Why Did Newspapers Take So Long to Copy Groupon?

Word leaked out today about a new service The New York Times (NYT) is planning to launch soon called TimesLimited, which is expected to provide readers with special offers on travel and other lifestyle items via e-mail. If you're thinking this sounds more than a little like what such companies as Groupon and LivingSocial do, you'd be right. It looks like a fairly straightforward copy of these services and also of higher-end offerings such as the Gilt Groupe. What took The New York Times so long? As usual, the traditional media industry seems late to this particular party—and may even have missed the chance to take part in the festivities altogether.

The NYT isn't the first to come up with the idea of taking a marketing cue from Groupon. Just a few months ago, the Cox Media Group launched what appeared to be a Groupon clone called DealSwarm, and the Minneapolis Star-Tribune has had a similar offering called Steals for some time now. In Canada, the TorStar chain—which publishes the Toronto Star newspaper and a series of regional weeklies—acquired a group-buying service called WagJag last year and has integrated it into its various publications. Other newspapers groups, such as McClatchy (MNI), have chosen to partner with Groupon instead of trying to create their own version.

As more than one Groupon observer has noted, the service isn't exactly rocket science. It involves sending people e-mail offers and discounts from companies and service providers, then charging a fee for connecting companies with customers. After less than three years of focusing on this business, Chicago's Groupon has grown to the point where it had annual revenue last year of almost $1 billion and recently turned down a $6 billion offer from Google because it's planning an initial public offering. And as I noted last fall when Cox made its announcement, copying Groupon isn't the answer to all of a newspaper chain's problems by any means, but at least it is a place to start.

Missing the Omens

To be fair to newspapers, not even Web giants such as Google (GOOG) and Yahoo (YHOO) have managed to come up with something like Groupon, which is a big part of why Google wanted to acquire it. But if anyone was in a position to do so, it should have been the newspaper industry; after all, who else already has relationships with hundreds, or even thousands, of local merchants and businesses? The problem for newspapers was seeing those relationships in a different way: not just as a static provider of banner ads and full-page color spreads for the advertising salespeople to harvest on a semiannual or quarterly basis, but as a resource the papers could connect directly to customers for a fee.

It seems so obvious, in part because newspapers like The New York Times have done somewhat similar things in the past—offering subscribers early access to theatre tickets or similar events, for example. The Times even started a wine club aimed at giving readers preferred access to new vintages and reviews. In many ways, Groupon and LivingSocial are just extensions of that kind of marketing. But newspapers missed the connection, just as they didn't see the writing on the wall for classified advertising when Craigslist came along with its free model.

The problem now is that Groupon and LivingSocial have become such behemoths in the e-mail marketing business that they can offer a size and scale newspapers can't hope to compete with. There's arguably still an opportunity for the NYT to target its own niche readership for high-end offers, but it's a much smaller opportunity than it might have been if the paper had launched TimesLimited a year or two ago.

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