November 8, 2011, 4:08 PM

Google aims for daily deal dominance

Personalization and self-service deals could help sell more Google Offers. 

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Google Offers will gain ground on such battle-tested rivals as Groupon and LivingSocial by personalizing the discounts it sends consumers and drawing upon its vast experience with digital marketing, says Eric Rosenblum, Google Offers director of product management.

Google Inc. launched its daily deal service in May with offers designed for consumers in Portland, OR.  Google Offers now operates in 19 U.S. markets, and Google says it will add 23 more within the next few months.

Rather than simply imitate what Groupon and LivingSocial already offer, Google wants to exploit its strengths—namely its search engine, which accounted for 66% of all U.S. searches in September, according to Experian Hitwise, along with its experience enabling marketers to use self-service ad formats such as AdWords, which places relevant paid ads on search results pages.

Also important is whether Google’s can offer a range of deals that appeal to consumers, Rosenblum says, through a mix of desirable national and local offers. Last week the search giant launched its first nationwide deal, with outdoor gear and apparel retailer Recreational Equipment Inc., No. 62 in the Internet Retailer Top 500 Guide. The deal,  a $25 voucher for $15, sold roughly 89,000 vouchers, according to data compiled by daily-deal aggregator Yipit. Google also recently began aggregating online discounts from 14 providers within Google Offers.

More offers means Google has a larger discount inventory that it can leverage to better tailor results to consumers’ interests, says Rosenblum. “We believe that people want more deals that are personal to them,” he says. “It’s important not to send deals to consumers that we can know they won’t be interested in.”

Google has several ways to personalize its offers. The most basic method is allowing consumers to craft the promotions they receive via Google Offers, through what the search engine calls a “personalization quiz.” Consumers on www.google.com/offers can mark various boxes—for instance, Arts & culture, or Food & drink—to opt out of receiving discounts for those categories.

Google will also display Offers to consumers based on what they’re doing—for instance, someone looking at a map of Palo Alto, CA, may see a deal for a restaurant in the area. “We think Offers should fit in naturally with where you already are,” he says. “You shouldn’t necessarily have to look for them.” Google Offers will be displayed across Google’s various products, including the Google+ social network. Google began testing the program about a year ago and it is now rolling the program out more broadly.

Google eventually wants to enable merchants to create their own deals, which could appear instead of a conventional paid search ad. However, such a plan does not guarantee quick success, as Groupon has learned. Its Groupon Now service, which allows a merchant to choose what it wants to offer, the discount it wants to give, and how long it wants the deal to last, has largely failed to gain traction with consumers, according to Yipit. It estimates that Groupon Now generated just $1 million of revenue in September across its 25 markets. That was less than 1% of Groupon’s North American revenue that month.

Rosenblum says that Google’s experience of working with marketers gives it an edge. “The creation of a self-service Offer will look a lot like AdWords,” he says. “But we know Offers are more complex, so merchants need more data. We’re working on how to show the right user the right offer, like we do with AdWords. Like AdWords, marketers will be able to see how the Offer is performing. They can check the click-through rate, the expected performance and make adjustments on the fly.”

The ability to adjust an Offer at any time is essential so that merchants don’t waste time on deals that fail to entice consumers, he says. “We think the world of Offers will look more like the world of ads,” he says. One difference, he says, is that while ads are paid on a cost-per-click basis, Offers will be paid on a cost-per-action basis.

Google executives say they are working on more Offers, as well. For instance, the search giant aims to measure the success rate of an Offer aimed at leading shoppers into bricks-and-mortar stores by encouraging shoppers to use their Google Wallet while in the store, which would let Google know what the consumer buys. Google Wallet is a mobile loyalty, coupon and payment service that relies on Near Field Communication, a wireless technology that enables devices to exchange data over short distances.

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