Not being well versed in the deals arena I wanted to better understand Google’s baby steps with their Offers product. I turned to a number of respected folks, that have more experience in the field than I to get their sense of Google’s progress in their newest local effort. Here is the discussion thread from earlier in the week where Greg Sterling, Jim Moran, Sebastien Provencher, David Mihm, Sol Orwell, Rocky Argawal and Andrew Shotland gave their impressions of Google’s efforts to date based on these sales numbers in Portland.
Google Offer’s Beta in Portland started on June 1 and there have been 12 deals through the first two weeks of June. Google seems to be serious in their committment to the market. They are putting feet on the ground in Portland and elsewhere, including NYC. They have started hiring sales staff for a direct sales team for Offers and other local endeavors. But it would seem that getting from here to there (wherever there is) is no small task.
Here is a summary of the deals to date and projected dollar amount generated for Google for the past 2 weeks:
|Avail.||Sold||% Sold||Total Dollar Value||Google’s Proj. Take @50%|
|6/1||Floyd’s Coffee||$3 for $10 work of food||70%||15 hrs||2000||1709||85%||$5127||$2563|
|6/2||Uptown Billiards||$10 for $200 worth of Pool||50%||15 hrs||500||95||19%||$950||$475|
|6/3||Karam Lebansese||$8 for $16 of Lebanese Food||50%||15 hrs||500||500||100%||$4000||$2000|
|6/4||Celebrity Tan||$10 for $39 Spray Tan||74%||39 hrs||NA||157||NA||$1570||$785|
|6/6||Portland Pedicab||$45 for a $90 3 brewery pub tour||50%||23 hrs||700||26||4%||$1170||$585|
|6/7||Le Bistro Montage||$4 for $10 of Cajun-style Brunch||60%||23 hrs||2000||706||39%||$2824||$1412|
|6/8||Mt. Tabor Dental||$59 for a $421 dental package||85%||23 hrs||300||51||17%||$3009||$1504|
|6/9||Malu Day Spa||$30 for a $75 spa package||60%||23 hrs||600||39||7%||$1170||$585|
|6/10||Mississippi Studios & Bar Bar||$7 for $20 towards food, drinks or an advance show ticket||65%||23 hrs||5000||1189||24%||$8323||$4161|
|6/11||Fulcrum Fitness||$45 for one month of unlimited boot camp sessions f($254 value)||82%||47 hrs||500||83||17%||$3735||$1867|
|6/13||Ground Kontrol Classic Arcade||$1 for admission to Free Play Night (a $5 value) plus a $5 food and drinks credit||90%||23 Hrs||750||750||100%||$750||$375|
|6/14||il Piatto||$15 for $30 worth of locally inspired Italian food and drinks (deal ends at 3 PM)||50%||33 Hrs||1500||504||50%||$7650||$10175
|Totals||11350||5821||51%||$40278||$20139 at 50%
$14097 at 35%
Is this first two weeks a success? Is it an abject failure? Does it just point out how far Google has to go before they are successful? Here’s what Greg Sterling, Jim Moran, Sebastien Provencher, David Mihm, Sol Orwell, Rocky Argawal and Andrew Shotland had to say:
Greg Sterling: My quick take is that most of these deals underperformed re the % sold. Maybe Jim has a sense of how these deals are performing relative to other competitive vendors.
It’s difficult to evaluate whether they were successful for the businesses themselves without talking to those involved.
It was probably a big failure for Portland Pedicab. But Malu day spa and Uptown Billiards might have seen some success if these are new customers who a) spent more than the face value of the deal or b) will return.
The Lebanese restaurant is the only one to completely sell out (note: the discussion occurred prior to 6/13). My guess is that a chunk of the buyers were existing customers who liked the place. But that’s speculation of course.
James Moran: – I don’t think Google is taking 50%. I’m not sure where, but I think I heard 35%. Could be wrong.
– Per Greg, one apples to apples comparison:
LivingSocial ran with Uptown Billiards Feb 2011 and sold $3,274 in Gross Revenue vs Google’s $950 [for the exact same business in Portland] IE LivingSocial sold 3.5X as much as Google Offers with the same vendor
– One big UI point of feedback is, many deal sites display a cap to the consumer to provide a sense of scarcity. However, I would disagree with Google’s implementation of showing caps in the high hundreds or thousands of deals.
Sebastien Provencherr: My two-cents: Except for a couple of merchants, sales results seem extremely low. I read somewhere that Google is taking a very small share of the total revenue, can’t find the source but I tweeted it a few weeks ago. Maybe 25%? Maybe less?
David Mihm: Initial reaction: why is Google even bothering to get into this space? Did someone say “Oh, daily deals are hot in SV right now & if we don’t get in our share price will suffer?”
It looks like their average cut is $1410. That seems shockingly low. Think of how much touch-and-feel they need to exhort the business owner to run a deal, coordinate the ad copy, etc. For a one-time shot.
Why not do a better job of marketing Boost to 14 businesses a day at $10/month? That would be the exact same revenue over the course of a year.
For all you non-Portlanders out there, today’s Offer–Ground Kontrol–is a very popular Portland business that I cannot imagine needed to drive any foot traffic. I wouldn’t be surprised if Google was eating 100% of today’s deal just to be associated with it. It’s kind of like Powell’s in terms of its iconic presence in the community.
Rocky Agrawal: Their sellthrough rates are so embarrassingly low that I’d stop publishing the cap — thought I wouldn’t be surprised if today’s sold out.
I agree with David that Google is likely eating the difference on the arcade.
I’ve been tracking since launch and Groupon is 5x Google revenue in PDX. (median/deal)
And I still strongly believe that for Floyd’s ~1500 were purchased by competitors/analysts willing to spend $3 to test it out. Footfalls first day couldn’t have been more than 20. (They had a notepad where they were writing down voucher numbers.)
Greg Sterling: Wonder if Google will turn around after a bunch of months and try to buy a smaller player but one with a sales force — an adility for example
Sol Orwelll: (formerly Ahmed Farooq) Hadn’t thought about competitors buying Floyd’s – makes sense.
Question is, how heavily is G promoting this (both on supply and demand site)? It took them a while to gear up on the constant promotion on Chrome, and it is doing well for them. HotPot (as Mike has documented) is exploding. Once they really turn it on in deals, I can see them solving the demand-side problem.
Then again, I can see them fixing the supply side by just buying out a B player for their sales process (as Greg mentioned).
Per Mike’s original question, while the numbers are far from impressive, with G’s reach and bank account, if they are willing to keep at it, I really don’t see why they would fail (consumers have no loyalty to Groupon or anyone else).
Lastly – isn’t this also a bit of a Trojan horse to promote Google Checkout?
David: Everywhere I turn these days is Google offers. They’re advertising the hell out of the internet based on IP geotargeting. I know it’s only been out a few weeks, but…
Greg: Good point about Checkout/Wallet. But I don’t believe Wallet is entirely dependent on Google Offers. There can be a range of offer types and third party offer ads that would create additional incentives to use Wallet.
Google can do the consumer side, they’re more challenged on the sales side. They would much rather outsource if they could.
I have difficulty imagining they’ve got the stomach to build a several thousand person sales force for this. Per Andrew Mason, 4K of 8K Groupon employees are in sales.
Rocky: I can’t avoid the IP geotargeted ads for Offers here.
There will be a TC post dropping within the next two hours that should spark a bit of discussion. (See Rocky’s deal series on TechCrunch here)
Sol: Ah – as a Canadian, I still only see Groupon/LS/DealFind backfilling the hell out of Adsense.
As for sales side – yep, makes more sense for them to acquire. But again, with their muscle + bank account + other benefits it gives them, I just see it as a matter of trying till they get it right.
David: Re Checkout:
As I wrote back in the fall towards the bottom of this post – http://www.davidmihm.com/blog/google/groupon/ …3% of $6 Billion is not a small number…even on existing transactions if the customers never use Checkout again.
Andrew Shotland: While their inability to sell these out fast is kind of embarrassing for the great GOOG and the economics look weak, given that these are early days for GOOG Offers, it’s hard to say how relevant these metrics are to the long term prospects for the service. I am kind of curious how the other players in the market have responded, or not responded, to GOOG’s entry?
James, are you seeing any data that suggests that GOOG’s entry has slowed or changed redemption for any other service? Did the others change their offers when GOOGOff (TM) came out to try to blunt its entry or did Groupon put up weak offers – kind of like scheduling a documentary on Local Search against American Idol?
I would expect their to be huge overlap between GOOGOFF subscribers and the other major services. How many deals can you deal with in your inbox every day? Did the entry of GOOGOFF create dealmail overload and change redemption rates for the other services?
Right now I think I get Facebook, Groupon & LivingSocial, and I barely look at them. If only there were a service that aggregated all of these in one place
Rocky: Google’s Offers have been remarkably weak. I expected more of them to be like today’s.
Pedicab rides? The contestants on The Apprentice generated more revenue from pedicab tours—$1,270 vs. $1,170.
Andrew: True, but I am guessing the Apprentice’s CPA was much higher than GOOG’s
Rocky: I’ve found it interesting that LivingSocial is competing aggressively for “portland offers” keyword, but groupon is not. wonder what that’s about.
David: it’s possible Groupon thinks they have gotten all the low-hanging deal fruit here in PDX. I hardly hear them on Pandora anymore either.
Greg: Agree. If they’re genuinely in this for the long haul and have multiple objectives tied to the success of Offers I suspect they’ll need to acquire a sales force.
Mike: You all did see their job postings for Offers? http://blumenthals.com/blog/2011/06/07/google-hiring-sales-staff-in-seattle-for-large-scale-smb-acquisition/ So at least some of this is occurring now in-house.
Greg: Had not. Will be interesting to see how far they go with this.
So what do you all think? Will Google build out their own sales force successfully? With enough time and money will they achieve the scale they need or will deal fatigue set in prior to their reaching their goals? What is your takeaway from the Portland efforts?Google Offers 2 Weeks On - The Local Vantage Point by Mike Blumenthal