Google (GOOG) quietly shuttered its digital coupon initiative, Google Zavers, this week after a troubled year-and-a-half run.
So if Google coupons don’t work, does that mean the end of the line for other couponing and daily deals businesses such as Groupon (GRPN), Coupons.com (COUP) and Retail Me Not (SALE)?
Admittedly, the outlook isn’t good.
According to Re/code, “Sources say the program did not expand as quickly as Google had hoped, in part due to some retailers’ uneasiness with giving Google access to information about their best customers.”
Coupled with the unique privacy concerns of the Google coupons strategy has been the unique challenge of other couponing/daily deals sites in convincing customers (that is, businesses) that the service is worth their while. Complaints from merchants about a lack of return on their Groupon marketing deals has been well documented (look here, here and here), and there is very little room for error in the war for small-business advertising.
The icing on the cake: All of these efforts have failed to turn a profit for any parties involved. While we don’t have specifics on the GOOG effort in a vacuum, SEC filings prove that Groupon and Coupons.com are all big money losers that continue to operate at a loss. And while RetailMeNot has managed to turn a profit in the last two quarters, those numbers haven’t been substantial or consistent.
So should you take a flier on digital coupon companies, or write this segment off as another internet fad?
Well, I’d be reluctant to sound the death knell for digital coupons simply because there are plenty of frugal shoppers out there looking for deals. In a digital age, it makes sense that targeting these folks would involve smartphones and digital coupons of some kind.
However, I am not entirely convinced that this kind of marketing needs to come from a third party.
For instance, I shop at Safeway (SWY) for groceries and regularly load digital coupons on to my customer rewards card; I just surf the Safeway website or use an app on my smartphone and pick the products I want … then when I scan my Safeway card, the coupons are automatically applied.
Why do I need Coupons.com or Google Zavers or anyone else?
Similarly, there are a few local restaurants or entertainment venues that I really enjoy and have signed up for their individual email lists for news of events (and, of course, marketing). Clearly the most loyal customers would be on that list and thus the most valuable potential audience … so why would a restaurant buy an outside list? If your goal is simply to get in front of new customers, there is a host other marketing options than a coupon.
In short, I think digital deals are here to stay … but whether there is a third party that can build a profitable business around simply connecting consumers and businesses remains an open question.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via@JeffReevesIP.
