Wednesday, February 09, 2011

Why Social Media isn't special

When I look at the valuations of Groupon, Facebook and LinkedIn I can't help feeling that Tesco, Nectar, Amex and Airmiles must be regretting that they can't just slap on a "social media" buzz on their current solutions. Lets compare Groupon with Nectar and Tesco's Loyalty programmes.

Now Groupon has 50m registered users (in the US) while Tesco has "only" 15m in a market 1/5th of the size and Nectar has "only" 16.8m users. Now what is the difference on these users?

Well Groupon know when users sign up to small business offers in a specific local. Tesco and Nectar know everything about what you buy and how you buy across a huge range of products and across multiple retailers. They give you targeted offers that are based on exactly what they know you will buy and they have the information set available to make sure this marketing is accurate.

Put it another way, Tesco Loyalty and Nectar are like Groupon + Google and yet they are rated as being worth a fraction. Now why is this?

Well arguably the first reason is that these sorts of loyalty cards are "private" between big business so you don't see them as social elements even though you are quite clearly sharing way more information with them than you do with Groupon.

The second reason is that they aren't independent, they are attached to massive corporations which makes them difficult to over-value and extract.

The third reason is that they started before the hype. Loyalty cards like Tesco with their rich set of data and massive active corporate marketing just aren't "social media", now part of this is that they aren't primarily driven via a website but the main bit is just that old isn't sexy.

So what would it take for someone like Tesco to move into the Groupon market? Well lets see
  • Would small businesses love to get access to that massive targeted customer base?
  • Would Tesco or Nectar's profiling make sales and conversions more likely?
  • Would this allow them to be more profitable?

Check, Check, Check. so the reality is that the only reason that a major loyalty programme hasn't undermined Groupon is either because they don't see the market or they haven't been bothered so far.

How long would it take for Tesco or Nectar to become the "Groupon" of the UK or equivalent organisations across Europe and the Far East? About a month.

Sometimes its worth looking at social media and looking at what its normal equivalent is and where its real advantages lie.

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1 comment:

Magdalena said...

Very, very good post! This is it! Thank you!