Groupon and Loopt partner to offer real-time, location-aware deals

By Molly McHugh May 20, 2011

There’s some serious overlap in the daily discount and geo-social platforms. Fortunately for Groupon, the coupon curator to rule them all is launching a way to most effectively bridge whatever divide is left. We recently mentioned that the site announced it would be launching Groupon Now, a smartphone app to provide you with real-time discounts that are sent to you based on your current geographical location.

Today it was announced that Loopt, a check-in app with its own social network, is collaborating with Groupon to launch the area-aware deals app in Chicago. According to Business Week, all five million Loopt users will soon be alerted when they’re physically near a local deal, pulling that discount info from Groupon. But don’t think that means Groupon is deferring this partnership with Loopt, as the Groupon Now national launch is in our near future.

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Groupon Now is currently also available in Chicago only, meaning the site is directly competing with its new partner, Loopt. But both companies are getting something out of the new business relationship: Loopt is using Groupon’s retailer data and Groupon is using Loopt’s location data. Loopt may have beaten Groupon to the punch by beginning distributing the localized deals first, but it’s safe to assume Groupon will come out the easy victor.

The daily deals market has its fair share of problems and it definitely seems like we’re nearing the end of the honeymoon stage. But this feature could put new life into what’s quickly becoming a very repetitive platform, and could spur a significant increase in sales. Groupon has been ably luring consumers in with deep discounts and timed sales, things that have proven to motivate people to buy the coupons. Add to that the element of immediate satisfaction and conveniently nearby retailers, and you’ve got a recipe for some renewed success.

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Groupon Now deals coming to Foursquare check-ins

Foursquare’s been making a serious effort to develop its daily deals platform partnering with the likes of LivingSocial, Gilt, and Amex. Now, it can add the veteran coupon curator of them all to that list. Today Groupon announced it would be partnering with Foursquare, and its Groupon Now deals will be available when you use Foursquare to check-in.
“As you get out and explore your city, just peruse participating Groupon merchants on Foursquare, from lunch spots to live events, and purchase your Now! deal to apply immediately to your purchase,” it explains. Daily deals will also be viewable when you use Foursquare.
Months ago, we heard that the two big purveyors of local commerce were working on integrating, which would be a big coup for Groupon. It would give the daily deals service a new way to reach users outside its current model, and Foursquare’s massively growing userbase is no small territory to invade.
The Groupon phenomenon has come under serious scrutiny recently as vendors have tired of the operation and its potential fallout has become common knowledge. Consumers have slightly soured toward the site as well, given the oversaturation in the daily deals market and some general disillusion with the process. But the Groupon Now application could easily give the site a boost, offering deals in real time based on users’ locations. Pairing it with Foursquare, despite some of the competition between these two companies, will likely skyrocket its use.

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Foursquare partners with LivingSocial, Gilt Groupe for daily deals

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On Tuesday, Foursquare announced a partnership with five daily deal sites including LivingSocial, Gilt Groupe, Zozi, AT&T and BuyWithMe, according to the Wall Street Journal. Foursquare is also actively negotiating with Groupon to integrate its feed into the daily deals. When a user checks into a restaurant or shopping store, they will be presented with a daily deal based on location. Foursquare gets revenue from the sale of each deal, but the share is unknown at this time. If successful, this social distribution model for daily deals would help Foursquare create a positive stream of revenue to appease investors. While LivingSocial and Groupon offer a wide variety of deals, Gilt Groupe offers discounts on luxury stores and Zozi offers discounts on activities within a city.
Foursquare has its own internal deal program with half a million merchants signed up to offer check-in bonuses, but the company lacks a large sales force to drive daily deal creation and marketing. However, Foursquare has a large database of check-ins that it can compare against the aggregated feed of daily deals from its affiliate partners. Users of the Foursquare service are going to be exposed to more advertising with this new model, but it's likely that Foursquare will create options for controlling the frequency of deal notifications after the recent overhaul to its notification system.
Foursquare is currently valued at 600 million dollars after the company raised an additional $50 million in funding during June 2011. Foursquare believes that the conversion rate for daily deals will be much higher with location-based notifications over traditional email marketing that's used by Groupon and LivingSocial. The Foursquare service competes directly with AT&T's location based deals, but AT&T is welcoming the chance to reach coupon purchasers outside the realm of AT&T service. Foursquare is also facing competition from Facebook and its recent foray into daily deals as well as Google Offers, AmazonLocal and Groupon Now.

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Research looks at daily deal drawbacks

We’re not one to beat a dead horse, but given the way the daily deals market refuses to slow down, it’s difficult to ignore reports of the effects they are having. It’s fairly well known at this point that Groupon and its clones are not a catch-all for local retail success and it’s just as easy to find yourself losing money as making it. The fact that there’s been growing disenchantment with the Groupon IPO has muddled the deal-a-day market a little as well, but a new report regarding how businesses are being affected by the setup is really what supports our cynicism.
Rice University’s Utpal M. Dholakia has been researching the effects of Groupon-type promotions, and in a recent study found that 55.5-percent of surveyed businesses made money, 26.6-percent lost money, and 17.9 broke even. He also found that while using Groupon, LivingSocial, OpenTable, Travelzoo, and BuyWithMe brought in hoards of new customers, most didn’t spend more than the coupon’s value, most didn’t return to buy the product at full price, and that 21.7-percent of deal buyers never brought their coupons in. The study also supported the idea that converting these deal buyers into repeat customers is extremely difficult.
And of course, these types of marketing schemes only work for some businesses (health and services were very successful, whereas dining and salons/spas didn’t do as well). Dholakia remarks that it’s surprising that restaurants and bars account for so much of these daily deal promotions while they aren’t raking in as much money as you’d expect.
But the most significant take away from the study is the general weakness of the daily deal business structure. “Over the next few years, it is likely that daily deal sites will have to settle for lower shares of revenues from businesses compared to their current levels, and it will be harder and more expensive for them to find viable candidates to fill their pipelines of daily deals.” It’s possible the Groupon-system will fade away as quickly as it arrived and took the industry by storm.