AOL Jumps Into Deals With Wow!

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AOL is taking the plunge into the competitive deal-a-day space, launching Wow! as an integrated deals sites under the larger brand that will serve “your bargain of choice” from both local and national offers.

Increasingly, group buying offers are sold like advertising units, not promotional items. The initial value proposition is strong: no upfront costs, strong traffic-driving potential and easily measurable ROI based on tangible deal redemptions and in-store purchases. As Ned Brody, AOL’s president of paid services, touted, it is an opportunity “to buy advertising on a CPA basis that is proven effective.”

AOL has advantages in brand recognition and deep, wide distribution that can distinguish among the littany of group buying sites that are popping up. The company still has a widely used e-mail service, a highly trafficked home page and a portfolio of blogs and other content services that can be piggybacked to promote deals, which should in turn minimize the advertising expenses that have burdened deal-a-day start-ups.

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CEO Tim Armstrong is campaigning to expand and diversify AOL’s distribution network. Just last week, he purchased the influential technology blog TechCrunch and is rapidly expanding Patch, the company’s hyperlocal initiative, which plans to have 500 community sites by the end of 2010. Though unannounced, it’s conceivable and logical that AOL would incorporate daily deals through its Patch network to make good on the “local locations” part of the Wow! proposition by inviting community-level SMBs to participate and offering a national-local platform for larger brands.

Scope of demographic appeal will be important to watch. Groupon targets primarily younger, affluent females with offers catered to lifestyle, vanity and adventure. For AOL to stand apart, can it broaden Wow!’s appeal to resonate with wider demos, including older and more middle-class buyers? Further, can it avoid potential group buying fatigue — how many manicures and skydiving lessons can the 150-plus deal-a-days sell? — by inducing more service-oriented offers at the national, mid-market and local levels?

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