I’ve got a really hot tip for all you folks out there on the Interwebs. It’s amazing. And no one knows about it.
You see, the latest red-hot technology, the keys to the proverbial kingdom, the ultimate cash-cow money machine isn’t what you think it is. No, it’s not social media. It’s not even behavioral or targeted ads. The ultimate killer-app money machine is….email. And Groupon proves it.
Say what? Hear me out, folks.
Exhibit 1: Talk to any merchant who has placed ads in the social group buying craze, and they will tell you that the most important thing a social buying company can bring to the table is reach. In other words, how many email addresses can you send my super duper deal to? The merchants don’t care about how many Twitter retweets a social buying company gets on average for its deals. They don’t care much about how many “Likes” deals from the social buying company obtains. Buyers understand perfectly well that these are both nice side benefits that emerge from a well-targeted or suitably massive list.
As anyone who has followed Internet ads and commerce can tell you, suitably massive has generally trumped well-targeted in the recent past, which explains why Groupon is the big kahuna. Of course, this all sounds ridiculously intuitive but in many ways it’s not.
How many Silicon Valley VCs are frothing at the mouth throwing money at email-based commerce startups? Lots, actually, but they are all called social commerce plays — even though the social aspect is actually less important than the email aspect. To put it in an elevator pitch framework, Groupon is Daily Candy with a better monetization vehicle.
Exhibit 2: Email captures intent better than just about any other form of advertising. Why is that? You have to actually input your email address to get a newsletter or receive a steady stream of deals. It’s a lot more intent than one shows by retweeting a link or clicking on a Like or Follow button. The market understands this.
In many prime verticals (finance, travel, luxe goods) CPMs (cost per mille, or the amount earned for every 1,000 views) for email newsletters are four to five times higher than the CPMs for content advertised on those same publishers’ Websites. Groupon and all the other social buying companies use email as the social currency to fuel their commerce engines precisely because it goes further than capture fleeting intent. What’s more, getting an email subscriber vastly increases the probability that anything sent to them is actually read.
Compare that to stream-based social media offerings. I use Facebook a lot. Do I read or even scan every message that floats through my stream? No way. Maybe I’m an anomaly, but I somehow doubt it. And if I “Like” a company, do I seek out their Fanpage regularly or make sure to read their posts? Not really. Again, I am certain I am hardly alone in this — which explains, partly, why Facebook is moving more aggressively into the a quasi-email application space. Intent equals higher chance of sales and a better currency.
Exhibit 3: Not to denigrate Facebook. On the contrary, with the social networking giant bagging a huge chunk of pageviews on the public Internet, it’s clear they are doing something right and pulling in a lot of ads.
But consider that Groupon’s gross revenue is already approaching what many estimate will be Facebook’s revenues and you have a pretty good proxy for a CPX (insert advertising revenue measurement of your choice) between the two entities. Which one is pulling in more revenues per subscriber, the social network or the email play? The market (meaning, people who spend money to advertise) know where value in the ecosystem resides. That nexus of that value, despite all the social noise, resides in your inbox. The more things change, the more they stay the same.
Editors Note: Alex Salkever is a former technology editor of BusinessWeek.com and former senior writer at AOL DailyFinance.com. He works in an executive marketing role at a venture-backed greentech company in Silicon Valley but can’t get the writing thing out of his blood.