The New Economy is….

Its typical to talk about the “hot” space in startups being “social networking.”  Its been that way for years.  No offense to Green Energy and BioTech, but the barrier to entry for launching a software app is so low that much of the VC money is going to continue pouring in to places where small amounts of cash can lead to big amounts of cash (as opposed to big amounts leading to slightly bigger amounts in the Green and Bio sectors).

But the “social networking” thing is just a facade to the true driver out there:  coupons.  Social networks have long struggled to find ways to make money.  They can sell real things (music, etc.) but that is a marginal idea since people can buy those things other places.  They can sell fake things, which Zynga and others are doing in games, but that doesn’t really reach everyone.  They can plaster ads all over the site or application (puke).  Or they can integrate coupons in to the equation.  BING.  O.

FourSquare isn’t getting attention because of scavenger hunts.  Its getting attention because its a real-time portal for where people are at, which means its a real time portal for the most direct advertising possible:  “Hey buddy, you’re going to be passing our coffee shop in about 25 feet….we’re the one on the left with a bear above the door….why not stop in and get a cup of coffee for $1 off the normal price….”  Yelp is sort of coming up on the same strategy/idea.  And Groupon has the best execution of it yet.  Find what people already like or are interested in RIGHT NOW AT THIS VERY MOMENT THAT and offer to make it easy for them to spend money RIGHT NOW AT THIS VERY MOMENT.  If I offer you 20% off at a bistro in Chicago, you might not care.  If I offer it to you via SMS or email right as you’re coming out of the Art Institute and it’s 12:15pm and you’re looking for lunch….well that’s a different story.

I, for one, love the idea of real time and location based coupons.  I think it makes advertising more effective for businesses and it makes commerce more affordable for consumers.  What’s not to like?


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