Getting Paranoid About Google’s Move Into Coupons

Authored by Peter Krasilovsky on August 16, 2006 - 6:04am.

There’s a little summertime hysteria going on about Google’s progressive move to include local coupons in Google Maps. Jeff Jarvis goes so far as to say “this is a stake in the heart of local newspapers,” whose only hope has been to go hyperlocal via targeted promotions. Donna Bogatin, referencing an earlier post she did on Google’s ecommerce payment system, says that “Google has officially launched its ecommerce payment service with a predatory pricing model to lock in its advertisers, increase advertiser spend with Google and attract new Google advertiser customers.”

But newspapers, of course, aren’t hyperlocal (although they should be). Most aren’t selling anything more local than a zoned edition. They certainly haven’t broken up the U.S. into 50,000 neighborhoods of 10,000 homes apiece, like Val-Pak, which was announced as Google’s first coupon partner. The fact of the matter is that newspapers are too broad a medium for most local coupon advertisers.

As for Donna Bogatin’s charge, it all depends on whether you think that Google is systematically evil, or just opportunistic. I lean towards the latter.

Google execs are being blunt in saying that they want merchants to drive their own traffic to the coupons by taking out positions on AdWords (just like Yellow Pages advertisers using AdWords to drive traffic to their own ads). At this point, however, it would be a real stretch to asset that local businesses will have to pay gangster-like protection money for their coupons by buying AdWords. There are so many other options for them.

Instead, I choose to think that they will be able to use the coupons as an alternative to building out Websites. Although 50 percent or more of advertising small businesses now have Websites, for many, it is overkill. The successful launch of coupons will enable businesses to de-emphasize their Websites.

‘Aggregating the World’s Content…..’

From where I sit, Google’s move into coupons is not at all inconsistent with what it has been saying about “aggregating the world’s content”, and adding traffic to the content providers. You really can’t argue that it hasn’t added more traffic to (some) newspapers, via its aggregation of local classifieds into Google Base; added more traffic to (some) Yellow Pages, via its aggregation of Yellow Pages listings and ads into Google Local; and added more traffic to (some) social network/review sites, by incorporating user reviews into Google Local.

The little realized fact in all this is…that Google actually hasn’t added that much traffic to its vertical partners. Google’s verticals aren’t very dominant at this point. The partners can live without them. And that’s healthy.

When Google gets better market positions for Maps, Base and Local, maybe it will be scarier to deal with. But for now, Google has a good chance to push the whole coupon environment. We know that consumers are ready for it. A survey by Prospectiv (the successor to online coupon pioneer EverSave), found that 58 percent of parents said they will use online coupons for in-store purchases (this via Merchant Circle’s blog).

Ultimately, I like what online-to-print classified vendor Ad2Ad CEO Jay Schauer says: “Google is just the one to execute this properly. (Its’) Dynamic Coupon Management could eventually be tied into ERP and inventory systems as means of increasing flow of slow-moving inventory on the fly…..”

Schauer adds that if it all works out, the meaning of “coupons” would evolve to mean “the price that is presented for only a limited period of time, not an advertisement showing a general message. Coupon price could be adjusted based on coupon click through rate.”

All that would be great. To be sure, other online coupon companies have already developed good solutions, too. IAC’s Entertainment Publishing, ValPak, Boodle and Q Interactive’s CoolSavings have fairly good coupon products. They have done well by integrating features like user reviews and local content. Another contender, Zixxo, has focused on RSSing its coupons, which is really clever.

My guess is that other contenders will emerge as well. But for now, Google, with its resources and execution, is pushing the needle. For the coupon sellers that have their sales channels in place, at least, it represents a new opportunity.

Note: This post originally appeared on my blog, Local Onliner. My bio can be viewed here. Additional comments on this post can be viewed here.