Groupon, the popular, online coupon service that launched less than two years ago in Chicago, has become a hit with money conscious consumers. But as it continues to expand to more and more cities including right here in Phoenix, local business owners are discovering the service isn’t without its downsides.

A Local Story

Dana Mule, part owner of Hula’s Modern Tiki at 4700 N. Central Ave., recently participated in a Groupon deal offering $30 of food for $15. The resulting hoard of customers that descended upon Hula’s to take advantage of the 50 percent off deal created havoc for Mule’s restaurant.

“Initially, it was disaster,” said Mule. “Far more people showed than we could accommodate, which made for long wait times … and angry people (which counteracts any benefit you’re supposed to get from this kind of marketing).”

How Groupon Works

The way Groupon works for consumers is relatively simple. Every day, a new local deal is featured on the Groupon homepage, sent to subscribers in a daily email and updated daily on the Groupon iPhone app. If the pre-determined minimum number of people purchases the Groupon within the established time frame, then the deal is active. If the minimum isn’t reached, then the deal is cancelled.

Mule initially decided to take part in Groupon to get additional exposure for his business and to expand his customer base, which are two of the key selling points Groupon uses to attract businesses. But as some experts have pointed out, there can ultimately be a backlash if the discount price ends up taxing a business’s ability to serve its customers, thus eroding their brand.

“The race to the bottom is never the way to get to the top,” said Ellen Malloy in a recent Reuters article regarding the Groupon phenomenon. Malloy promotes high-end restaurants in Chicago and blogs about the topic of discounting for Restaurant Intelligence Agency.

Groupon Threatens Customer Experience

According to Malloy businesses risk a cheapening effect on their brand and that the customer experience can be threatened if an oversubscribed offer ends up producing a short-term spike in demand.

Mule’s own experience with Groupon was uncomfortably akin to Malloy’s cautionary advice.

Groupon provides the business no tools to help manage the number of coupons sold – they up sell you to drive the value of the coupon up (making them more money),” said Mule. “They are not responsive with concerns – the amount of the sell given to the restaurant doesn’t even cover food/liquor cost – and they will not let you put a limit on the total number of Groupons you’d like to sell (we had to beg them to stop it at 1,000).”

After his initial experience with Groupon, Mule said he wouldn’t participate in the service again. He also advised businesses that require appointments, such as salons, to avoid Groupon altogether.

“We’ve talked to other businesses where they had sold so many Groupons that those were to only appointments they could accommodate for months, allowing them to take no additional new clients who would more likely become repeat customers,” he said.

So what do you think?

We have had many clients ask us how Bing differs from Google and if there are SEO considerations to account for. Coincidentally, MarketingProfs.com gave a webinar last week with the topic of optimizing your site for Bing vs. Google and uncovering the differentiators. Google now has 70% of search market share while Bing is now around 10%. The 10% is in speculation depending on who you ask but we believe this 10% is the amount of search market share that MSN/Live search engines had before Bing was introduced. Bing’s search market share is anticipated to increase when and if the Yahoo! deal is approved.

While nothing earth-shattering, or new, was uncovered during the hour-long presentation relative to SEO we did take notice of a few observations in relation to how Bing displays several types of content and search engine results.

Let’s begin with the bottom line – Bing organizes and displays their data differently than Google does. Bing’s focus is on making travel and shopping related searches better for the user to make a decision (hence, the decision engine) while Google’s ultimate goal is to deliver the most relevant results for a specific search query no matter what topic. There are new and different opportunities that Bing offers if you are in one of these key industries (shopping and travel). While Bing will be able to gain in these areas we don’t believe SEO strategies should change dramatically. Following best practices, building a crawlable site and creating great content are still the keys to success with all search engines.

Here are some of the items that make Bing different from Google:

1) Bing’s “Best Match” or top result is manually chosen by an actual human, not algorithmically as is Google’s. Not every search will have a “best match” because of this manual selection. This human moderation (similar to DMOZ and Wikipedia) confirms the importance and relevancy of quality site content and as we all know, content remains king in all search engines. It also means that Bing may be a bit harder to game for a top ranking for anything other than a branded search. That is unless you truly are the most relevant, useful site for the target query.

2) Bing will show results from “their” web properties and third parties with which Bing has agreements such as MSNBC, Hulu, MSN, and others before anyone else’s. With Yahoo! becoming more of a media entity, this plays right into Bing’s apparent strategy. We are seeing how Microsoft is positioning this search engine to leverage their other properties as news and content sources. This could and most likely will have a huge impact on search relevancy, since the most relevant result won’t always be shown.

3) Bing’s image search likes absolute URLs as opposed to relative ones. (Absolute URLs are when the domain is in the URL like www.libertyinteractivemarketing.com/directory versus simply pointing to /directory) The application of this is that if an image is linked from another site, the original site will still get the visibility in image search. So don’t steal images, but if you do, make sure to host them on your own server.

4) Local ads on Bing are supplied by YellowPages.com. So, if you want your business’ text ad to appear on Bing local search you’ll need to advertise with YellowPages.com.

5) Bing Shopping is CPA-based (cost per action) and sorts results based on a combination of price, shipping and Bing’s cashback program. An important note: You can’t participate in Bing Shopping unless you are already an advertiser on Bing/MSNAdcenter.

A key element regarding personal privacy is that Bing indexes the Facebook profile pictures and photo albums of fans of pages (business profiles) and shows them in its image search with little regard for relevancy. So, for example, if you search your company name on Bing, it may pull in pictures of people who fanned your page – and not necessarily pictures that are representative of the brand or that either party wants shown to the world. We find this extremely scary. If you do too, read this related article on Facebook pages now included in Google’s real-time results.

Have you noticed other differences between Bing and Google? We would love to hear how people are using Bing and other observations about the new “decision engine.”

It was just announced that Facebook pages will now be a part of Google’s real-time results. There is still no way of knowing if or when your status updates will also start to appear but pay attention, this is a major game changer. If you thought changing your privacy settings on your Facebook profile was going to keep everyone on the outside, think again. Last week we sat in on a webinar on Bing’s search engine and one feature hit a nerve with us – how and from where Bing pull images into their results.

We took a closer look by searching our own company name “liberty interactive marketing” in Bing’s images tab and found that profile pictures of our Facebook fans came up for our very own company name.

The key point to highlight here is that there is no such thing as privacy. There is only perceived privacy. There are loopholes. Kind of like when you join an association, purchase membership, or opt-in to any program – many companies use that “relationship” as a legitimate reason to contact you or loan out your information. In this case, the relationship of you fanning a company page may be permission by proxy to Facebook then to Bing (given their new relationship with Facebook) to pull in any data they want….this includes your mug or at some point status updates.

While both Google and Bing are figuring out real-time search and what data makes sense to display as a result (primarily trending for now), Facebook is slowly opening up the gates of information and in my opinion, in all the wrong ways.

Facebook is taking the fun out of Facebook. I would really like to be wrong in this prediction, but this direction seems to be headed down the wrong road. Why?

Because of the unknown. Google plans on more than 550 updates to their algorithm in the coming year (they made over 450 in 2007), their search engine algorithm is smart, really smart. There is no telling how the engineers will figure out how to use this data and it may be at your expense.

Privacy is gone. Bing has proven that with its image display.

If this gets your blood boiling, read these articles for more search engine marketing dish:
Facebook Pages Now Part of Google’s Real-Time Results
How Google’s Algorithm Rules the Web