The new equation: "Deal Quality times reach equals cash"

The daily deal is hottest new product in advertising history; Groupon alone has sped to $500 million in sales in just 17 months.

But local media have a clear advantage in competing, not just because of their existing promotional traffic, but because of how it ties into the business formula: Deal Quality times Reach equals cash.

I first heard this formula from Pat Lazure, President of World Herald Interactive which launched a daily deal just over a month ago.

He contends that local media companies should not underestimate the advantage of reach.

As the case in point, "DailyDealOmaha" promoted on Omaha.com launched the site six months behind Groupon's entry into Omaha Nebraska (this new case study is here).

Due to the power of the top right banner ad on half a million page views - plus newspaper ads - the same deals on his site have done as well as they did on Groupon's program.  

Another metrics is that every email on the list is worth 10 to 15 cents in revenues (this comes from Patrick Dillon, president of Deal Current, a daily deal software partner).  But massive advertising can - and do - make up for underdeveloped email lists early in the game. 

Groupon is also spending a good part of its last ($50 million I think) round of funding on Google ads, but there is still a clear advantage to local media who can massively promote at very low margins.

Groupon also (unlike Living Social) does not field a sales force yet in smaller markets like Omaha, which it supports from a Chicago call center, so this is an  opportunity to compete at an advantage. So take it while you can!

If you are thinking of just letting this opportunity slide by for another year, consider that early snapshots easily project hundreds of thousands in new annual revenues in a mid-sized marketplace like Omaha.

Since several of our members have asked if there is such a thing as a weekly deal, yes, there is. The second case study on DiscoverSD.com is an example of a weekly deal that is having great success.

So to slide you around the learning curve, here are fourteen tips to launching a daily deal written collaboratively with Patrick Dillon, president of Deal Current.

Which leads me to vendors. We plan on releasing a study of vendors later in the month, but for now three that we like are Deal Current, which is hands on and has some great features like the ability to create email affiliate partners and is willing to work with smaller media that prefer to launch weekly. Two more contenders for large scale companies are Shoutback Concepts, which pioneered with both Signonsandiego's program and with Omaha's World Herald; and Nimble Commerce which has some large scale infrastructure and an interesting group of partners from Open Table to IYP companies.

Our only definite recommendation is that local media for now should avoid partnerships with Groupon or Living Social. Living Social is apparently moving towards a white label version but in this case we think they are both more in the realm of frenemies,  with the emphasis on the last three syllables, and  there are a number of better alternatives.

Many thanks to Nadav Wilf, CEO of DiscoverSD.com; Pat Lazure, President of World Herald Interactive and Patrick Dillon, President and co-founder of Deal Current for providing deep expertise on the daily deal to members of this site.

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