The Groupon Model | Hacker News Reader

The Groupon Model

There is all this hype about Groupon and social buying. Why aren’t advertising platforms doing this instead of buying platforms that do this?<p>Currently, the advertising platforms such as google adwords, facebook advertising, adbrite, buysellads.com, etc are all based on models that support “the highest paid advertiser will have the best placement.” I know when I search, I want the best deals to show up - not who paid the most to give me the potentially worst deal for me. Opinions?

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Groupon takes an old model - "one day sale only" or "first 1000 people to sign up get a free t-shirt" - and makes it work in the social space.

Groupon is promotions, not advertising. Trying to compare it to Adsense will be extremely difficult.

AdSense, to my knowledge, doesn't only optimize for maximum CPC but rather for max earnout for Google, a large part of which is the likelihood of you clicking the ad. This is a fair determination of the quality of the "deal"/ad, I suppose.

Right. My point is as an advertiser, I have to lay out money with the hopes of making more back (ROI). With the groupon model, I don't have to lay out any money to "advertise" and I pay for the ads once I get paid.

The significant difference seems to be that Groupon takes a 24 hour "risk" and pushes content to its users via email. If a platform like AdWords offered free advertising that delivered only the most relevant advertising to users, the list of companies hoping to have their ad seen would be enormous.

It is interesting to consider whether expertly targeted ads would see as many click throughs as the ads companies pay to have us see now.

Right, but the categorized list of businesses ads are enormous already.

I'm not saying replace the models they have in place, but just offering up something different from a social perspective which google doesn't seem to have a lot of luck with. It will really even the playing field for non-big dollar advertisers.

Are you suggested gathering information about users and providing ads based upon it?

Yes. This will rank the best deals as they will emerge via the high amount of clicks via the social aspect and sharing.

In my experience modern ad systems use, among other things, CPC x CTR. Using CPR x CTR is good for all stakeholders: 1. Advertiser value - the better/well targeted the ad, the lower the cost 2. Publisher value - higher CTR means more clicks, means more $$$. 3. And most importantly, user value - higher CTR is generally a good indicator of better targeted ads

Really good points. Thanks for the feedback. You still have to layout money before you make any, hence the reason why the groupon model is so enticing from an advertiser's perspective.

Adwords on Google considers CTR as well as Quality Score to determine which ad will display, not the CPC that you're willing to bid.

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