I am in a pretty exciting position in the deal industry because I get the opportunity to speak and deal with folks on a daily basis that are looking to enter the daily deal space and launch a geographic or niche specific deal site. It seems that people from many industries across the board are closely watching Groupon and LivingSocial and realizing that they can enter the deal space and work to take market share away from them.
Yes, the barrier to entry to get involved and start a deal site is virtually non-existent, but here are 6 things that you might not know about running a daily deal website.
1. Successfully launching a deal site takes work, persistence, dedication, and drive.
As with any business venture that you may get involved with, you want to properly plan your venture and set realistic milestones to reach along the way. Set weekly, monthly, and quarterly goals about your subscriber base, revenue goals, merchant goals. For example; At month 1 set a plan to grow your userbase to 3000 and bring in revenues of $4500. Month 2: grow subscriber base to 6000 and revenues of $9000, etc.
A misconception that I commonly come across is folks who think that they will become a millionaire overnight… On one hand, if you take on a bunch of venture capital and investor money, it may seem that you have become a millionaire overnight – but that isn’t the way it works and leads me to #2…
2. You don’t need venture capital money and investors backing you up.
One of the problems that I believe is facing the major deal site players is the fact that they have to answer to a group of investors whose primary objective is to see a return on their investment. Yes, a huge injection of cash into your business can help spur growth. It can give you a heftier advertising budget and room to invest in mobile development and your website, but in an industry where margins are already low, special care and consideration needs to be given to the actual merchants running deals. Oftentimes, this might mean to take a loss on a deal or two in order to retain the merchant for future work together. When the business is yours entirely and not a bunch of other investors who don’t care about your idea…
a. You are not under water in terms of debt or owing money to investors
b. You can make actual profits… ie see net revenues
c. You can provide a service to merchants and consumers where everyone wins.
Because you don’t have so many costs and expenses (…and debt…) you are able to make deals with merchants that don’t hurt the merchant financially, or worse put the merchant out of business. This breeds the development of trust and loyalty between you and your merchants. Every time someone mentions your website, your merchants should think warm, fluffy thoughts and be overwhelmed by a sense of well-being, not that your stock price is down 80% and they read bad press about you on a near daily basis.
3. Don’t have a list? Not a problem.
One of the largest misconceptions that I hear is that you have to already have a large subscriber base in order to successfully launch a deal site. Now, on one hand, it can definitely make your first couple months in business easier by having already built up a list of prospects in your target market; however, by no means is this a necessity. We see folks starting from total scratch quite often and successfully launching and growing their daily deal site. Yes, it takes a little more work up front to arrange some joint ventures and strategic partners to promote your website as well as driving traffic in the beginning months – but this is normal business and something you should always continually focus on…
4. You need to constantly focus on growing your userbase.
Continually putting effort into growing your subscriber base is a primary activity that you should always be focusing on when running a deal site. A large part of the way that your business is valued is from the size and responsiveness of your userbase. Every offer that you run you will surely get people unsubscribing, so replacing those unsubscribes (and growing more) is a must. Regularly hold contests where your target market can win something they would be interested to win and share with their friends. Release remarkable content on a regular basis, issue news worthy press releases when applicable, and put an effort to only promote high quality products and services from respected businesses.
5. Stick to the basics.
Don’t lose sight of your primary mission: to offer in-demand, world class products and services at great prices. Yes, have your own mission statement and unique spin to your website, but if you are running a daily deal website one of your primary goals needs to be to ensure your merchants love doing business with you, and see a return on running a deal with you.
6. Understand the expiration dates and local laws.
The 2 major players in the deal space have been experiencing some major troubles regarding expiration dates and coupon laws. Living Social is in the midst of a class-action lawsuit that alleges that LivingSocial and a merchant partner offered vouchers with illegal expiration dates in violation of state and federal gift card laws. When running a deal site, you must comply with these laws and include clear and conspicuous disclosures regarding expiration dates. Living Social is currently offering to settle for $4.5 Million. This comes less than three months after a U.S. District Court judge rejected a proposed $8.5 million settlement in a class action lawsuit against Groupon for similar coupon expiration date troubles
Consulting legal counsel regarding this is highly recommended.
These 6 bullets are just a tip of the iceberg and I welcome your feedback and comments.
Marc D. Horne
Daily Deal Builder – Provider of daily deal software and solutions.
I originally posted this article on Daily Deal Media.
