April 29, 2011, 11:54 AM

Are daily deals the new AdSense?

A new report suggests deal sites may offer an alternative to Google’s ad-placing program.

Lead Photo

In the first quarter, ads placed on other sites’ web pages through Google AdSense accounted for $2.43 billion, or 28.3% of the search giant’s total revenue. That’s up 19.1% year over year.

That success is to be expected because since its 2003 launch Adsensehas provided a powerful way for web sites to monetize their traffic, according to a new Wedbush Securities report. Also  key to AdSense’s success is its lack of a true competitor, says the report.

Until now.

That’s where daily-deal sites fit in. The report suggests that daily-deal sites offer an alternativeto AdSense because those sites could evolve their strategies and place deals on other sites’ web pages. They could become more intelligent, says the report, and serve a different promotion to a consumer based on the page displaying the ad, what device the consumer is using and other information. In a way that would only be a more sophisticated version of the daily deals already displayed on sites seeking to leverage consumer excitement about daily offers, such as ChicagoTribune.com, which features Groupon-sourced Chicago Shopping promotions.

“The space is so embryonic,” says report author Lou Kerner. “But we think the space can evolve to present promotions not only based on the context of the site you’re on, but also to be personalized to the person viewing the ad.”

Already Groupon and LivingSocial are seeking to leverage mobile applications to personalize promotions based on where a consumer is at a given moment. Groupon’s mobile app has a localized "Groupon Now" feature that allows a consumer to click either "I'm hungry" or "I'm bored." He is then presented with relevant options based on the time of day and his location. And LivingSocial's is testing in its home town of Washington, D.C.,  Instant Deals, a new feature within in its mobile app that lets users search for deals within a half-mile radius of their current location.

“It’s the early days and there will be rapid market share gains and losses as the ecosystem evolves to best serve the needs of merchants and consumers,” says Kerner, in the report. “But given the ability to drive significant revenue, we believe deal commerce may become as ubiquitous as AdSense around the net.”

Among those changes in market share, Kerner expects LivingSocial to overtake Groupon as the leader in the space. That’s because LivingSocial gets a significantly larger share of its traffic from Facebook than Groupon and he expects the social web facilitated through things like Facebook’s Like button will be a critical tool to generate traffic.

In the past three months 10.1% of Groupon’s traffic came from Facebook, compared to 17.4% of LivingSocial’s traffic. In part, that’s because the site aims to make its offers go viral by giving a consumer a free voucher if she refers three friends who buy an offer. A popular way to share those offers is via Facebook, which is evident as 19.8% visitors leaving LivingSocial then click to Facebook.

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