Social couponing finally made it to the big game.
Groupon was a busy sponsor during last night's Super Bowl, checking in with controversial ads that are bound to stir up debate over the fast-growing site's references to some notable causes.
- Cuba Gooding Jr. discussed the plight of the whales, before pointing out how he was able to take part in a discounted whale-watching cruise.
- Timothy Hutton draws attention to the unrest in Tibet, only to dig into some half-priced fish curry at a Tibetan restaurant in Chicago through Groupon.
- Elizabeth Hurley plays up the rainforest deforestation, before moving on to describe marked down Brazilian waxes through Groupon.
The spots may be tasteless, but this is also the Super Bowl. When companies fork over nearly $3 million for 30 seconds of national airtime, they're aiming to stand out among the advertisers trying to do the same thing.
Flash sale websites have come a long way. Market leader Groupon saw its registered user base skyrocket from 2 million to more than 50 million last year, offering the buyers of prepaid vouchers $1.5 billion in deal savings. After shockingly refusing Google's (Nasdaq: GOOG) generous buyout offer, Groupon now needs to justify its indie spirit.
Provocative ads will also keep the public talking about Groupon by the water cooler this morning.
Groupon isn't alone in this high-margin niche.
Amazon.com (Nasdaq: AMZN)-bankrolled LivingSocial sold more than 1.3 million half-priced Amazon.com gift cards in a single day last month. It can't be a coincidence that Groupon offered $20 Barnes & Noble (NYSE: BKS) vouchers for $10 nationwide all weekend long.
Rival upstarts aren't the only potential competitors. Google is launching a similar platform. AOL's (NYSE: AOL) Wow.com was a World of Warcraft hub a few months ago, but now it's a social coupon site with more than two dozen selectable cities. Sadly most of the cities fall back to a national deal, but it's clearly dreaming big.
Groupon is also being challenged by niche-specific sites. OpenTable (Nasdaq: OPEN) and Yelp are offering discounted eatery vouchers. Travelzoo (Nasdaq: TZOO) is gaining serious traction with its prepaid local dining, lodging, and spa experiences.
During Travelzoo's conference call last week, the travel publisher hinted that its margins are in the 30% to 40% range on these deals, less than the 50% that Groupon typically rakes in with its merchants. In other words, competition should drive industry margins lower. Groupon is in the enviable lead, but it can't afford to lay off the accelerator.
Did the site offend a few people last night? Absolutely. Did it introduce its service to even more potential deal-seekers? Definitely. Groupon will gladly take that trade-off as it barrels toward an eventual IPO in the coming quarters.
Did you catch Groupon's ads? What did you think? Share your thoughts in the comment box below.
