think Cumulus has miscalculated SweetJacks.

Based on response factors that are established in online advertising, I'm just not seeing where the return on a, let's say, 40%-off deal - where the media gets to keep about 40% off-the-top - will be fruitful for merchants.

Stepping into Daily Deals two, maybe three, years ago would have made it easier for the radio industry to establish itself in this space. Doing it this late in the game, hoping it generates excitement by simply having the power of the microphone to persuade locals that there's a deal waiting is where I'm thinking we have a problem.

With the other companies playing this game from the technology side - and Facebook folding its Daily Deals offering after only months on the grid - I'll issue a caution flag: A deal is a deal only if the consumer and merchant see it that way, and your company has the technological know-how to grind out the stats.

It didn't take long before Broadcast.com's curtain was pulled back to show how empty it was for the radio industry. My hunch for the Daily Deal is that we'll see the same type of reaction in roughly the same amount of time.















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