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Yesterday, Sugar Inc., an online publisher focused on women's media, purchased FreshGuide, a group buying startup similar in nature to Groupon.
According to Sugar Inc. CEO Brian Sugar, the purchase was a no-brainer for his media company: "We believe the winning business model for next generation media companies must include diverse revenue streams...we believe that FreshGuide will provide local advertisers the ability to advertise to Sugar's large audience in a high-quality and cost-effective manner."
Sugar Inc.'s acquisition of is just the latest example of publishers pushing beyond the sale of advertising and actually moving into the arena of sales. The New York Times points to several examples, including email-focused publisher Thrillist, which recently bought a make-oriented private sale website called Jack Threads. But it's not just online publishers that are jumping into the fray. The San Diego Union-Tribune, for instance, operates its own Groupon-like daily deal website through its Sign on San Diego website.
Given that traditional publishers, particularly newspapers, are struggling to find new business models, there's good reason to believe that the San Diego Union-Tribune won't be the last print publisher to launch such a service. The question, of course, is whether the group commerce and private sale models can provide publishers, both online and off, with a sustainable source of revenue.
While I'm generally a fan of the group commerce and private sales trends, publishers will inevitably face a catch-22: although these models are wildly popular right now, growing competition and commoditization will increasingly strain their sustainability.
Publishers that enter the group commerce space, for instance, will face many challenges. Naturally, publishers with the largest and most attractive audiences will find themselves at a significant advantage. But those players will increasingly be competing to run deals for the same businesses, and given the nature of the deals being offered, this is more of a zero sum game than, say, moving banner ad inventory. Thus, it seems certain that businesses will eventually be able to exert significant downward pressure on the commission publishers can charge. As commissions decrease, group commerce won't resemble the cash cow it is today.
There's also the risk that competition and commoditization will kill the goose that laid the golden egg. If every publisher is hawking 50% off deals on a daily basis, the deals lose their value, and the urgency that drives sales today will probably be reduced. After all, if you can always find similar deals, chances are you'll eventually become 'numb' to them since you know you can always find them.
All of this said, there's little reason for publishers not to try to cash in while group commerce and private sales are hot. For the time being, it looks as if these trends have some staying power and it would be foolish for publishers to ignore them. Interestingly, publishers that launch these sorts of offerings may realize an ancillary long-term benefit: by getting into the business of selling products and services, they will arguably learn far more about their audiences -- and how to effectively sell to them -- than they know now. That certainly won't hurt when it comes to building more rewarding and long-lasting partnerships with traditional advertisers.