AT&T, Angie's List Take Cues from Groupon

Spurred by the success of daily coupon site Groupon, phone book companies and newspaper publishers are taking aim at the market for coupons sent via e-mail

By Olga Kharif

Angie Hicks, co-founder of business review site Angie's List, overheard employees raving in late March about the great deals they got from sites such as Groupon, a startup that sends users daily coupons via e-mail.

Days later, Angie's List followed suit. "I said, 'Let's do it. Let's do it now,' " Hicks says. Angie's List began sending daily coupons offering discounts on such services as carpet cleaning to users in Indianapolis, where Angie's List is based, as well as in Washington, D.C., and Chicago, Groupon's home turf.

Spurred by the success of Groupon, which has amassed a more than $1 billion valuation since it was founded in 2008, phone service provider AT&T (T) is weighing a push into e-mailed daily deals, while newspaper publisher Morris Communications Co. has begun sending coupons over the Internet. Angie's List and other upstarts are targeting the direct-mail market, valued by consulting firm Borrell Associates at $38 billion a year. "It's a very large and quickly growing phenomenon," says Gordon Borrell, chief executive officer of Borrell Associates in Williamsburg, Va. "It's so easy for advertisers to participate, and they get immediate, measurable results. They get a check, and they get customers."

Within six months, Angie's List expects to e-mail coupons for everything from air-conditioner repair to driveway high-pressure water cleaning to several million people in 200 markets, Hicks says. The more companies send coupons over e-mail, the less they will rely on printed materials, Borrell says. "It will be similar to newspaper classified advertising, almost all of which went to the Internet," he says.

Cheaper Marketing

Other coupon sites include Washington-based LivingSocial and Mobile Spinach, a San Francisco-based site that sends deals to wireless handsets. Besides threatening direct-mail companies, coupon providers may also crimp demand for services provided by phone book publishers such as AT&T, Dex One Corp. (DEXO), and SuperMedia Inc. (SPMD), according to Borrell. AT&T, based in Dallas, is considering its own coupon site in response. "If it's an area consumers are interested in, we'll launch products in this area," Will Hsu, chief product officer at AT&T Interactive, which owns a yellow-pages business, says in an interview.

Coupon sites help businesses that can ill afford newspaper advertising or direct mail reach a broader audience, says Sucharita Mulpuru, a vice-president at consultant Forrester Research Inc. (FORR), which is based in Cambridge, Mass. Groupon charges no up-front fees and takes 50 percent of sales it helps generate.

Some businesses opt for coupon sites over traditional avenues, including online ads. Four-month-old Venus Allure Salon & Spa in Portland, Ore., sold 900 gift certificates through Groupon on a single day in late July. "For us, it's 900 potential clients; our books are jam-packed," Jasmine Enciso, manager of the salon, says in an interview. The spa opted for Groupon over radio or online advertising. "People could be clicking on it all day long, and no one would be coming," Enciso says of online ads.

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