Social networking software

Wow! Another Groupon Clone Launched By AOL

On the Internet, cloning is the sincerest form of flattery--and a sure sign you're making money hand over fist. Just ask Groupon.

Groupon is a service that sends its approximately two million members a coupon each day offering a discount at a local merchant. The appeal is as potent as it is simple. Consumers get a deal. Merchants get increased foot traffic, some of which they hope to convert into repeat business.

This year, Groupon is expected to rake in $350 million or more. And earlier this year, the property was valued at $1 billion when it obtained $135 million in capital from Digital Sky Technologies, which is also an investor in social networking gamer Zynga.

With numbers like that, it's no wonder that the deal-of-the-day market has fostered hundreds of clones. And now it has one more: AOL.

The AOL offering was made public today on a "coming soon" page. "Wow provides you and your family with savings at your favorite local and national locations each and every day!" AOL gushes at the site. "Eating, shopping, weekend outings--Wow offers things you want and things you need at a price that makes sense for your on-the-go lifestyle."

One twist AOL may be bringing to the mix is the personal deal, although how that's going to work isn't clear from the copy at the site. "If you want a deal, we listen and offer up your bargain-of-choice on a silver platter at an astronomically discounted price, helping you stretch your hard-earned dollar to infinity and beyond," AOL declares.

The company is equally effusive in its pitch to the merchants it wants to participate in the program. "What if we told you your promotion could potentially reach up to several hundred thousand local people, convert online impressions to offline sales, and build a loyal consumer base all with no upfront costs?" AOL asks. "You'd probably say "Wow!" That is, in fact, the name of our business."

Becoming a Groupon knockoff may not be such an awful development for the company, according to TechCrunch, which was recently acquired, with much fanfare, by AOL. "While AOL is clearly following the pack here, it is not clear that is a bad thing. AOL certainly has a lot of distribution muscle through its homepage, AOL Mail, and growing network of local Patch sites (which could be a perfect place to promote local deals)," TC writer Erick Schonfeld opined. "AOL customers also tend to have a better than average proclivity to buy things online."

However, everything isn't rosy in bargainland. The owner of a cafe in Portland, Oregon, made headlines when Groupon nearly drove her business into bankruptcy and the owner of a flight school had an employee revolt on his hands when Groupon discounts drove more people to his business than his staff could accommodate.

What's more, there are signs that merchants are starting to tire of the promises of Groupon. A study released this week by Rice University revealed that while nearly two-thirds of the merchants polled ran successful campaigns with Groupon, 40 percent didn't want to repeat the experience. "There is widespread recognition among many business owners that social promotion users are not the relational customers that they had hoped for or the ones that are necessary for their business's long-term success," the report said.

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