The new entrants look a lot like the third-party networks and
exchanges that stormed onto the scene in online advertising about
five years ago. They fall into two rough categories: networks that
function as sales forces for hire, sourcing deals and reselling
them; and exchanges, where deals are bought and sold.
Both eliminate the highest barriers to entry, technology and a
sales force, which is why you're about to literally see hundreds of
publishers with Groupon-like offers. Recently, media companies such
as Hearst, Meredith Corp. and the New York Times Co. have caught
With their own sales forces and audiences already in place,
media companies are looking at the deals market to bolster meager
digital revenue. Now, they can source more deals from networks to
fulfill demand, or feed excess deals onto exchanges for wider
distribution. From the pool, publishers then pull what they need,
say, to fill the slot for Thursday.
"Every publisher wants to control the transactional relationship
with their buyers," said Prashant Nedungadi, CEO, Nimble Commerce.
"They want to sell deals under their brands and that creates the
need for a different kind of network."
One such network was born from an existing sales organization,
ReachLocal, which has more than 600 sales people globally. It
acquired a daily deals brand, DealOn, this year and is building a
deals-only force for partners. For Facebook's deals test,
ReachLocal is using its presence in San Diego to source offers from
local businesses for the social network's users. Facebook is also
working with similar companies, such as Tippr, Gilt City, OpenTable
and PopSugar City, for other markets.
Yet another network, Nimble Commerce, has 50 clients, including
coupon distributor Valpak, the Wedding Channel's the Knot and
YellowPages Canada. While most have their own sizable sales forces,
Nimble's exchange allows clients to fill empty inventory.
Outside of keeping a steady flow of deals, publishers use
exchanges for extra distribution, so deals they've sold themselves
pull in extra revenue. One exchange, Analog Analytics, says its
partner the Orange County Register brought in $188,000 gross
revenue for boat rides to Catalina on its own site, and the LA News
Group syndicated the deal for another $32,000.
On Analog, a publisher like the Register, which sells the deal,
gets 15% of all deals sold on any site; the publisher that
distributes the deal -- LA News, in this case -- gets 20% and
Analog gets 15% for brokering. (The merchant, per the usual Groupon
model, gets the remaining 50%.) While the economics could resemble
Groupon's affiliate relationships with publishers -- McClatchy Co.
gets 15% from Groupon deals distributed through its newspaper
sites, two execs told Ad Age -- at least publishers get to keep the
buyer's email address, said Ken Kalb, Analog's founder-CEO.
"Each one of those consumers has an enormous lifetime value
worth hundreds of dollars," said Mr. Kalb. "That's worth a fortune
to publishers that can capture that email registration."