If you happen to buy stuff from Amazon in the past, you would have inevitably would have received an email from Amazon Local regarding their local offers.
The real question is why would Amazon do this?
Why would they expose their biggest equity – the email list they have created over the years. Understand when Amazon was created there was no intention to use their biggest asset in any other form, apart from marketing the products they retained on Amazon (Most cases these consisted of tangible products).
Now with their creation of living social, they are trying to beat Groupon by tapping into an “already existing email list” they have built up over the years.
But how does this effect Groupon, and what implications will this have for Groupon in the future?
If you have been paying attention to Groupon or to my earlier posts you will notice Groupon pays around $8 to get a new subscriber in its email list.
But the magically question is many of these folks are actually buying anything?
Here is what I discovered:
During the first part of 2011, Groupon’s marketing expenses were mainly directed towards increasing its customer user base, according to public filings.
At the moment they have acquired approximately 143 million subscribers for its daily deals. One of the main concerns raised by the public (this was in response to the IPO) was its spending, which has decreased and resulted in a profitable “North American Groupon.”
But taking my question above into consideration, how much of these customers are really paying customers?
I discovered this graph – Original Source: This was obtained from the road show presentation for Groupon’s IPO.
There are just two paths to this graph.
- The number of paying customers vs.
- The marketing cost to acquire a new customer
The graph basically shows the number to sales in relation to the marketing costs
Without stating the obvious, you will notice the actually paying customers are less than the cost of their marketing.
To break this further, I dug into the numbers to fully understand the implications of their advertising to actual paying customers.
The number on Groupon’s Email list was 9 million at the end of 2010. Now this represents the acquisition of new customers from 2009 to the end of 2010
Now if you are a small business owner pay careful attention to this as this will affect your sales for daily deals.
Groupon grew this number 77% to 16 million in the first quarter of 2011.
They decreased their marketing costs by still grew by 43% in the second quarter to 23 million
And finally by 30% to 30 million in September 2011.
To give you some idea, Groupon has spent approximately $613 in marketing this year.
But how big is this in relation to the other huge markets out there?
To give you some perspective Vista Print the printing mogul has spend to date this year approximately $964 million, worldwide on adverts and all of its promotions. Time Warner Cable has spent approximately $629 million.
The magnitude of these companies is crazy; Apple reported spending $933 million on advertising this year alone. As a small business owner you can tap into the daily deals sites, and take advantage of their spending.
If you had to dig deeper into the composition of Groupon’s spending, you will see they focused on search and email marketing campaigns, growing their equity in the online world. To date approximately $466.5 million was spent on building the email list.
Interesting enough Groupon just spent $16 million on TV and radio ads. This truly shows you the power of the internet and more importantly the ability to track every single cent online, to see if it is giving you return or not. This matrix will include capturing people’s email addresses, to testing the landing pages on their website.
It shows the CEO’s mindset, where not matter how large the budget, no cent is spent online, without it being accounted for.
Amazon is trying to get ahead of the curve by using their email list as well within Amazon Local. I think if you are small business owner try to use both daily deals services, without violating their terms and conditions.
Groupon Marketing vs. Amazons Local existing list: is a post from: Get New Clients Guaranteed
