Local Legacy Media Say 'Let's Make A Deal'

Last week, consumers in Dayton, Ohio, had an opportunity to dine on Indian fare at half price. In Seattle, it was similar savings on sending their kid to camp. While in Atlanta, it was a whopping 82% off for a massage and chiropractic therapy.

These bargains were available via Cox Media Group’s DealSwarm — one of a host of Groupon imitators that wants a piece of the multi-billion dollar deal market.

Many of these imitators are, like Atlanta-based Cox Media Group, local legacy media companies. If local businesses are going to divert marketing dollars from advertising to daily deals, they figure, they had better be in position to receive those dollars.

Groupon, which triggered the group buying spree when it launched less than three years ago, dominates the space, claiming some 35 million subscribers in the U.S. and 70 million worldwide.

With 2011 worldwide revenue expected to exceed $3 billion, according to Groupon watchers, a planned IPO later this year could be valued at as much as $25 billion. It famously rejected a $6 billion takeover bid by Google last December.

LivingSocial is a strong No. 2, whose last round of capital investment values the company at $3 billion.

Other national services giving chase include Tippr, Gilt City, Woot (owned by Amazon), Eversave, Kgbdeals, BuyWithMe and HomeRun. Even heavy hitters like Facebook, Google and AT&T are getting in the act.

As of March this year, BIA/Kelsey estimated that there are 178 cities with daily deal sites reaching 102 million people in the U.S.

Basically, the services all work the same way. A local restaurant, for instance, agrees to heavily discount goods or services, offering a $30 meal for $15. The service pitches the $15 voucher via website, mobile or e-mail. Using a credit or debit card, the consumer pays $15 upfront for the voucher. The service and any media partner pocket a percentage of the purchase price and forward the rest to the merchant.

Despite the dominance of Groupon and LivingSocial and the presence of other local national companies, BIA/Kelsey analyst Peter Krasilovsky says local legacy media have a substantial role to play. “They can do pretty well,” he says. “They know their own marketplace and typically have a very credible brand in the community. And they have large audiences they can turn into users. That should not be discounted.”

The number of legacy media companies offering deal-a-day services is growing.

Among the players: Gannett, Belo, Media General, New York Times, McClatchy Newspapers, Seattle Times, Dow Jones, E.W. Scripps, Hearst, Freedom Communications, Tribune, Washington Post, Journal Broadcast Group, Fisher Communications, Newport Television, CBS Local Media, Fox Television Stations, NBC Local Media, Lee Enterprises, Gray Television, Post-Newsweek Stations and LIN Media.

For the most part, the local media companies are turning to white-label platform providers so that they can build their own brand in the marketplace and potentially make more money. [In Part II of this special report tomorrow, NetNewsCheck will provide a listing of the leading white-label platforms now working with local media companies.]

“Groupon is stealing their customers and their advertising dollars,” says Aaron Ellis, co-founder of Groupigg, a white-label provider that is helping Newport Television’s 50 TV stations enter the daily deals business. “They shouldn’t let them do that.”

Most white-label providers offer a revenue-sharing arrangement with their media partners, typically taking anywhere from 7% to 10% of the total deal. In some cases, they may charge additional processing fees of 2%-3%, or a one-time license or set-up fee that could run as much as $5,000.

“Our platform lets media companies kick Groupon out of their backyard,” says Kevin Wray, VP of sales and business development, NimbleCommerce, another white-label company whose clients include the Seattle Times, Philly.com and Cox Media Group.

The white-label approach works, say the media companies. With the support of NimbleCommerce, DealSwarm is proving to be a “good investment,” says David Shipps, VP of the Cox Media service. “It’s a great opportunity to diversify revenues. I think it’s a smart strategic move for any incumbent media organization.”

Cox Media is now offering DealSwarm in Atlanta; Austin, Tex.; Seattle; Dayton, Ohio; and Reno, Nev. And it expects to roll it out in San Antonio, Tex.; West Palm Beach, Fla.; Tampa, Fla.; and Tulsa next month. Cox promotes the service over its TV stations, on its local websites and on Facebook and Twitter. While there is a dedicated DealSwarm sales force, local Cox operations also “source deals,” says Shipps.

Belo, the owner of 20 TV stations in 15 markets, chose to enter the business in partnership with Tippr, a white label service provider based in Seattle, which also runs its own daily deal destination sites in more than a dozen markets.

Yollar, as Belo calls its Tippr-driven service, is expected to be in all 15 Belo markets by the end of this month. “We’ve been in most of our local markets with our brands for 50-plus years. We felt it was beneficial for us to launch our own brand as opposed to building someone else’s brand,” says Joe Weir, general manager of interactive for Belo.