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Posted on Wed, Mar 9, 2011 : 5:55 a.m.

Groupon expands into Ann Arbor by launching daily deals offering specific to region

By Nathan Bomey

Daily deals website Groupon plans to launch a deals offering specific to Ann Arbor, AnnArbor.com confirmed.

Groupon was already delivering occasional Ann Arbor deals to consumers who subscribe to daily e-mails through its Detroit page and e-mail list.

But the new Ann Arbor-specific page and e-mail list, which officially launch Monday, will involve deals specific to this region. For now, the company has set up a Twitter account to start promoting its Ann Arbor deals.

"The market has proven so popular amongst merchants and consumers that we will be launching it as a standalone market," Groupon spokeswoman Kelsey O'Neill said in an e-mailed response to an AnnArbor.com inquiry. "As a college town with plenty to see and do, Ann Arbor is an ideal market for the Groupon model."

Groupon's business model involves selling coupons for retail products or services in specific metropolitan markets. In Ann Arbor, for example, the website has offered deals like $15 for $30 in food and drinks from Arbor Brewing Co. Groupon reportedly keeps about half of the revenue from the deal, and the client keeps the other half.

Groupon sells it services to customers in more than 400 markets, including Detroit, Grand Rapids, Lansing and Kalamazoo. The company's Chicago-based salespeople communicate with local businesses in each market to sell deals.

The company's decision to actively pursue the Ann Arbor market ramps up competition with online coupon dealers that already operate here.

AnnArbor.com, for example, launched its own daily deals offer called The Real Deal in November.

BradKeywell_Brad_Keywell_Groupon.jpg

Groupon co-founder Brad Keywell is a University of Michigan grad.

Photo courtesy of LightBank

"This is a model to drive engagement for businesses, and it’s a great model because we can impact small businesses over a 24-hour period," said Kevin Currie, AnnArbor.com's sales director. "That hasn’t been something that you could necessarily do before."

Tracy Lindsay, co-president of the Ann Arbor Ad Club and owner of The Lindsay Exhibit Group, said the daily deals model offers advertisers a unique way to reach customers.

"It’s a great engager," Lindsay said. "The potential client has to opt in. It’s the new way of doing advertising where they sign up for your advertising and then you can talk to them specifically."

Still, critics have questioned the sustainability of Groupon's business model, a strategy that can be easily replicated by competitors, such as Amazon.com-backed Living Social. Also, some Groupon clients have reported mixed results.

Among the challenges is the fact that a Groupon offer can drive enormous traffic to a small business that's not prepared to handle it or could stand to lose significant revenue because of the deal. That's why Groupon typically limits a client's offer to a specific number of purchases.

"That system is very powerful," Lindsay said. "If you don’t plan for the engagement, you could easily get into some trouble."

Currie said the daily deals model is compelling, but he argued that more comprehensive marketing services are better.

"We’re looking for long-term term impact for businesses so that they can see long-term results from people in the local community that are going to be long-term customers for them," Currie said. "We’re not just focused on one sale a day. The local businesses are the true fabric of the community and we're trying to work with them to help them achieve their goals."

Ironically, Groupon, which reportedly rejected a $6 billion acquisition bid by Google in late 2010, has Ann Arbor roots. Two of the company's founders, Brad Keywell and Eric Lefkofsky, earned bachelor's degrees and law degrees from the University of Michigan about 20 years ago.

Chicago-based Groupon, which formed less than three years ago, has been described as the "fastest growing company ever" for rising from 124 employees on Jan. 1, 2010 to more than 5,000 today.

In an interview in January, Keywell, who still serves on the Board of Directors of U-M's Zell Lurie Institute for Entrepreneurial Studies, declined to discuss Groupon's strategy.

Asked whether Groupon would ever consider opening a sales office in Ann Arbor — much like Google did in 2006 — Keywell was mum.

"I just can’t comment on anything regarding Groupon’s plans," he said. "But I know what Google has done and I think it’s pretty cool."

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.

Comments

CynicA2

Thu, Mar 10, 2011 : 6:14 a.m.

I must be missing something here... coupons have been around in one form or another for decades, and 1/2 price goods or services always sound appealing, but as we all know, there is no free lunch. Either the "goods" are grossly overpriced to begin with, or the quantity/quality has been compromised. I wonder if this is just a flash-in-the-pan marketing scheme that will fade when the new wears off, or just a high tech variation on the good old Ponzi scheme. No such thing as "free" lunches or "free" trade - somebody pays somewhere along the line.

lynel

Wed, Mar 9, 2011 : 4:22 p.m.

I would have taken the $6 billion and run!

Soothslayer

Wed, Mar 9, 2011 : 3:42 p.m.

All Groupon does is siphon resources out of the consumers hands and gives it to themselves instead of those funds going to the local service providers/retailers and surrounding community. If consumers want to spend they will and the price is whatever the retailer feels is a fair market value with the power of the consumer to choose. This is an applied tax on commerce with the resources being drained from the community itself and sent elsewhere. Enjoy the continued Walmarting of America as this will surely lead to the cheapening of goods & services as well as increased community trade deficit. It's simple economics, less costs for goods & services = lowering of quality of those goods & services to make up the difference along with the compounded whammy of less resources available in the community. Wise up folks.

actionjackson

Wed, Mar 9, 2011 : 5:44 p.m.

Or just a simple method of bringing someone in your door for repeat business in the future. Limiting the supply does no harm to the merchant or vendor. Wise business practice.

snoopdog

Wed, Mar 9, 2011 : 2:20 p.m.

I get daily emails from Groupon and I have yet to see one that I would buy. Most of them are over in Wayne and Oakland county which is too far away and for silly stuff like facials and backrubs. Good Day

actionjackson

Wed, Mar 9, 2011 : 5:41 p.m.

Real Deal had a facial coupon that was great! Something we normally buy and received quite a substantial discount.

A2K

Wed, Mar 9, 2011 : 2:03 p.m.

Excellent. I've used Groupon at least 1/2 dozen times - it's a good deal if you are organized *e.g., don't forget to use your coupons* and the coupons have been a good incentive to try a new place for dinner, but just needed that extra reason to go.

bugjuice

Wed, Mar 9, 2011 : 12:53 p.m.

Groupon is a rip off.

Nora

Wed, Mar 9, 2011 : 12:44 p.m.

Daily deal sites are continually cropping up, and that is great news for people looking to save money. As they expand all over the country, more people are going to be able to save money in their local area. One great site to use to save money is <a href="http://www.dailydealpool.com" rel='nofollow'>http://www.dailydealpool.com</a>. This site will compile a list of the best sales and deals in your area and email them to you daily. This keeps you from having to search!