Groupon vs. Google: Are Daily Deals Good for Business?

Aug 25, 2011

Groupon vs. Google: Are Daily Deals Good for Business?

You are probably already familiar with daily deals that have increased in popularity over the last few years. These deals provide discounted products and services by local and national businesses marketed to potential customers to get them through your doors.

Groupon and Google Offers are considered the principal players in this marketing channel, and provide copywriting services, payment collection and distribution of deals that best represent the businesses who sign up with them. However, if you’re a small business owner, there are many facets of the daily deal landscape to consider before signing up.

How Groupon Works for Businesses

From the start, Groupon handles all the details, such as writing up the offer, placing it during the best time for your business, payment for the offer, distribution of the Groupons and sending your business a check after they take their cut. The services they provide cost nothing out-of-pocket. Groupon takes a cut of the revenue that you bring in for your business through selling the Groupons and then you get the rest. There’s also a branch called Groupon Now, involving real-time offers that run automatically, taking advantage of the rise in mobile marketing.

How Google Offers Works for Businesses

Google Offers is similar in structure to Groupon, helping you to create and market your offer in order to attract new customers. The main difference that I found is that with Google Offers, you get paid right away while Groupon sends the balance of your earnings in thirds over a span of time. The masters of using video tutorials, Google Offers also has this helpful video:

But How Big of a Cut Do They Take?

It’s difficult to say. Concerning Groupon, I’ve heard anywhere from 30% to 50%, and this source states that on average, the cut that Groupon takes from the revenue generated is 42%. After preliminary research, I can’t find anything definitive regarding the cut that Google Offers receives once a contract is signed and a daily deal is completed – I can’t imagine, however, that it would be much less than 50%.

An important point to remember is that even with simple search terms using Google’s own search engine, I couldn’t find that information for either Groupon or Google Offers – squash the excitement before signing a contract for a daily deal of your own, and make sure you understand what you’re giving up.

Is a Daily Deal Good for Business?

There’s a bit of controversy regarding whether or not an offer or daily deal is worth it, especially when it comes to a small business. While these brands have the ability to send new customers through your door, the discount to the customer combined with the cut each one of them takes from the revenue could simply make it not worth the risk.

One way to figure it out is to sit down and do the math. Let’s say that I own a salon and decide to run a massage special for half off an hour massage. The regular price for this product is $60. The daily deal rate takes it down to $30.

Now it’s time to stop and realize that I will be giving each of those massages for half the original revenue each time a person comes in with a voucher.

Next, factor in the cut that Google Offers or Groupon will take, using 50% to be safe. This brings my revenue from a $60 massage down to $15 every time someone comes in with a voucher.

Let’s say I sell 25 of these vouchers at $30 each for a total of $750 in sales. The marketing daily deal company takes 50%, which leaves me with $375 for 25 potential new customers and 25 hour-long massages I have to complete. If a third
of these potential new customers don’t use their vouchers, this leaves me with 17 hour-long massages and still $375, which brings my hourly rate up to $22 versus the $15 I take in if every voucher is used.

Would I be willing to work for such reduced revenue? Couldn’t I make that $375 with about 6 new customers by charging the original $60 per hour at a fraction of the time?

These are important considerations for this hypothetical but very busy owner of her own salon.

Next in this series: The Daily Deal and Customer Loyalty

Kelly Wilson is a copywriter for Verticalwerks Interactive Media. What’s your story? Let Verticalwerks help you share it with the world.

Image: digitalart /

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