August 15th, 2006

Google Local Coupons: A Limited Offer for Consumers

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Google is allowing local businesses to offer coupons through Google Maps for free (some details from Google here), which is pretty good from the perspective of Google’s hallowed “user experience,” but far from revolutionary. Local searchers on Google Maps will be able to see which local businesses featured in the search results are offering a coupon. They will also be able to see relevant AdWords ads on Google search results from local businesses that are offering coupons but which might not have a web presence.

That’s certainly progress. But here’s a consumer need that isn’t being fulfilled: Which local businesses that offer the products/services I need are offering the BEST coupon deals?

Here’s the real problem: When local businesses use AdWords to promote their Google-hosted coupons, they will be taking some of the money that could have gone to consumers and instead paying Google to promote the coupons. Businesses will have to weigh how much they want to give to consumers through the coupons against how much they need to bid on AdWords keywords to drive traffic to the coupons.

So consumers are getting deals — but not the best deals. And businesses are competing — but on keyword bids, not on giving consumers the best deals.

Lending Tree’s tagline is: When Banks Compete, You Win

The tagline for Google Coupons should be: When Local Businesses Compete, Google Wins

  • All of us who watch the local media space are abuzz and atwitter about Google coupons.

    I've blogged about this a few times -- a little fact nobody seems to pay attention to ... local small businesses do not use AdWords. Most AdWords advertisers (except in real estate) are aggregators and online-only plays, not your typical locally owned small business ... the kind who traditionally buy space in coupon packs.

    Small business owners are busy people with a lot of things to worry about. Learning how to manage an AdWords account just isn't high on their priority list.

    That's not to say that eventually small business owners won't take the plunge and figure it out, but many of them still struggle with understanding how to download their e-mail (I was just in a small business owner's office yesterday where he was complaining about how he didn't understand all this Internet stuff).

    Of course, my basis for saying all of this is purely anecdotal, based on years of dealing with small business owners in various contexts, including selling advertising and consulting on Web projects. My other basis for my suppositions is actually going through various searches trying to find small business advertisers using AdWords. I'm putting the two observations together to reach my conclusions.

  • Vlad,

    First, thank you for helpfully putting this in the context of my "missing the point, once again."

    The rebate or contest amount are meaningless compared to the marketing effort around the said rebate. Efficiently measuring profitability and efficiency of marketing initiatives is what what allows companies to reduce prices.

    With all due respect, I think you are missing the point. Coupon amounts are relatively "meaningless" only because the marketing effort necessary to promote them is so wildly inefficient, and thus disproportionately expensive. If marketing were more efficient, that cost savings could be passed on to consumers in the form of coupons or other price reductions. The whole point of coupons is to market, i.e. make consumers aware of the price reduction. If there were a more efficient way to make consumers aware of lower prices, the prices could be lowered even more, i.e. companies would have more money available to lower prices and still achieve target profitability.

    In other words, my point is entirely about efficiency and profitability.

  • That's like saying "if companies run contests, consumers don't get that amount as savings"

    The rebate or contest amount are meaningless compared to the marketing effort around the said rebate. Efficiently measuring profitability and efficiency of marketing initiatives is what what allows companies to reduce prices. Coupon rebate amounts are absolutely meaningless and you're missing the point, once again.

  • >>As with local search, consumers will start to realize there are better search apps for shopping that create more value for them than Google’s general search app.

    One would hope so. I'm increasingly seeing Google through a Microsoft lens though, which perhaps is clouding my view.

    Using the obvious OS analogy, sure -- there are excellent alternatives to Windows. But so far, only certain types of people make the move.

    Of course, the switching costs related to bailing out on a search engine are nil compared to switching operating systems. I guess that's why Google releases a new tool every other week to simulate some kind of customer lock in.

    Interesting space to watch. Maximizing cash now at least gives Google the opportunity to gobble up the upstart challengers before they get too big.

  • Brian,

    As you point out regarding Jellyfish, it's not a choice of keeping all the money at one extreme or giving it all to consumers like a charity at the other extreme. Google, like all the other players, needs to make money -- my point is that they are leaving consumers out of the economic value equation.

    Shopping search (like all search) is still in its early stages -- it will get better over time. As with local search, consumers will start to realize there are better search apps for shopping that create more value for them than Google's general search app. There are also opportunity to create category-specific shopping apps that could create even more value for consumers.

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