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

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The market for e-mailed coupons is getting crowded. Review site Yelp, which has 35 million unique monthly users, experimented with daily coupons in Sacramento, Calif., in June. "It's something we continue to test," says Stephanie Ichinose, a spokeswoman for San Francisco-based Yelp.

Newspapers Seek a Boost

Traditional media companies are moving in as well. In June, Morris Communications in Augusta, Ga., began delivering coupons through its site, an e-mail list, and two of its printed papers. Morris shares with merchants part of the revenue generated through the coupons, Everton Weeks, a vice-president at Morris, says in an interview. About 75 percent of businesses that have started to advertise through the effort weren't regular advertisers before, Weeks says. "It's going to help us grow advertising revenue," he says. "This will be a huge factor for our business."

Other newspapers might build their own daily coupon sites. McClatchy Co. (MNI) in Sacramento, Calif., plans to start posting ads for Groupon deals on Web pages of several newspapers in September or October, says Christian Hendricks, vice-president for interactive media at McClatchy. "If this gains traction, there's no reason we won't launch our own platform," he says.

Direct-mail companies that analysts say may be affected by the coupon frenzy include Valassis (VCI), Money Mailer LLC, and Cox Target Media Inc.-owned Valpak. "I don't see sites like Groupon as being directly competitive," says Deanna Willsey, a spokeswoman for Valpak. "Groupon has a limited inventory of offers, consumers have a limited time to respond, businesses can't advertise [on Groupon] frequently." Still, Valpak is testing text-messaging coupons for mobile phones. John Gramata, vice-president of marketing at Money Mailer, says group buying websites can't offer deals over the long haul. The sites "can provide a useful short-term strategy for companies without a strong customer base," he says. "However, the nature of the required steep discounting is not sustainable for prolonged periods of time, at least for most local advertisers." A representative of Livonia (Mich.)-based Valassis didn't return an e-mail or phone call seeking comment.

Eye on the Competition

In the face of increased competition, Groupon may have to offer more features. In July, Groupon began letting users in six cities choose what types of coupons they'd like to receive. It has also made the deals available via apps for the Apple (AAPL) iPhone and smartphones that run Google's (GOOG) Android software. "Competition is healthy," says Groupon President Rob Solomon. "It forces us to constantly improve. While we keep an eye on the competition, we are much more concerned with growth, innovation, delivering millions and millions of new satisfied customers each month to our merchants, and being the iconic Internet company that defines our space."

Would-be investors in Groupon don't betray worry, either. In the second quarter, they were more interested in buying shares of Groupon than of any other company, according to SecondMarket Inc., a marketplace for private company stock. Still, the company can't rest on its laurels, says Tom Taulli, an independent analyst who researches initial public offerings. "It doesn't take a lot to build one of these sites," he says. "The leader today could be a has-been tomorrow."

Kharif is a reporter for Bloomberg Businessweek in Portland, Ore.

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