Second Street: Deals Remain Highly Social, Referrals Generate Sales

One of the questions we have about the deals space is, how social is it really? In early days, with demos leaning toward college-educated women, deals were very social as subscribers referred deals to each other in return for a free deal, typically after three references.

As deals become more oriented toward mass mailing lists, we wondered if social aspects had plateaued. Not very much, reports Second Street Media’s Matt Chaney.

On a company webinar last week, Chaney said that referrals remain a top means of bringing in business for the white-label deals and promotions company, which now works with more than 300 local sites and has processed over 1 million deal offers. Best of all, while many customers make referrals, they don’t always qualify for the free deal, making such referrals inexpensive for the publisher.

Chaney said the company has been averaging one refund for every seven purchases. But that doesn’t dissuade the referrers. “People will keep pushing out the deal to their friends and family in the hopes of getting theirs for free,” said Chaney. “That’s how the numbers can work in the favor of the site.”

A deal with WCAX-TV in Vermont for $36 worth of movie tickets and popcorn at Majestic Cinema, for instance, sold 576 via referrals. But only 32 refunds qualified. That made the referrals worth $7,396, with an “opportunity cost” of just $576. Moreover, users who receive a referral credit are 3x more likely to buy, according to Chaney.

Referred customers are also typically more engaged than “non organic” customers, perhaps acquired via a mailing list. Referred customers and other “organics” score very high in link traffic, he said. “We consistently see that the organic email list accounts for 70 percent or more of the revenue for our sites.”

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