The Webs Next Breakout Hit

Biggest Social Media Trend of 2010

Social Media is one of the least understood web trends to date. Companies large and small are desperately trying to figure out how to harness its power and make a profit from it. Most of them aren’t getting anywhere.

Wikipedia defines social media as, “…web based technologies that turn communication into interactive dialogues.” Some people just like to make things more complicated than they need to be. Let me break this down for you. Social media are websites like Facebook, Twitter, and MySpace where users mingle and correspond with other users. In general users post information they would like to share about themselves, their family or things they find interesting. Most social media websites are purely for socializing and entertainment.

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One of the latest trends in social media is group-buying websites. It does not follow the beaten path of social media though. It is not purely for mingling and socializing or entertainment. Its purpose is to share information with users that facilitate deep discounts and deals across their social networks.

Buying In Bulk

You know the savings trick behind stores like Sam’s Club and Costco, right?  Warehouses like these sell their wares in larger than average units, in bulk. Buying items in larger quantities drops the price per piece thus allowing the consumer to save money. Essentially, the consumer gets more product for their money.

Seems like a great way to save money, right?  This tactic is not a new concept. It’s been used by salesmen in their pitches for centuries. “The more the consumer buys the bigger my commission!” Modern day group-buying internet start-ups are employing this tactic as the basis of their business.

The premise behind group-buying is simple: If enough people agree to buy something, everyone gets a big discount. Group-buying websites offer one coupon or massively discounted item to its members each day. As long as a minimum number of people take advantage of the discount, the deal goes through. If not enough people sign up, no one gets the discount.  The caveat behind these sites is that they need to attract large groups of users for their websites to work.  If only nine people take the deal and sign up, the merchant offering the deal can’t make enough money so the entire deal goes bust and no one wins.

A few other group-buying websites take a slightly different approach. They don’t require a minimum number of people take the deal for it to be good. They simply reward shoppers based on how many others they get to take the deal. Some of these websites offer you the deal for free or increase the amount of the discount (with a max limit) based on the number of people who sign up.

It’s not a complicated system. The point is to get a large number of people together to achieve phenomenal discounts by buying in bulk. The deals are broken down by city, county or large metropolitan areas. You’ll find that most coupons and discounts are for restaurants, salons, spas, and adventure activities.

Group-buying is one of those things that makes complete sense for people on both sides of the deal. You, the consumer, get to purchase coupons and gift cards for less than their face value and the merchant gets to attract new customers and advertise their business for very little money. This is one of those ideas that are so incredibly simple you just wished you had thought of it first!

The Market Leaders

Some of the most popular and successful group-buying websites remain the hidden gems of social media.  The only one you might have heard about is Groupon.com. In fact you’re probably smacking the palm of your hand against your forehead right now while exclaiming, “Aaah, I see!  So that’s what all the hoopla behind Groupon is about.” Groupon was the first of such group-buying websites and it is also the biggest, covering the most cities and countries. This gives it an extreme advantage over the other less popular sites because the whole process revolves around the amount of users. The more users one of these sites can attract, the more leverage it has to score impressive discounts from businesses. Whoever has the best deals will win this race.

Groupon isn’t a struggling web based start-up either. It’s reported that Groupon is valued on Wall Street at $1 billion! Not bad for a business that was only born two years ago. Still there are competitors. LivingSocial.com is ranked number two in the web based group-buying industry. LivingSocial works slightly different than its rival. While Groupon’s great deals only work if a certain number of people sign up for the deal, LivingSocial gives everyone the deal, no matter how few sign up. You must wait 24 hours to receive the coupon via email and if you lure three people to sign up for deal via your personalized link then you get the coupon for free!  Both business models seem to be kicking butt. An article on CNN.com reported that recently LivingSocial was able to raise $25 million in venture capital.

The other big player in this market is Twitter. They have developed @earlybird accounts that aim to match businesses and brands with their incredibly large amount of users. The project is too new to know if they have achieved success or not but the idea behind this account certainly is attractive.  It could certainly become a main monetization strategy for Twitter. For other ways to make money with Twitter check out:
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In total there are more than 500 of these group-buying websites that have popped up in only the last couple years. The sharp rise in popularity of these social media, group-buying websites is either extremely well timed or a by- product of a down economy. As long as people are tightening their belts or looking for deals, group-buying websites like these will thrive and grow. I expect this trend to become a staple in the American shopping habit, replacing traditional coupon cutting. At the very least it will save you time by flipping through the flashy ads in the paper trying to discern between the good and bad deals.

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Until next week…

Keeping Money In Your Pocket,

Nancy Patterson


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