Case Study in the Changing, Expanding Coupon Marketplace: Offers.com

I think everyone in the affiliate industry will agree that change is fast and constant. In this bittersweet turn new affiliates enter the marketplace and thrive, while old affiliates who can’t keep up fade away.

Earlier last year I was struck by how much this applies even to the coupon space, where you might think the established players would be able to maintain their dominance with established SERPs, procedures, and customer bases. While most established players (FatWallet, BradsDeals, AnyCoupons, etc.) are continuing to do well as far as I can tell, many new sites are entering the marketplace. I remember being impressed when RetailMeNot was up and coming a couple years ago because I though this territory was staked out. Today RetailMeNot is one of the big players and enjoys some of the best SERPs I see. Similarly, Savings.com has come up and grown into a power player.

I have now come to accept that the coupon space is going to continue to see strong players enter, hence my attention was caught when I heard Steve Schaffer had launched Offers.com. Steve has a strong publisher background in lead generation and the domain is suited to his background because it includes both coupons and comparisons of different lead offers. Curious about his probable financial outlay in a crowded space , I talked with him on the phone for a while.

Steve would not tell me how much his company paid for Offers.com or Offer.com, which forwards to Offers.com, though I did find a blog entry that quoted a sale price of $180,000 at the Moniker Domain Auction at Affiliate Summit West last year. That is pretty serious money. The site has good content editing and some nice personalization features. (Their “My Offers Locker” is, in fact, their main attraction. It is pretty slick and reminded me a little bit of the email notification service at ShopItToMe.com.)Visitors can Tweet deals with a proprietary URL shortener. Steve was a little vague when I asked him about his anticipated point of profitability but made it clear he wants his site to be one of the leaders in the space and that the space is getting bigger.

To me it is in a testament to the strength of the coupon model. I think coupon sites are an excellent value add. Beyond online and offline deals, they have a natural affinity for loyalty, price comparison, community, and more. At the same time that the coupon vertical is growing, I perceive a simultaneous growth in the myth that coupon sites don’t provide value because orders “would have happened anyway” or some similar logic.

Here are some interesting statistics swiped from Commission Junction’s (Thanks, CJ!) recent webinar on coupon use:

  • “There was a 140% growth rate in online coupon use over 2007’s previous high.” -eMarketer, March 12, 2009
  • Coupon sites are the second most popular site (at 25% to 37%) after search engines among types of shopping sites users found very important in the past three months. -comScore “State of the US Online Retail Economy” Feb 19, 2009
  • Coupons were the fastest growing web site category in November 2008. -comScore Media Metrix

I believe that the increasing sophistication of coupon sites and growth of online retail and affiliate marketing bodes well for this space. So good luck to Steve and everyone else above as the this space continues to grow and change. On the other side merchants will do well to appreciate how nicely coupon sites reach a customer segment intent on purchasing.

Please pardon a lack of reply to any comments. I am leaving on vacation shortly after posting this.

About Brook Schaaf

You can find Brook on Twitter @brookschaaf.

8 Responses to Case Study in the Changing, Expanding Coupon Marketplace: Offers.com

  1. David says:

    "I perceive a simultaneous growth in the myth that coupon sites don’t provide value because orders “would have happened anyway” or some similar logic."

    Why is this a myth? I have had many people in the affiliate world tell me that coupons create incremental revenue, rather than simply reducing margin (both on the sale price and by nature of the fact that the merchant ends up paying affiliate commission to the affiliate and a commission to the affiliate network).

    I would love to see some hard data that supports the notion that affiliate coupons are incremental revenue and profit dollars.

  2. David says:

    Yes, I am looking for causality. To put it simply: if Merchant A uses coupons and Merchant B does not, is there evidence of incremental profit dollars for Merchant A? If all things are equal, do coupons drive positive profit dollars. I am sure there is some correlation between coupons and increased revenue – a certain percentage of users are swayed by the discount offer to complete the checkout, and a certain percentage have never heard of the merchant prior to visiting a coupon site. But is this incremental conversion rate and incremental customer base offset by margin cannibalization that occurs when a customer who was going to buy anyway searches for a coupon, clicks an affiliate link on a coupon site, and ends up costing the merchant margin dollars in terms of final sale price, affiliate commission, and affiliate network commission? Surely someone in the coupon industry has done a statistical analysis that shows favorable data for the use of coupon sites? If not, it makes me wonder whether most merchants using coupon sites are in fact seeing the correlation but missing the causation.

  3. Pat Grady says:

    “Hard” data isn’t what you’re really looking for, causality data is. As the merchant, analyzing that isn’t a tough exercise at all, but understanding of timing and mechanics is essential to conduct any statistical experiment. Unfortunately, there’s a severe drought of it. You see, the noise level of various value claimants is suffuciently high to confuse most merchants, I know, I’ve had them run tests and analyzed them together – I’ve seen it first hand dozens and dozens of times.

    Today’s predominant comprehension status is… if these same folks were analyzing grocery store sales, and I showed them data of how the use of carts with wheels (or bags, paper or plastic or both) increased sales, they’d establish a causality relationship. In fact, they’d see exit door cross-sectional area as having the same power, when just viewing the numbers.

    Correlation and causality aren’t the same thing.

    http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation

  4. Pat Grady says:

    Causation is readily assumed, so they don’t feel they are missing anything. Talk to them, correlation is what guides them. Causality is like some foreign language they don’t speak. Opportunity cost concepts are also greek to them, imagining that the high cost (to the merchant) affiliate coupon sites are the sole method to deliver the perceived value’s mechanism. Further, even the most basic metrics are ignored, and I don’t mean ROI of their affiliate coupon channel, I mean whether a purchaser who uses a coupon was on their site shopping (or with items in their cart) immediately preceding their coupon activity.

    As a consumer, I’d go so far as to say the existence of the value of coupons is inherent. Coupons do have value – I’m not arguing that. It’s their amount and their respective cost and assigned value and their commonly assigned exclusive mechanisms available to the merchant that needs deeper analysis.

    “Surely someone in the coupon industry has done a statistical analysis that shows favorable data for the use of coupon sites?”

    Take that question mark off of there! 🙂 I am very sure it’s a common declarative statement made by those whose self interests are under examination. This isn’t unique to couponers. Don’t look for data to be provided from the lab mice, but from the scientist running the experiment. And always suspect bias from the scientist as well, often their self interest can taint the outcome as well.

  5. I'm looking for a co-branded white label coupon/shopping application for one of my shopping domains.

    I'm not happy with the presentation of GoldenCan. ForMeToCoupon doesn't meet my requirements.

    Are there other white label solutions available?

    I know a white label solution won't deliver free search engine traffic, but I want people (who reach my shopping domain) to have a good experience leading to a sale without myself needing to design the site and constantly update coupons.

  6. I'd love to hear why ForMeToCoupon.com doesn't meet your requirements…we are constantly expanding and updating the service to meet our clients' needs. If you let me know what you're looking for, we should be able to provide it.

  7. […] affinity for loyalty, price comparison, community, and more Go here to see the original:  Case Study in the Changing, Expanding Coupon Marketplace: Offers.com Share and […]

  8. […] sites are everywhere, with no end of proliferation in sight. I feel sorry for the guy who has to estimate market share […]