How Groupon Could Scale “Groupon Now” — Make It An Ad Network

Andrew Mason, Groupon

[credit provider=”Dan Frommer, Business Insider”]

Groupon is launching a new mobile deals service next month called “Groupon Now.” The idea is for users to be able to click two buttons — “I’m Hungry” or “I’m Bored” — and get a deal for a restaurant or service nearby that is valid RIGHT NOW, but might only last for a few hours.It sounds like a brilliant idea, but one of the initial challenges for Groupon — besides getting merchants to buy into it — will be attracting enough Groupon Now app users to build a large market of deal shoppers. If these deals are hyperlocal, and not just covering the whole city, they’ll need a good stream of users to make it work.

While Groupon has had an iPhone app for a long time, and probably sees a good amount of mobile deal purchases and redemptions, it isn’t an inherently mobile service. It’s not like Facebook or Foursquare, for example, which active users could easily open up several times per day.

So here’s one way Groupon could scale up Groupon Now pretty quickly: By running the deals in a lot of other apps, too, via an ad network.

Groupon could either offer specific deals — and dynamic, just-in-time ad creative — based on the user’s location and time of day. Or it could make an attractive “I’m Hungry” “I’m Bored” button ad. The ads could direct people to a mobile web site or to Groupon’s app, where users could complete their purchase.

And then Groupon could give some money to the app publisher, as with any lead-gen affiliate relationship. (Either on a cost-per-click or cost-per-acquisition basis.) If the deals are well-targeted, they could have high clickthrough or purchase rates, creating a hot ad unit. And if Groupon can offer publishers more revenue than competing ad networks, it could become very popular.

To be sure, this would add complexity to the offering, and there could be things we’re not thinking of that would make this challenging or impossible. But it seems like one way that Groupon could extend its Groupon Now audience beyond just its app and email newsletter.

Now check out our photo tour of Groupon’s awesome Chicago HQ →