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Tippr Deals Behind the Scenes

For daily deal companies, getting new customers to buy into their discount offerings isn’t cheap. That is why online coupon purveyor Tippr also builds sites for media firms with audiences already paying attention.

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Tippr COO Samy Aboel-Nil

The way Samy Aboel-Nil, COO of the daily deal site Tippr sees it, making money in a daily deal landscape dominated by the likes of Groupon requires taking one big expense out of the equation: customer acquisition.

Tippr offers discounted deals in more than two dozen U.S. markets, from Atlanta to San Francisco, with a model resembling that of Groupon and LivingSocial. Its reach is sizable enough that after Groupon spurned Google's famous $6 billion acquisition offer, there were whispers that Tippr would be the search giant's next choice. It has a famous tech founder: Seattle entrepreneur and venture capitalist Martin Tobias—who made millions as a Microsoft IT executive before setting off on his own in 1997.

But like other daily deal companies that wish to stay in it for the long haul, Tippr is focusing on its unique selling proposition, which in its case is Powered by Tippr, a "white-label platform" for daily deals launched last November. Tippr leaves its own name out and creates branded deal sites for online publishers, such as TV news websites or regional magazines, and handles the operational aspects of the business.

“We consciously wanted to be a software platform from day one,” says Aboel-Nil, who cofounded FanForce, the Austin, Texas-based company that Tippr acquired last year in order to build its white-label platform. “To help [clients], we needed to have a live site that we could also use to experiment.”

So if a media client wants to try something with its own deal site—such as adding live phone operators or trying a different subject line in their deal email—the concept can get a test run on Tippr.com first and see how it works out.

With a team of 100 Tippr staffers split between Seattle and Austin, Texas, Tippr is one of a handful of deal sites that Facebook chose to work with for its Facebook Deals, and while that has been going well, Aboel-Nil sees the white-label platform as the growth strategy going forward. Like other daily deal executives, he eagerly reviewed Groupon’s recent IPO paperwork , and it confirmed his suspicion that with more and more deal companies competing for the same customer in the same space, it is getting more expensive to get the eyeballs.

“The question everyone has about Groupon is whether the growth rate is sustainable,” Aboel-Nil says. “And when you look at growth, you have to look at the phenomenal cost of customer acquisition.”

He contends that going after new customers is what accounted for the losses Groupon's SEC filing revealed, which were $113.9 million in the first quarter of 2011 and $413 million in 2010.

Groupon claims to have 83 million subscribers spread across 43 countries. The price of per-customer acquisition has grown from about $10 per customer to something like $30 per customer, with costs that include display advertising, traditional media ads, Facebook and Google Ads, email database marketing, and more, Aboel-Nil says.

Though he didn't mind pointing out Groupon's red ink, the Tippr executive said he was unable to disclose much about its own finances or say whether it has reached profitability. Its last round of funding was reportedly $4 million in February. What the COO will say is that thanks to Powered by Tippr, getting customers comes relatively easy.

One site Tippr operates, for example is called “The Goods” for several NBC-TV affiliate markets, including San Diego, and another is for Belo Television Group, which airs a morning program in Seattle called New Day Northwest in which the host may interview a restaurant owner and then, when the segment is over, send viewers online to sign on for a daily deal at that same establishment.

“They say ‘I already have a great brand, and people come to me for the news and the resources. What I don’t have is the technical expertise for daily deals,’” Aboel-Nil says.

Tippr isn’t the only company to catch on to this idea of pulling the deal strings behind the scenes. A Yipit review of white-label platforms shows that Groupon itself offers deals via 28 different McClatchy Company-owned newspapers, and there are also purely behind-the-scenes players that do not have their own sites, like Analog Analytics and Group Commerce.

One client who chose Tippr after doing a fair amount of research is Rolfe McCollister, CEO, founder, and publisher of Louisiana Business Inc., which publishes the Baton Rouge Business Report and 225 magazine, named after the city's area code. It is a free print and online magazine that city residents turn to when trying to figure out what to do and where to eat on the upcoming weekend.

"I wanted something that's been tested, I didn't want to be a guinea pig," said McCollister, who said he also felt like Aboel-Nil was "more of an entrepreneur and not a computer geek."

Through Powered by Tippr, 225 now has a branded deal site called 225 Eats, a site that offers about one carefully chosen deal per week to an affluent readership that enjoys getting a price break at sushi and higher-end restaurants, knowing that the magazine won’t steer them wrong, McCollister says.

Print publishers with websites have been more reluctant to offer deals via Tippr than TV sites, according to Aboel-Nil, but 225 Eats is a notable exception. The publisher says the daily deal revenues are adding about 3 or 4 percent to gross revenues and perhaps 5 percent on profits, and his sales team simply sells the deals as an add-on while also selling online ads or display ads to the same restaurant.

What Aboel-Nil finds really interesting is that even though Groupon is offering more restaurant deals per month in Baton Rouge, 225 Eats is actually clinching more of the deals in the market every month. The reason? Consumers know the magazine and trust its editors, including the publisher, a lifelong native who knows his way around town.

“They know who we are and we know who they are,” McCollister said. “I eat at these restaurants myself.”


Teresa Novellino writes for Portfolio.com

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