Since the Gap’s Groupon deal went viral last week, there’s been a healthy debate whether the group-buying platform generates profits and repeat customers or is loss-leader quicksand. Well, Fandango was featured yesterday in a $4 movie ticket offer via Groupon nationwide – albeit with limited online distribution – and may not have risked a dime in the effort.
Groupon spokesperson Kelsey O’Neill said 65,000 tickets had been sold at that deeply discounted price. That number becomes more impressive when you consider that Groupon didn’t send the offer to its list of 10 million e-mail subscribers at all. Instead, Fandango e-mailed the lucrative deal to its much smaller list and pushed it on Facebook (one post) and Twitter (two tweets, as seen in the image below). The language in the messages suggested it was actually Groupon’s campaign and not Fandango’s.
Here’s one of the Los Angeles-based movie site’s tweets from yesterday morning: “Oh, and if you happen to have any questions about the Fandango Groupon deal, please refer to the Groupon page, as it’s their offer. Enjoy!” And here is the Facebook post: “Our friends at Groupon are offering Fandango fans movie tickets for only $4! Cool! This is a limited supply offer, so check it out now!”
Neither Fandango nor Groupon would say on the record who picked up the tab for the loss-leading deal. And what a tab it is: With movie tickets priced $12 apiece in a lot of markets, the overhead for $8 per ticket would come to at least $520,000. But there are enough clues in this case that one can reasonably assume Groupon paid the bill.
From a business standpoint, it’s unlikely Fandango would pick up the cost of those tickets without seeking reimbursement from theater chains for the extra sales of popcorn, soda, and candy. Yet there would be numerous obstacles to getting those family-owned and chain theaters to pitch in on such an effort.
When ClickZ directly asked Groupon if it paid for the coupon, spokesperson Mark Desky replied via e-mail – but sidestepped the question. “We do not disclose specifics on the economics of deal performance,” he said, “although this promotion with Fandango has certainly generated a lot of consumer interest as evidenced by the tens of thousands who have purchased it.”
Considering it’s been well known that Groupon charges partners per unit ordered, the almost no-comment response to the Fandango question appears to at least signal an unusual arrangement between the two parties. Also suggesting an experimental type of partnership in this case was the fact that Groupon didn’t e-mail the movie tickets deal – a tactic that’s at the heart of its business model.
“We didn’t do anything here internally as far as on Facebook or Twitter. We didn’t e-mail the deal out,” said Groupon’s O’Neill. “We anticipated that once Fandango e-mailed the offer to their people that they would start tweeting it and Facebooking it.”
Indeed, like the Gap deal, the Fandango offer appeared to go viral – though in a more modest fashion. A referral reward of $10 was pitched at the end of the ordering process.
Purchasers of the $4 tickets had to register on Groupon, while supplying their e-mail addresses. So the Chicago-based company certainly picked up at least several thousand new subscribers who were interested in deals during the course of a single day.
So was the Fandango deal actually an ad buy of sorts for Groupon? Though the two parties are mum, it seems likely.
Groupon is the largest online daily coupon service, competing with LivingSocial, Dealster, Woot, BloomSpot, and others. The space appears likely to fragment further as some daily newspapers are getting into the game. In the latest example, The Minneapolis Star Tribune has launched a program it expects to create about $50,000 a month in incremental revenue.