At the end of Q1 2011 Groupon had 83 million total subscribers compared to 26 million for Living Social. At first glance it seems that Groupon and Living Social have the same business strategy but the way each company approaches its audience is vastly different. Both companies spend heavily on advertising but rely on different channels to get their message across.
“LivingSocial concentrates the vast majority (73%) of its display ads on the top five U.S. Web properties, especially Yahoo and MSN. Within those sites, the ads run chiefly in email and news sections. The rest of LivingSocial's ads are scattered around the Web. Groupon takes the opposite track, running only 31% of its ads to the top publishers' site and spreading the bulk (69%) across mid-tier and long-tail sites.”
The reason might lie behind the demographic and geographic make-up of their audience. Geographically, Groupon's user base lies towards the Midwest and Pacific regions, while LivingSocial is stronger in the East. Which makes sense as Groupon is headquartered in Chicago while LivingSocial in Washington, D.C.
Demographically, Groupon users are younger than its rival’s (25% Groupon users are in the age bracket of 18-24 compared to Living Social’s 10%). Also while Living Social users are more gender balanced, Groupon users are primarily female.
Another reason for the difference in choice of advertising channel might lie in the retail categories that the companies focus on. More than half 50% of Groupon's offers are for restaurants, while more than 40% of the LivingSocial's deals are for books and magazines.
It is worth noting that both companies heavily rely on display marketing instead of search marketing (SEM or SEO) due to the nature of their business model which relies heavily on interruption marketing.
At the same time the differing strategies of both companies raise the question as to who is smarter and why? And what is the brand impact of these strategies. Does LivingSocial benefit from being more selective about its ad placement or is it just a matter of targeting its older audience who read more books and magazines more effectively? Is Groupon chasing its younger audience when advertising in niche websites or is the game simply about achieving the lowest customer acquisition cost?
Another thought to ponder in this discussion might be whether these companies intially used these advertising channels because of their target audience or whether their choice of advertising channels has created their unique audience. I guess it is the case of the chicken or the egg…
Source: Online Media Post
2 comments:
Good article specially when Groupon is going for IPO. As you mentioned they follow different strategy, they are quick different in many aspects. The difference in number of subscribers, revenues and geographic targeting make them quite unique from each other.
Its interesting that a year back I was not even aware of their existence but now I cannot stop myself not to click their daily emails with the deals you normally don't get that often.
On this topic, I find it interesting that amongst all the comparisons between flash sale sites like Groupon, LivingSocial, Gilt, Jetsetter, Rue La La, etc. and their advertising strategies, their daily email marketing strategy is not thrown in the mix. I think the differences in display and search strategies that the article mentions are very interesting, and I also believe that these companies target different segments enough that there is not a huge customer overlap, minimizing cannibalization effects. But they certainly all rely on a very important and identical email marketing strategy: daily or near daily email marketing that creates a sense of urgency and frenzy as customers view deals and feel the countdown immediately. I'm very curious to see how these programs will differentiate themselves within certain profitable segments, like New Yorkers, who are more likely to be signed up for all the emails. I mean, we don't all have time to view all these emails all day long to scope deals; how will they successfully complete for share of attention on the most vital part of the their digital marketing strategy, email?
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