More revenue for Wildwood. It gets to keep all of the revenue generated. In a typical Groupon deal, Wildwood would get about $15 for each $50 gift certificate sold. Here, it keeps the entire $30. Given that food costs are typically 30% of a restaurant’s expenses, Groupons are break-even at best just on incremental cost.
More restrictions on redemptions. Groupons usually have longer redemption times and fewer restrictions on redemption. They are often valid for a year and can be used at almost any time. These certificates are only valid for dinner on Sunday, Monday and Tuesday and not valid for alcohol. It’s essentially a yield-management play, used to fill seats when the restaurant would otherwise be empty. Some restaurants use OpenTable’s Dining Rewards to accomplish this. These factors combine to increase the restaurant’s profitability on the deal.
More qualified customers. The restaurant is essentially reaching people who have already expressed some interest in it. Some of these are undoubtedly existing customers.Groupon brings in a much broader range of customers. That is both a blessing and a curse: some will be potentially new customers who will become repeat visitors; some will just be deal seekers who are unlikely to return. For many businesses, the primary market area is a 5-mile radius. Groupon’s coarse geographic targeting amounts to casting too broad a net for many local businesses.
No online purchases. The deal requires that customers visit Wildwood to buy and pick up the gift certificate. This is both good and bad: it means that customers are more qualified because they have to visit twice. They are more likely to live nearby and thus more likely to be repeat customers. But it also serves as a significant deterrent to purchase.
Limited viral distribution. Wildwood may reach some new prospects as other retweet/share the link. Twitter accounts like EaterPDX sometimes share such announcements. At the time of this writing, two people had retweeted the offer, for an additional 1,000 potential impressions. But it’s not likely to spread as virally as deals on Groupon and LivingSocial do. Both platforms offer built-in financial incentives for sharing deals with others.
I’ll check in with the business later in the week to see if they’re willing to share the results.
As I wrote earlier, businesses and consumers are directly connecting with each other online. In some ways, you can consider Groupon an arbitrage business — using its skill in marketing and online customer acquisition to deliver traffic to local businesses. (Much like ServiceMagic and 800-DENTIST.) As local businesses get more sophisticated and adopt tools like Facebook and Twitter, this will put margin pressure on Groupon and its peers.
Earlier in this series, I talked about the importance of business and consumer engagement in the success of local search. Here are some statistics based on research I conducted in the Portland market.
Staking out a presence online is the most basic step, and it seems that most businesses are taking this step. With the exception of foursquare, all of these numbers are substantially higher than I expected.
86% of businesses I looked at had a Web site. The quality of the Web sites varied tremendously, but generally included business location, contact information and hours. Some included sample menus. Most weren’t regularly updated. For businesses that had Twitter and Facebook presences, links to those sites were usually provided. A few embedded Twitter feed widgets right on the home page.
Claiming presence on Google, Yelp, Facebook and foursquare
“Claiming” a page on local search sites that consumers use provides a number of benefits that vary by site, including the ability to edit your map position, enter information such as hours of operation, post special offers, see metrics about visitors to your page and respond to reader reviews. Perhaps the most important benefit is to keep competitors and malicious users from messing with your page. Claiming is a relatively low-effort activity.
Foursquare lagged with only 5% of businesses claiming their foursquare page.
Twitter does not provide a default presence for businesses, yet 55% of businesses I looked at had a Twitter presence. Many of these were regularly updated with information on specials, events, industry news and closings. Several food carts used their Twitter presences in place of Web sites. See my earlier post, Twittering up some dosas. Several businesses had abandoned their Twitter accounts and were not included in the charts.
44% of businesses I looked at had a presence on Facebook. “Presence” varied, because Facebook has offered various tools over time and businesses have adopted Facebook in various ways. I’ve linked to examples of each:
Profile page – Businesses set themselves as if they were people and were friended as if they were people.
Group – Businesses created a group. Customers joined these groups.
Page – Businesses created a “Page” which customers could originally “Fan” and now “Like”.
Places page – Businesses in theory automatically have a Places page which people can check into. In practice, finding these businesses can be difficult because Facebook’s search tools don’t deliver consistent search results.
Combined page – Businesses can merge their Page with their Places page. The combined page is the fullest featured one.
Twitter and Facebook combined
35% of businesses had both a Twitter and Facebook presence. For businesses on both platforms, the median followers was 424 on Facebook and 323 on Twitter. Some of these businesses used tools, such as Facebook’s Twitter sync, to feed the same information to both platforms.
Consumers are engaging with local businesses online.
This chart shows the range of followers on Twitter and Facebook. (These numbers are directly comparable.) The chart also shows the number of unique users who had checked into venues on foursquare. The ranges are quite wide: foursquare (1 to 2385), Facebook (9 to 4998) and Twitter (6 to 14027).
There was no clear pattern to the outliers; I expected this to be correlated to the size of the business, but it didn’t seem to be. The outliers also varied by platform.
The medians from the above chart are summarized below. I also added the median number of Yelp reviews.
Although the numbers may not seem large in the absolute sense, they represent a highly targeted list of consumers who have expressed interest in a business and are likely to be repeat customers.
Checkins are still an emerging behavior. Here is the distribution of check ins on foursquare and Facebook:
The range on foursquare was 1 to 3695; on Facebook, it was 0 to 1587. The medians were 192 for foursquare and 63 for Facebook.
In every case, foursquare checkins were higher than Facebook checkins. Part of this can be attributed to the fact that foursquare has been around longer. Mostly, I’d attribute it to the selection bias of foursquare users and its game mechanics.
The range of checkins per unique user for Facebook was 1 to 4.06. The median ratio (on a venue basis) was 1.56; the median on a user basis is likely lower. Given that many venues require 5 or more checkins to get to mayor, this indicates that checkins are driven by a small proportion of users.
The above charts are based on a review of 100 local businesses in the Portland area, focused on high consumer value and frequency categories such as restaurants, bars and cafes. National chains were excluded from the sample. The sample included a mix of new and old businesses and businesses that ranged in size from food carts to large restaurants and brewpubs.
Facebook’s much awaited Places product finally launched this week. It’s the first step toward bringing friend finding to the masses.
People have been using Facebook to do this for years; posting their location in freeform status updates that their friends can read and comment on. (e.g. “heading to Cambridge for dinner.”) By turning that freeform text into structured location data, Facebook can make that data more useful.
From an iPhone or HTML5-capable mobile device, you can check in to a place, such as a restaurant, bar, movie theater, airport. You can also leave a message with the check in. The check in is posted to your wall and may appears in friends’ news feeds. On the mobile side, you can see a list of your friends and where they’ve checked in. Clicking on a place will show you details of the place, including a map and who has checked in.
The initial release is fairly simple. In fact, it’s not that much more useful than the freeform status updates.
Facebook is entering a very crowded space with competitors such as foursquare, Gowalla, Loopt, Google Latitude, Whrrl and Twitter. Many of those products are much more robust. Facebook’s key advantage is the size of its social graph: within the past 24 hours, 18 of my friends have checked in.
There are many opportunities for improvement to Facebook Places:
Basic UI. Check ins are sorted by time, not distance. A friend checking in 2,000 miles away 2 minutes ago is less relevant than someone checking in 2 miles away 5 minutes ago. This problem is exacerbated by the fact that the city isn’t shown. Considering that many people use Facebook to keep track of friends all around the world, this is a significant issue. Foursquare has a separate bucket of “Friends in other cities.” Update: Facebook now has a separate grouping of nearby friends.
Map view. Often, visualizing your friends on a map is much easier than scanning a list. Foursquare already offers this.
Visiting friends. Out of town friends who are in town aren’t indicated. One of the big potential values of social friend finding is discovering when friends are in town. If a friend from far away is visiting, I’m more inclined to want to get together than someone who lives in town.
Pictures. There is no way to associate a picture with a check in. Given the difficulty in typing on mobile devices, often a picture gives a lot more information. These pictures could also be used to build a much more robust Place page.
Pushing location. Sending people your location via SMS is tedious. You have to address the message, type out where you are. If they don’t know where it is, they have to pull up a map or text you back for directions. With Places, it would be easy to push a notification to friends with where you are, complete with map. This could be sent as a push notification on iPhones or as an SMS with a URL for other phones.
As with most Facebook product launches, questions of privacy come up. In general, I think Facebook has done a good job with the default privacy settings on Places. You must explicitly check in; there is no background tracking.
With the increasing use of mobile applications such as Yelp and foursquare, it’s becoming possible to pull ideas from thin air. Users of these apps can leave tips for others to find that are linked to a specific location.
In most places there aren’t enough tips yet to make filtering an issue. San Francisco International Airport, with more than 57,000 checkins on foursquare, is an exception. It offers a glimpse of what we can expect as these services become more popular. The airport is the perfect petri dish for tips: it serves a technically savvy audience and people often find themselves there with plenty of time on their hands.
The SFO tips page contains dozens of notes including places to eat, complaints, ground transportation, wifi and power availability. Mixed in to all of this are ads, other spam and random observations. Some examples:
have a corned beef sandwich at max’s if you’re flying southwest. the best! well, really good
When you enter short term parking do it as far to the right as you can (lvl 2) & then immediately head to lvl 1. There is always parking next to gate and that is the lvl that connects to the terminal
Free wifi at the Continental lounge in Terminal 1- be warned, it’s located outside Security
Smoking hot brunette woman at gate 20. Stop by and smile at her. She is so lovely!
Bart to Millbrae gets you within 1 block of an in n out burger. Great for 3+ hour layover!
Heading to wine country? Take a moment to stop by St. Supery in the heart of Napa on Hwy 29. Mention this to get a 2 for 1 tasting.
Sorting through the volume of tips can be overwhelming. As the volume increases, we’ll need ways to filter them. Among the ways to filter:
Social network. Among the tips were tips from people I follow on Twitter, including Danny Sullivan and Adam Lasnik. Being able to surface these would increase relevance.
Ads vs. not ads. Sometimes people want ads, especially if it can save them money.
Places like airports are especially complex because they’re really collections of places, sometimes with other groupings and physical restrictions. Being able to filter tips by terminal would also be useful. But then maybe that’s best left to GateGuru.
In 2007, I used a third-party application from Where to include my location. Clicking on that link would take you to a map on Where’s site showing the address. (The link in the original post no longer works.)
With the launch of Twitter Places, the search is done within the Web browser (and soon in Twitter’s mobile applications). You can select where you are from a list of nearby places. Clicking on the place name brings up the map above and the option to view tweets about that place.
Although the difference between the two may seem subtle, they are significant:
Because the place is metadata, it doesn’t count toward the 140 character limit.
Place names are human readable, unlike addresses and latitude/longitude. Knowing the name of a place makes it much easier to find than just a street address, especially in dense metropolitan areas.
Places are unique to a specific venue. Doing a pure location-based search would return tweets from surrounding businesses or businesses that have since disappeared.
Integration in to the main Twitter experience means broad exposure and eventual standardization of place identifiers. That has been a longstanding challenge in the local space.
Twitter’s geo APIs have been available for several months and third parties like bing have created interesting applications like Twitter Maps. With the availability of places across the Twitter platform, we can expect to see more interesting applications including both real-time applications (ride sharing and ticket exchanges) and historical (restaurant reviews, past events).
Once Twitter allows owners to claim their Place and associate it with a Twitter account, we could see official tweets of announcements and offers incorporated into a Place’s search results.
When pictures are tagged to a Place (instead of a lat/long), we’ll have the ability to visually browse a venue in Twitter.
Events. For last-minute party goers, a real time view of what’s going on around town, complete with pictures and real-time reactions.
Ticket scalping. Rather than walk around for blocks talking to scalpers about what they have, glance at a list of tickets posted. The information transparency would result in a higher price to sellers and a lower price to buyers than what scalpers typically offer. (In my experience at baseball games, scalpers usually ask at least 3x what they paid.)
Finding a place to go. When in new cities, it’s often hard to figure out where to go — what are the lively neighborhoods at night. By looking at a map of recent tweets, you could quickly discover where people are still awake.
Read reviews from friends. Geo-enabled tweets filtered by those you follow would provide socially relevant recommendations.
Offers from local businesses. These could be persistent or distressed inventory. Slow night? Tweet an offer to draw in customers.
Construction and accident information. Avoid bottlenecks by seeing tweets from fellow drivers, DOTs and news sites.
Trip sharing. Find others at the airport headed your way, cutting costs and reducing pollution.
And, of course, there’s friend finding, which is the most talked about use of geo-enabled tweets.
So far, the percentage of tweets I see with geo information is tiny (>1% of those I follow). But as more and more geotagged data is put into Twitter, the key will be applications providing the right tools to filter all of that data. At a minimum, we’ll need the ability to filter by time of tweet, people we’re following, hashtag and application (e.g. foursquare).
Unfortunately, bing’s Twitter Maps doesn’t seem to be available where real-time information would be most useful — on mobile devices.
Most local businesses are too busy running their business to exert a lot of effort maintaining an online presence. If it’s not easy, it won’t get done. My favorite example of a small business reusing their existing work is the Webcam pointed at the wall of Beachwood BBQ where they list the pints on tap.
The challenge is that these businesses are only announcing their presence to existing customers or passersby. While this can help drive repeat visits through specials, notices of new arrivals, etc. it does little to bring in new customers.
That’s where foursquare comes in. This location-based social game allows users to “check in” to places they visit. Check in often enough and you become the “mayor” of that place. Savvy businesses have latched on to this and begun offering discounts to their mayors.
It has also been incorporated into the foursquare check in process. When I checked in at a restaurant in Seattle, I was presented with an offer at a nearby bar: happy hour all day for the mayor or $1 off well drinks for anyone else who checked in. (Checking in updates your social network status, providing further exposure for the business.) It’s one of the first examples of location-based mobile advertising that works. The process is a bit cumbersome now, but it provides a glimpse into where the technology is headed.
In addition to providing exposure to businesses, it solves a user problem that local search has long failed at: discovery. People often don’t know what they’re looking for when they’re out. Suggestions, even if they’re sponsored, help fill the discovery gap.