Google Offers 2 – The Local Vantage Point

Not being well versed in the deals arena I wanted to better understand Google’s baby steps with their Offers product. I turned to a number of respected folks, that have more experience in the field than I to get their sense of Google’s progress in their newest local effort. Here is the discussion thread from earlier in the week where Greg SterlingJim MoranSebastien ProvencherDavid MihmSol OrwellRocky Argawal and Andrew Shotland gave their impressions of Google’s efforts to date based on these sales numbers in Portland.

Google Offer’s Beta in Portland started on June 1 and there have been 12 deals through the first two weeks of June. Google seems to be serious in their committment to the market. They are putting feet on the ground in Portland and elsewhere, including NYC. They have started hiring sales staff for a direct sales team for Offers and other local endeavors. But it would seem that getting from here to there (wherever there is) is no small task.

Here is a summary of the deals to date and projected dollar amount generated for Google for the past 2 weeks:


Date Co./URL Deal % off Purchase


Avail. Sold % Sold Total Dollar Value Google’s Proj. Take @50%
6/1 Floyd’s Coffee $3 for $10 work of food 70% 15 hrs 2000 1709 85% $5127 $2563
6/2 Uptown Billiards $10 for $200 worth of Pool 50% 15 hrs 500 95 19% $950 $475
6/3 Karam Lebansese $8 for $16 of Lebanese Food 50% 15 hrs 500 500 100% $4000 $2000
6/4 Celebrity Tan $10 for $39 Spray Tan 74% 39 hrs NA 157 NA $1570 $785
6/6 Portland Pedicab $45 for a $90 3 brewery pub tour 50% 23 hrs 700 26 4% $1170 $585
6/7 Le Bistro Montage $4 for $10 of Cajun-style Brunch 60% 23 hrs 2000 706 39% $2824 $1412
6/8 Mt. Tabor Dental $59 for a $421 dental package 85% 23 hrs 300 51 17% $3009 $1504
6/9 Malu Day Spa $30 for a $75 spa package 60% 23 hrs 600 39 7% $1170 $585
6/10 Mississippi Studios & Bar Bar $7 for $20 towards food, drinks or an advance show ticket 65% 23 hrs 5000 1189 24% $8323 $4161
6/11 Fulcrum Fitness $45 for one month of unlimited boot camp sessions f($254 value) 82% 47 hrs 500 83 17% $3735 $1867
6/13 Ground Kontrol Classic Arcade $1 for admission to Free Play Night (a $5 value) plus a $5 food and drinks credit 90% 23 Hrs 750 750 100% $750 $375
6/14 il Piatto $15 for $30 worth of locally inspired Italian food and drinks (deal ends at 3 PM) 50% 33 Hrs 1500 504 50% $7650 $10175


Totals 11350 5821 51% $40278 $20139 at 50%

$14097 at 35%

Avg 946 485 $3356 $1678

Is this first two weeks a success? Is it an abject failure? Does it just point out how far Google has to go before they are successful? Here’s what Greg SterlingJim MoranSebastien ProvencherDavid MihmSol OrwellRocky Argawal and Andrew Shotland had to say:

Greg Sterling: My quick take is that most of these deals underperformed re the % sold. Maybe Jim has a sense of how these deals are performing relative to other competitive vendors.

It’s difficult to evaluate whether they were successful for the businesses themselves without talking to those involved.

It was probably a big failure for Portland Pedicab. But Malu day spa and Uptown Billiards might have seen some success if these are new customers who a) spent more than the face value of the deal or b) will return.

The Lebanese restaurant is the only one to completely sell out (note: the discussion occurred prior to 6/13). My guess is that a chunk of the buyers were existing customers who liked the place. But that’s speculation of course.

James Moran: – I don’t think Google is taking 50%. I’m not sure where, but I think I heard 35%. Could be wrong.
– Per Greg, one apples to apples comparison:

LivingSocial ran with Uptown Billiards Feb 2011 and sold $3,274 in Gross Revenue vs Google’s $950 [for the exact same business in Portland] IE LivingSocial sold 3.5X as much as Google Offers with the same vendor

– One big UI point of feedback is, many deal sites display a cap to the consumer to provide a sense of scarcity. However, I would disagree with Google’s implementation of showing caps in the high hundreds or thousands of deals.

Sebastien Provencherr: My two-cents: Except for a couple of merchants, sales results seem extremely low. I read somewhere that Google is taking a very small share of the total revenue, can’t find the source but I tweeted it a few weeks ago. Maybe 25%? Maybe less?

David Mihm: Initial reaction: why is Google even bothering to get into this space? Did someone say “Oh, daily deals are hot in SV right now & if we don’t get in our share price will suffer?”

It looks like their average cut is $1410. That seems shockingly low. Think of how much touch-and-feel they need to exhort the business owner to run a deal, coordinate the ad copy, etc. For a one-time shot.

Why not do a better job of marketing Boost to 14 businesses a day at $10/month? That would be the exact same revenue over the course of a year.

For all you non-Portlanders out there, today’s Offer–Ground Kontrol–is a very popular Portland business that I cannot imagine needed to drive any foot traffic. I wouldn’t be surprised if Google was eating 100% of today’s deal just to be associated with it. It’s kind of like Powell’s in terms of its iconic presence in the community.

Rocky Agrawal: Their sellthrough rates are so embarrassingly low that I’d stop publishing the cap — thought I wouldn’t be surprised if today’s sold out.

I agree with David that Google is likely eating the difference on the arcade.

I’ve been tracking since launch and Groupon is 5x Google revenue in PDX. (median/deal)

And I still strongly believe that for Floyd’s ~1500 were purchased by competitors/analysts willing to spend $3 to test it out. Footfalls first day couldn’t have been more than 20. (They had a notepad where they were writing down voucher numbers.)

Greg Sterling: Wonder if Google will turn around after a bunch of months and try to buy a smaller player but one with a sales force — an adility for example

Sol Orwelll: (formerly Ahmed Farooq) Hadn’t thought about competitors buying Floyd’s – makes sense.

Question is, how heavily is G promoting this (both on supply and demand site)? It took them a while to gear up on the constant promotion on Chrome, and it is doing well for them. HotPot (as Mike has documented) is exploding. Once they really turn it on in deals, I can see them solving the demand-side problem.

Then again, I can see them fixing the supply side by just buying out a B player for their sales process (as Greg mentioned).

Per Mike’s original question, while the numbers are far from impressive, with G’s reach and bank account, if they are willing to keep at it, I really don’t see why they would fail (consumers have no loyalty to Groupon or anyone else).

Lastly – isn’t this also a bit of a Trojan horse to promote Google Checkout?

David: Everywhere I turn these days is Google offers. They’re advertising the hell out of the internet based on IP geotargeting. I know it’s only been out a few weeks, but…

Greg: Good point about Checkout/Wallet. But I don’t believe Wallet is entirely dependent on Google Offers. There can be a range of offer types and third party offer ads that would create additional incentives to use Wallet.

Google can do the consumer side, they’re more challenged on the sales side. They would much rather outsource if they could.

I have difficulty imagining they’ve got the stomach to build a several thousand person sales force for this. Per Andrew Mason, 4K of 8K Groupon employees are in sales.

Rocky: I can’t avoid the IP geotargeted ads for Offers here.

There will be a TC post dropping within the next two hours that should spark a bit of discussion. :) (See Rocky’s deal series on TechCrunch here)

Sol: Ah – as a Canadian, I still only see Groupon/LS/DealFind backfilling the hell out of Adsense.

As for sales side – yep, makes more sense for them to acquire. But again, with their muscle + bank account + other benefits it gives them, I just see it as a matter of trying till they get it right.

David: Re Checkout:

As I wrote back in the fall towards the bottom of this post – …3% of $6 Billion is not a small number…even on existing transactions if the customers never use Checkout again.

Andrew Shotland: While their inability to sell these out fast is kind of embarrassing for the great GOOG and the economics look weak, given that these are early days for GOOG Offers, it’s hard to say how relevant these metrics are to the long term prospects for the service. I am kind of curious how the other players in the market have responded, or not responded, to GOOG’s entry?

James, are you seeing any data that suggests that GOOG’s entry has slowed or changed redemption for any other service? Did the others change their offers when GOOGOff (TM) came out to try to blunt its entry or did Groupon put up weak offers – kind of like scheduling a documentary on Local Search against American Idol?

I would expect their to be huge overlap between GOOGOFF subscribers and the other major services. How many deals can you deal with in your inbox every day? Did the entry of GOOGOFF create dealmail overload and change redemption rates for the other services?

Right now I think I get Facebook, Groupon & LivingSocial, and I barely look at them. If only there were a service that aggregated all of these in one place :)

Rocky: Google’s Offers have been remarkably weak. I expected more of them to be like today’s.

Pedicab rides? The contestants on The Apprentice generated more revenue from pedicab tours—$1,270 vs. $1,170.

Andrew: True, but I am guessing the Apprentice’s CPA was much higher than GOOG’s :)

Rocky: I’ve found it interesting that LivingSocial is competing aggressively for “portland offers” keyword, but groupon is not. wonder what that’s about.

David: it’s possible Groupon thinks they have gotten all the low-hanging deal fruit here in PDX. I hardly hear them on Pandora anymore either.

Greg: Agree. If they’re genuinely in this for the long haul and have multiple objectives tied to the success of Offers I suspect they’ll need to acquire a sales force.

Mike: You all did see their job postings for Offers? So at least some of this is occurring now in-house.

Greg: Had not. Will be interesting to see how far they go with this.

So what do you all think? Will Google build out their own sales force successfully? With enough time and money will they achieve the scale they need or will deal fatigue set in prior to their reaching their goals? What is your takeaway from the Portland efforts?

Groupon Makes Sense to Google

David Mihm has an excellent piece (that I happen to agree with) on why Groupon in a broad sense is synergistic for Google. I think coupons and the new twist that Groupon brings to them will be a successful  and profitable advertising medium. John Battelle thinks it worth significantly more than $2.5 billion. Greg Sterling though argues that it isn’t worth $5 billion and that very well could be true. But Google may be the only company for which the purchase makes sense at these levels.

I would like to add the following thoughts to the discussion. Greg has estimated  to me that only 25% of all SMBs will ever be willing to participate in self serve internet advertising. The leaves the vast majority of local businesses not participating in and unaffected by most of what Google offers (Tags, Boost, Adwords) today.

I have estimated that Boost with a 10% adoption rate and an average $100/mo spend would generate $500 million a year in income. If it approached the 25% cap it would reach $1.2 billion with current adoption levels of 2 million claimed businesses. I have estimated that Tags, at a fixed spend of $25/mo and the same 10% has a much more limited short term potential of  $60 million. Even as claimed listings grow, there is a very real top side expectation for both products in a self serve world.

Enter Groupon. It is a product that is already generating $500,000,000 in annual income. If Google did nothing else but add the revenue stream to Tags and Boost when it rolls out nationally, they would be at a $1 billion dollar in local ad revenue.

But Groupon also has staff on the ground trained in selling new media. The portfolio for these sales people would immediately increase with a buyout. And an impressive portfolio it would be. These folks could lead with a Groupon deal and then lock in a monthly recurring revenue source with Boost or Adwords. If their selling efforts for Groupon were a bust initially, they could still start folks with Tags and demonstrate the significant benefits of local internet advertising and of claiming their listing in Places and move on to Boost and Groupon down the road.

This purchase would not just give Google a successful, easy to explain coupon product for SMBs (and national players to add to the Adwords revenue stream) but it would give them an on the ground sales force with an actual foot in the door of the other 75% of businesses that would never self serve. It is conceivable to me that just by adding these products to the portfolio and pitching them in person Tags and Boost sales would skyrocket immediately.

Google would have in place Free (Places, Offers), Good (Tags, Tagged Offers), Better (Boost, *?) and Best (Adwords, Groupon) product offerings in both a self serve and full service model that could scale from the single shop to the national retail chain, nationally and internationally. It would cover 100% of the opportunity, have huge upside potential and start out of the gate with a roughly $1 billion highly profitable, income stream and a defensible position …

Investors may not like the economics and analyzed singly Groupon might not in fact make sense. But if Google could use the purchase to jumpstart and grow Boost, Tags and Adwords for local in the rest of the world, the potential of Groupon to them at least, is big.

Here is a chart of Google’s free and paid products for Local that shows how Groupon would fit in the mix…

Type Location Ad Coupon
Free Places Offers
Good Tags Tagged Offers
Better Boost *?
Best Adwords Groupon

*? one possible area of Groupon expansion for google would be downstream to an automated group coupon product that would work in those areas that Google doesn’t have a sales force. This would play to Google’s automation strengths and further leverage Groupon across broader markets.

Android Market Action

Almost instantly after I joined Google, it became obvious to me that the number-one area where Android developers wanted to see action and progress was in Android Market; your concerns in this area vastly outweighed whatever issues might be bothering you about the handsets and the framework and the programming tools. In recent months there has been a steady, quiet, incremental flow of improvements and upgrades. They add up. This is by way of a glance back at developments since the arrival of Froyo last summer.

First, we introduced error reporting to Market, so developers can see if their apps are locking up or crashing; and if so, exactly where.

Second, we upgraded the Market publisher site to include user comments, so you can read what people are saying about you, or at least what they’re saying in a language you understand.

Third, we added the licensing server, which, when used properly, tilts the economics of Android apps toward you, the developer, and against the pirates.

Fourth, we cranked up the number of countries people can buy and sell apps in: as of now, you can sell them in 29 countries and buy them in 32.

Fifth, we rolled in a “recent changes” feature, a place for developers to put their release notes. Android Market has a zero-friction process for app update, and the really great apps have followed the “release early, release often” philosophy. As a developer, I like having a place to write down what’s behind an app release, and as a person who downloads lots of apps, I like to know what the goodies are in each new update.

Sixth, Market now has a “draft upload” feature; this removes a lot of the tension and strain from the app-update process. Get your screenshots and feature graphics and text and APK all squared away with as much editing as you need to, then update them all with one click.

You’ll notice that I didn’t say “Sixth and last”, because this is a team on a roll and I expect lots more goodness from them; if you care about the larger Android ecosystem, or are already a developer, or are thinking of becoming one, stay tuned to this channel.