In class, we discussed the relative merits of Groupon versus Restaurant.com. I would like to examine another recent entrant to the restaurant promotion space: Savored.com.

Savored operates a bit like OpenTable, a bit like Restaurant.com, and a bit like Hotels.com. You register on the site and search for restaurants in your area, specifying the date and number of people in your party. Like on OpenTable, you’ll receive a list of restaurants in Savored’s system that have availability. You pay $10 to make your reservation, and in exchange you’ll receive 30% off your entire bill (40% off in Boston because they are just starting out). There’s no need to print out a certificate or code although a gentle reminder to your hostess is encouraged. If you don’t make your $10 back, Savored promises to refund your money.

Still skeptical? Here are a few characteristics that give Savored an edge in both sustainability and marketability:

Better restaurants: A common complaint about discount sites is that discounts aren’t available for restaurants that I want to go to or that minimum purchase requirements are difficult to meet. Savored addresses these problems by targeting relatively high end restaurants (Upstairs on the Square in Harvard Square is a participant) where it’s quite easy to make your $10 back (Dinner for 2 at Upstairs could easily run $150 resulting in savings of $45). By providing greater value to customers who are likely to spend more in restaurants, Savored can attract better restaurants, creating a virtuous cycle.

Fills otherwise empty tables: Unlike both Groupon and Restaurant.com where restaurants have little control over when customers show up, Savored allows restaurants to determine how many tables they would like to make available each night and at each time. In this way, Savored operates as an excess inventory clearinghouse, giving restaurants a way to fill tables that truly would otherwise be empty at prices that should more than cover their marginal costs.

It appears that restaurants are indeed using Savored to fill tables at non-peak times: in Boston 16 restaurants have availability for 2 on Wed 10/26 while 12 restaurants have availability on Sat 10/29. In New York City, the comparable numbers are 177 and 132. Reservations at Upstairs on the Square are only available for 5:30, 6:00, 9:00 and 9:30 – all non-peak times. (Numbers checked on Oct 13, 2011)

Drives incremental customers: Savored has a spiffy, easy-to-use-and-filter website and has partnered with OpenTable (to advertise deals) and Zagat (to provide reviews). They also have a blog and plan to feature recommended restaurant lists from celebrities. These discovery and curation features encourage potential diners to spend more time on the website and to use it for restaurant discovery based on quality, rather than on price.

Encourages incremental spending: By offering a flat percentage off the entire bill, Savored encourages diners to spend more (hey, that bottle of champagne’s 30% off). In contrast, Restaurant.com’s fixed discount encourages diners to spend the minimum where the discount is deepest. Ultimately, restaurants will likely benefit more from the increased spending than they will from having capped the discount.

One potential problem is that Savored may accidentally convert its high value customers into discount users. For instance, the very discretion advertised by Savored (no physical coupon) may also appeal to expense account managers looking to reduce business entertainment expenses. Losing expense account diners would be a serious hit to any restaurant’s bottom line. However, it appears that restaurants have been able to ameliorate this problem through date/time restrictions: The Capital Grille on Wall Street only offers Savored reservations on Fridays and Saturdays when businesspeople are unlikely to be around.

Savored seems to have found an untapped niche in the restaurant promotion market. They should stick to their strategy of providing high end customers access to high end restaurants. This isn’t a model that would work for restaurants where the average ticket is $30 or restaurants with primarily walk-in business nor is it a model that works for customers looking for 50%+ deep discounts. It is however a model that could successfully drive traffic to certain types of restaurants while retaining the restaurants’ ability to price discriminate.

Sources:

Carrns, Ann. “VillageVines: Dining Discount Site Tries New Name.” New York Times Online. June 21, 2011. http://bucks.blogs.nytimes.com/2011/06/21/village-vines-dining-discount-site-tries-a-new-name/

Duryee, Tricia. “Savored is a Groupon Competitor That Feeds Off Merchants’ Fears About Groupon.” AlllThingsD. June 21, 2011. http://allthingsd.com/20110621/savored-is-a-groupon-competitor-that-feeds-off-merchants-fears-about-groupon/

Olmsted, Larry. “Get Paid to Eat Out!” Forbes.com. Oct 5, 2011. http://www.forbes.com/sites/larryolmsted/2011/10/05/get-paid-to-eat-out/

Tigar, Lindsay. “Not Just Another Coupon Site.” The New York Enterprise Report. July 5, 2011. http://nyreport.com/articles/80736/not_just_another_coupon_site

On an earnings call last spring, Senior VP of local at Google Jeff Huber said “the smartphone is becoming an extension of the person, and how they do everything.” Google also stated that “without any radical effort,” mobile was already a $1 billion run-rate business for them. As someone attached to their mobile device, I find the evolution of this area to be fascinating. Beyond my personal experience, I see many growth opportunities springing from growing smartphone sales, new distribution models offered through app stores and mobile downloads and the increasing capabilities of mobile platforms. The emergence of ubiquitous computing and cross-mobile businesses is creating an area ripe for disruptive business models that solve problems by taking advantage of mobile’s unique characteristics in new ways. For example, there is tremendous potential in the powerful combination of social networking and e-commerce to achieve consumer checkouts via mobile devices. Asian markets are already witnessing greater transaction completion/commerce through mobile shopping.

Smartphone penetration in North America was 42% in 2010 and is expected to reach 60% by 2014. In addition to the increased availability of the iPhone, Google is now activating over 500,000 Android phones per day. I believe mobile is poised to become an “everything hub” and will also become an increasingly powerful marketing and advertising platform. According to media buyers, mobile is expected to comprise 5-7% of online media budgets in 2011, representing a $1-$1.5 billion spend versus $400-$500 million last year. Clients are also beginning to separate budgets for mobile rather than including them as a carve-out of online spend (30% of clients are expected to do this in 2011). Yet mobile ads have not yet systematically taken advantage of all the capabilities and features smart phones offer, which will include near field communication technology, scannable quick response codes, geo-locating etc. While companies like 4INFO have allowed brands and content owners to reach mobile audiences via text message delivery, I believe there is room for companies to enable more creative mobile advertising that fully utilizes the features of mobile devices.

MediaLets, for example, is a rich media ad platform for mobile that helps agencies and brands create high-impact mobile ads that aim to do just this. Their cross-platform solution enables advertisers to run a single set of creatives across a broad range of mobile properties while measuring performance. Their infrastructure also helps publishers drive higher engagement and thus get higher CPMs by targeting customers through means unique to the mobile medium, such as geo-location, app content, device type, time-of-day etc. In order to truly find ways to deliver effective mobile ads that fully leverage smart phone features, advertisers and marketers must deeply understand mobile usage. Compared to other platforms such as web analytics (analyze at a site level), data analytics for mobile have been somewhat limited due to the disparity across applications, networks, devices and demographic databases. Visibility into mobile data usage will be critical going forward. Boston-based Umber Systems is attempting to help carriers, advertisers and marketers extract value from mobile data usage by addressing this issue. The company has created a real-time automated platform for gaining insight into mobile data usage that works across applications, devices and networks. I think we will see an increasing focus on improved mobile analytics which serve marketers by allowing them to understand mobile behavior and thus target effectively. Such data (such as measurement of usage etc.) will provide enhanced subscriber intelligence and the ability to segment mobile audiences for product development and marketing. Given the expected growth in smart phone penetration and mobile advertising spend, I expect to see several companies attempting to address the currently unsolved problems in this market by providing specialized services to both brands/advertisers and publishers.

However, the question remains if small start-ups such as these will be able to compete and achieve scale in this market or if the Googles of the world will dominant. Is this a winner-takes-all market or can multiple players co-exist? Google is investing heavily in mobile with acquisitions such as AdMob. Google currently dominates mobile search and many predict that Android could be poised to become the largest smartphone platform. Given this trend, I believe Google will be able to leverage the strong network effects in enjoys in search to mobile. While small companies may emerge, I foresee the most successful as potential acquisitions targets for talent and technology for the larger players rather than potential leaders in this still developing market.

The internet’s impact on the advertising industry is difficult to overstate: what was once imprecisely deployed and bluntly measured, if measured at all, has been replaced with a quantitative pseudo-science accompanied by a plethora of data and tools designed to make it targeted, efficient, trackable, and effective.  Google’s text advertisement cash machine, generating billions of dollars in revenue from tens of billions of clicks, is an obvious bellwether of this transformation, but is far from alone.  Every year, millions of dollars of venture capital and hundreds of our country’s finest engineering and business minds flow into advertising technology companies with the hope of finding some new way to slice and dice data to generate more clicks and more purchases.  Google’s online sales and operations group is staffed to the gills with recently-minted Ivy League college graduates seeking to help advertisers to understand how to use the wide variety of tools Google offers and, of course, to spend even more money.  Likewise, Facebook hires only the best and the brightest to try to find a way to leverage its massive and proprietary dataset to advertise to its users more effectively.

Almost every one of these efforts is focused on the click: find a way to generate more clicks from fewer impressions.  Find a way to generate more conversions from fewer clicks.  Find a way to turn clicks into phone calls, Groupons, eBay purchases, or completed registration forms.  Incentivize would-be clickers with virtual tractors, entice them with photos of their friends, follow them with reminders of searches and clicks past.  Seek out any semblance of a signal of purchase intent, and exploit it.

Setting aside for now the creepiness of some of these tactics, what bothers me, and what I think creates a massive opportunity, is that these efforts are myopic in their relentless focus on harvesting intent.  This is a valuable pursuit, to be sure – ten billion clicks can’t be wrong – but it is only half the picture.  Advertising has the ability to stimulate intent, not just to harvest it.  Advertising that generates intent and provokes emotion is an entirely different animal, and one that has yet to find its footing in the internet age.

I posit that there are two reasons intent-generating or brand advertising has not found its way online.  One is that when you have a hammer, you look for nails.  When you can A/B test, target ad infinitum, optimize, measure, and track, that’s exactly what you do.  Any form of advertising that doesn’t fit into that model doesn’t make the cut.  Just as you won’t get fired for IBM, you will not get fired for profitably buying clicks – but, you may get fired for spending millions on a campaign that generates awareness and interest without those requisite clicks.

The second reason is that there is not yet a format that actually works.  Surprisingly, for everything the internet can do better than traditional media, it still can’t replicate the emotional impact of a full-page, full-color, glossy magazine ad, or that of a well-executed thirty-second spot.  Banner ads are pathetic, pre-roll or interstitial video advertisements are annoying and out of place (and applicable only to the web’s video content), and nothing else seems even remotely worthy of the likes of Don Draper.  Brand-building by tweet?  Give me a break.

All this said, I am confident these obstacles will be overcome.  As a society, we have a track record of trying to retrofit every emerging medium to the tedium of the familiar.  When television first became popular, for example, newscasters simply sat at a desk, stared at a camera, and read the news, treating the medium as a kind of radio-plus.  I don’t know how brands will ultimately succeed in their pursuit of emotional resonance and demand generation online, but I know it won’t be as simple as exporting a print media concept to the web.  Our children may never lust after a full-page, full-color, glossy magazine ad, but I fully believe we are on the brink of witnessing its twenty-first century equivalent.

I’m considering a career in the advertising industry. I find the field incredibly interesting, love the intersection of business and human behavior, and enjoy working with creative people. But in the back of my mind I have lingering questions about the field. Go out to any random bar, and surely you’ll be able to find someone who can list 10 compelling reasons why advertising is ruining society. On the flip side, you can probably also find someone in that bar who can list 10 equally compelling reasons for the economic value that advertising helps create. My interest about whether or not advertising is evil has risen this week in response to several news stories:

1) Google’s Anti-trust hearing with the FTC: In short, the search giant is being accused of abusing their market dominance and harming consumers in the process. One piece of this is how Google’s placement of advertising has evolved over time. Ten years ago, they barely featured any ads. Today, a google search looks quite different. For a company that makes nearly all of their revenue through advertising, it certainly seems that they have an incentive to increase the number of ads and decrease the number of organic search results.

2) Facebook’s new Timeline and Open Graph: Some have argued that Facebook’s new architecture has been enhanced mainly to create an amazing advertising platform. And when you realize that your actions will sometimes generate sponsored stories with your name on them, but without your knowledge, you can certainly start to see how it could be perceived this way. 

3) Disney targets babies: In the Adweek cover story this week, the magazine talks about how marketers are increasingly targeting babies to get early influence with a generation that will be using smartphones within their first few years of life. One story in this article was particularly interesting. Apparently Disney has partnered with a photography company that takes pictures of mothers and babies after they’ve given birth to offer the mom’s free Disney onesies in exchange for their email address. Back off, advertisers, the kid can’t even see clearly!

But you have to consider the flip side to all of these stories. Google’s incredible ad revenue has given them the money to create amazing products that have simplified and enhanced the human experience. They also give a lot back. For example, they’ve begun building low income housing (although it seems that this move will also generate healthy returns). Facebook timeline will arguably create a far more emotional and meaningful user experience that will transform our online social life for the better. And Disney has created more happiness in children around the world than any other brand I can think of, and for a lot of people, a free onesie is a welcomed gift.

So is advertising evil? Unfortunately, I think the best answer is still the unsatisfactory one: “it depends.” 

Certainly nagging questions remain about the motives of our most beloved brands. Is it that we’re unaware that we’re being marketed to that makes us uncomfortable? I don’t think so. My friend Matt Summers would actually argue that mystery and the unknown actually enhances brands in our minds. Or maybe it’s more the sense of deception doesn’t sit well. This seems feasible. Most likely its the proliferation of advertising that most alarms people. It simply seems to be everywhere today, from the baseball park to my friend’s blog to the delivery room.

But all is not lost. In the face of this proliferation, there is a real opportunity to do good by creating value for consumers. To educate, entertain and engage. Given the advent of the digital age, this is more possible than ever. This gives me real hope about the direction of advertising and I’m excited to be a part of it.