Paypal has decided to infiltrate the confined space of daily deals along with the likes of Groupon, Amazon, Living Social and thousands of other companies that barely register on the pie chart since an estimated 73% of the market is owned by Groupon and Living Social, according to Yipit. Living Social has managed to stay under the radar unlike Groupon who has been plastered with negative media about their business model, internal practices and lawsuits, not to mention a rather disappointing IPO. Chances are that sometimes Groupon even questions the viability of daily deals but Paypal feels they can make a name in that space for two reasons: they already have 103 million users and they are more familiar with what their users like.
More specifically, what Paypal wants to target are daily deals for the mobile space, not simply targeting deal placement on the geographical location of a city or zip code like Amazon. This is something that Groupon made a big deal about in their IPO roadshow: a targeted method to deliver deals based on current location. Users would be notified of a deal for a retailer when simply walking by their location. Groupon also made a big deal about being able to target deals based on consumers' personality and preferences. The live example they gave during their IPO presentation was notifying an adrenaline junkie of a deal for half-off a couple laps around a NASCAR track. Still, Paypal feels they know their customers better. According to President Scott Thompson,
The experience is going to be completely different than anyone else's, through and through. We'll only give you something that we think fits the category of unique and relevant. Everyone else is going to bombard you.
There are some other reasons why Paypal may want to enter this arena besides their "we know our customers better" reasoning. Find out more after the break.
Paypal is already familiar with the mobile space thanks to being in the payment processing industry. Practically all the major payment processing companies like Visa, Discover and especially American Express are exploring the possibility of more consumer friendly mobile payment processing options. Paypal is no exception as they have taken on Google Wallet that is riding on the success of NFC technology with their own service that will "provide a more comprehensive solution." Right now, Paypal is working with 200 large retailers in the U.S. to make themselves available as an acceptable form of payment in stores and if they get their way, they could be interjecting themselves on millions of mobile devices over the next year or two and bring them closer to their goal of $7 billion in revenue by the end of 2013.
We also can't forget about Paypal's parent company eBay. Peter Sorrentino, a senior fund manager at Huntington Asset Advisors, who watches over 14.5 billion of eBay's assets said that eBay stands to benefit from a daily deals platform by increasing customer retention.
EBay could definitely use coupons as counterpunch-type of approach to retain customers. If you can get consumers to your site for something that has a pretty broad appeal, then you can capture their wallets before the couponing companies lead them away from you. Once you've got the eyeballs, the clicks will soon follow.
I would agree there is a lot of potential for both eBay and Paypal here but it's still built on the potentially incorrect assumption that businesses will benefit from these deals in the long run. Groupon has already had a slew of unhappy business owners who have seen little loyalty from return Groupon users. I believe the company that finds a way to promote loyalty between consumers and business will be the winner but until then it largely seems that daily deals users are looking for just that, the deal of the day. It doesn't seem to matter as much what it is.