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Groupon bets on mobile, partners with Deutsche Telekom

Groupon partners with Deutsche Telekom in a bet that mobile will play a key role in helping it continue to grow.

The recently announced strategic partnership will see Groupon’s daily deals integrated into Deutsch Telekom’s mobile services. This is the first time Groupon has partnered with a wireless carrier.

“The aim is that Groupon’s mobile version becomes a more frictionless experience,” said Aapo Markkanen, London-based senior analyst for consumer mobility at ABI Research. “Notifications of locally relevant deals would go directly to users, without a dedicated app.

“Groupon needs a stronger presence on mobile, so it’s willing to establish needed partnerships with the right players – one of Europe’s biggest carriers, Deutsche Telekom is a great candidate,” he said.

“Mobile’s value to daily deals is in making them more locally relevant and more immediate. Both aspects would help in making the daily-deal experience more real-time.”

Deep integration
Mobile could be an important area of growth for Groupon because it would enable the company to provide offers based on a user’s purchasing history as well as their location, enable users to pay with their phones and share the deal with friends.

The deal with Deutsche Telekom suggests Groupon will look to build its business via mobile services.

The deal ostensibly removes some of the hurdles for mobile users by integrating Groupon into the phone’s operating system so that users do not have to download an app or turn on automatic notifications. Instead, Telekom’s mobile subscribers will receive Groupon local offers directly.

The deal will also include marketing activities.

Groupon’s local commerce deals will be made available across Deutsche Telekom’s European network in the first half of 2012.

Deutsche Telekom is the parent company of T-Mobile, is present in over 50 countries and has more than 128 million mobile customers.

The deal does not appear to include T-Mobile USA.

The news comes at a time when Groupon has been under pressure to show how it will grow its business after the company raised $700 million in November in an initial public offering, the largest IPO by a U.S. Internet company since Google raised $1.7 billion in 2004.

A week ago, shares in the company fell below the IPO price for the second time, reflecting concern that Groupon is having problems getting merchants to sign up for more than one deal. The issue for some merchants is that new customers gained through Groupon deals have a low rate of repeat business.

To continue to attract merchants, Groupon may be forced to reduce the price for deals.

Additionally, while Groupon is the biggest daily deals provider, competition is growing from the likes of LivingSocial, Google Offers and others.

Relevancy important for mobile
In order to continue to grow its business, Groupon could pursue deals with other wireless carriers.

However, Groupon will have to be careful in mobile to send only deals that are relevant to users or it risks turning them off to the service.

“[Other carrier deals are] entirely possible, especially if this venture takes off well,” Mr. Markkanen said. 

“Both sides will have to watch their steps, though,” he said. “A lot of Groupon’s shotgun emails are trashed every morning without reading because so many of the deals aren’t relevant – either for the customer’s location or purchasing history.

“If the same spam-like approach was applied in the mobile environment it would annoy the heck out of users.”

For Deutsche Telekom, the deal enables it to strengthen its stake in mobile commerce.

“Deutsche Telekom’s own motive in this is less clear to me, but I’d imagine it’s mainly about overall differentiation vs. competitors; if the concept is well received among subscribers then it could be another incentive for some of them to stick to DT when they’re considering other operators,” Mr. Markkanen said. “There may also be some revenue-sharing element involved in this deal, but I haven’t seen a mention of such.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York