The big news lately in local deals is around public offerings by Groupon and LivingSocial and the rising competition from web players like Google and Facebook. But the more I see of American Express, the more I think it stands a chance to be a major player to watch in this field, too.
The latter is all of 162 years old. But you wouldn’t know it based on the way it’s been throwing itself into social media and activating local deals and discounts through emerging social channels. With its Smart Offers API, a platform that allows third-party deals services to build upon its payment system, it’s been able to partner with Foursquare, SCVNGR and, most recently, Facebook to offer local deals to its members.
American Express’ Link, Like, Love platform on Facebook is a good example of how the company can be a power player in the local-commerce space, keeping up with and perhaps outpacing leaders like Groupon and LivingSocial. The new service, which launched earlier this month, allows users to link their AmEx card to their Facebook account and pick from among a number of personalized deals selected for them. Deals are redeemed when a member uses his card to pay for the offer. There is nothing to print out, no pre-buying of an offer and no special check-out process in the store, complexities that hamper other deals services. Users’ savings are simply credited to their account.
American Express has some 90 million card members worldwide, and its service is a simple and elegant way to offer a very robust and personalized deals service. While it only works for existing card members, it will have lot of reach with businesses. Altogether, if the service takes off, it could show many of the new deals companies how commerce, loyalty and offers are really done.
Here are a few reasons why:
- With its unique makeup as a card issuer, merchant acquirer and payment network, AmEx has direct relationships with both consumers and merchants — unlike other credit card companies, which work with acquiring banks. This allows it to appeal directly to both groups and enables it to quickly strike deals with third parties like Foursquare and Facebook. And because of its structure, it commands a vast amount of data that is valuable for merchants, helping them understand how effective their deals are, how people are spending money on their visits and how often they’re returning. It’s not personal information based on individual customers but aggregate data. But it’s still very helpful in “closing the loop” and helping businesses measure their return on investment and see how they need to tweak their outreach.
- AmEx is well positioned to appeal to merchants and brands. It’s already established a relationship with companies big and small, and it has an easy way for them to implement deals. They not only get information but also don’t have to train staff to learn how to redeem coupons. That’s one catch that can hold up some deals: Employees aren’t always ready to handle them. Unlike many services, AmEx is also not looking to take a big 50 percent cut of deals. American Express’ VP of global marketing capabilities, David Wolf, told me that the deals are negotiated individually, and small businesses using AmEx’s new self-serve product, Go Social, don’t pay anything. The company sees a revenue opportunity in providing advanced analytics or pay-for-performance campaigns down the road, but right now it’s primarily looking at driving more sales and taking its usual transaction fees.
- Consumers have a lot to like, too. AmEx deals are showing up on popular social services like Facebook and Foursquare, and users’ likes, interests and check-ins are helping determine what deals they see. So if a user checks in a lot at Dunkin Donuts, she will see more deals from Dunkin through Link, Like, Love. That’s another big issue with some of these deals sites. Their discounts are often not relevant to users, so many just ignore them. Also, consumers can take advantage of AmEx’s system with minimal effort. There is a lot of hype around near-field communication payments, but they are going to require new point-of-sale hardware by merchants, new NFC-equipped phones for users and new purchase behavior. With AmEx, members are using the cards they already have. And with the Facebook partnership, AmEx is offering not only deals but also membership rewards and early access to events. This expands upon American Express’ existing work in building loyalty with its members.
- Groupon and Living Social have thousands of salespeople, which has helped fuel their growth. But AmEx has thousands of client managers and representatives of its own, spread across different areas — membership rewards, merchant services, global advertising and sponsorships — who all interface with millions of business clients. They’re all now being tasked with presenting these deals opportunities to businesses. That’s a formidable force that already has its foot in the door of businesses. If AmEx makes this is a priority, it shouldn’t be hard to convince many existing partners to sign on. That should help with one concern I have about AmEx, which is what kind of deals volume it will be able to muster. It’s about not only creating personalized deals but also having enough offers overall to keep people interested and coming back regularly.
- Not talked about in the Facebook partnership or the other deals with Foursquare and SCVNGR is American Express’ Serve digital-wallet platform. That product is still just getting going but it offers users the ability to load up an account from various sources including American Express, other credit cards and bank accounts. Users pay for online purchases and offline transactions with a pre-paid card. David Messenger, executive vice president of online and mobile for American Express, said the company is poised to offer Serve deals and coupons in the next few months and is building a common infrastructure that will support merchants looking to target deals on both Serve and through partnerships like Facebook and Foursquare. He said AmEx is working on completing matching tools that allow the company to tap its data and deliver the most relevant offers to users. With a growing deals operation that can intelligently target different segments — both traditional credit card users and people less comfortable with cards — AmEx is building an attractive platform for brands and companies to offer discounts.
There are some limitations to AmEx. With its 90 million card members, it still trails Visa and MasterCard. That means many people won’t be able to avail themselves of these discounts. Wolf believes that AmEx will likely attract more customers as people start to see the kinds of offers available through Facebook, Foursquare and others. But it’s still a limitation that is not a problem for other services.
Right now, AmEx also is also relying on users to pull the deals. Customers need to visit Facebook to get their curated offers, or they can get them when they check in through Facebook or Foursquare at participating locations. But with Loopt’s partnership with Groupon and other location-based offers, we are seeing that a big opportunity is in pushing out deals to users when they pass near a merchant or business establishment. This is increasingly where deals will go in the future, I believe, though I imagine AmEx will be able to have an answer for that through its partnerships.
That, however, highlights American Express’ dependence on partners like Facebook, Foursquare and SCVNGR, who might not always want to cooperate as fully. Right now Foursquare is on board, but it’s not taking any revenue from its partnership. It will eventually look to bring in more revenue from its location-based network, and that could alter how it views its relationship with American Express. Facebook also has its own deals platform. If things heat up, it’s unclear how AmEx will fare if its partners don’t promote or make these deals as visible or as easy to access.
But I think American Express is still a company to watch, because it is poised to be a major player in deals, if it chooses to. And it’s a great lesson for other older firms, showing that it pays to embrace social media and to be where your customers are. The daily-deals market is still evolving, and a lot of ideas are in play. Many models are being pushed to the limit and may not survive as the industry matures. But I think in general, the less friction you have in offering and processing deals, the more value you provide both customers and merchants. And the more existing assets and relationships you can leverage, the more likely you’ll be successful. AmEx has a lot of that going for it. And it’s just getting started.