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Building a better deal site For some small businesses, daily deal sites like Groupon and LivingSocial have proved to be a lucrative way to attract new customers. For others, not so much. In a study released by Rice University in June, 61.5% of small and midsize businesses that had used major deal sites—including AmazonLocal, Google Offers and OpenTable—reported that daily deals were profitable for them. However, a substantial portion—19.3%—said they lost money. The businesses were based in 45 cities across the U.S. Frustration with traditional deal sites has given way to what serial entrepreneur Douglas Krone, the chief executive of the app Leloca, calls the “second generation” of this genre. “The first generation is an ad platform, which gives you huge exposure but is usually at a loss,” he said. “Second generation gives you targeted exposure but at a profitable rate.” Leloca, based in Manhattan, fits the second model. It lets users find nearby restaurants offering deals to fill empty tables. “The economics make sense,” he said. “If you have an empty table in a restaurant, you are paying that rent, paying utilities and paying salary to the staff. If that table sits empty, it’s a lost revenue opportunity that can never be recovered.” Often, first-generation deal apps attract customers who cash in on a special offer but don’t return, according to Mr. Krone. Leloca offers two features to help merchants make deals more profitable by limiting access selectively: geotargeting and the ability to turn the deal off. A Wealth Building Program To Help You They Dream Of Winning The Lottery, They Go To Casinos, They Purchase Powerball...

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In geotargeting, the merchant can determine the distance over which the deal will appear, or create an exclusion zone where the deal will not show up. This can enable a small business to target new, local customers, rather than pulling in folks who travel from a distance to take advantage of a deal but probably won’t come back often. Merchants may elect to turn off the deal during their busiest times, so bargain-seekers do not take space from customers who pay full price. The app is free for users, and costs businesses $1.99 per booking. So far, more than 200 New York City restaurants have signed up. Merchants can also take a hyperlocal approach to attracting customers through the giant social-media site Foursquare, which has attracted 20 million users since it launched in 2009. Last month, the social-media app—which lets users indicate to their contacts that they’re in a particular location by “checking in” —launched a several-months-long pilot of its first paid advertising program. Through its “promoted updates,” merchants can insert paid messages to attract nearby customers. Also last month, Foursquare rolled out its free “local updates” tool, which allows merchants to send updates to its most loyal customers. Noah Weiss, the product lead for merchant and monetization at Foursquare, predicts that this


type of mobile advertising will continue to accelerate. “Almost all commerce is untouched by online advertising,” he said. “There’s going to be increased penetration.” Some 45% of business executives worldwide currently use mobile as a marketing channel, according to the research firm eMarketer. Of the remaining, 75% intend to start using it. Some app creators are also offering merchants a way to attract customers who don’t want to spend money up front to take advantage of deals. “The typical sites where users can purchase coupons are dying off,” said Jordan Brill, the co-founder of CheckinSave, an app that offers discount deals. “I believe users want to buy deals but don’t want to spend cash to do so.” CheckinSave offers a points-based system that essentially allows users to exchange their social-media cred for these deals. Users can connect their app with Facebook, Twitter and Foursquare to tell their friends that they are “checking in” at a particular shop or restaurant. For each of these visits, users receive points; they also get points when their friends check into the same places. Users who accumulate a set number of points can exchange them for deals. The app launched in Toronto in April, and Mr. Brill expects it to roll out in New York within the month. Right now there are about 50 venues enrolled in Toronto; CheckinSave needs to attract a handful of New York venues to launch here, he says. The trick, of course, will be rising above the crowd of other app developers to catch merchants’ attention.

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Building a better deal site  
Building a better deal site