By Sharon Hill

Behavioral targeting, a darling of online marketers and publishers (see CIR 10.18, Sept. 17, 2009) has long been under intense scrutiny by consumer advocates and U.S. legislators.The primary consumer objection to BT seems not to be the tracking itself but the failure to disclose who is doing it when and how it’s being used. In contrast, transparent targeting is often welcomed when the publisher or vendor re-labels it, gives consumers the control, and clarifies its benefits. We found three that would seem to fit that bill: Groupon, WeShop and Beezag.

Groupon’s recent launch of Deal Personalization solves a big problem for the online coupon giant: So many deals, so few days. From its beginning in November 2008, Groupon has concentrated on one daily deal for everyone in a metro-wide locale. As the number of merchants requesting to be a Groupon daily deal grew far faster than the calendar could accommodate, Groupon started offering niche-merchant daily “side” deals. These often appeared below the fold, and much smaller.

The recent deal in Bakersfield, Calif., is $7 for $15 worth of homestyle diner cuisine and drinks at Cope’s Knotty Pine Cafe. The audience is wide: Everyone eats, nearly everyone dines out. The side deal, however, is $35 for a two-day pass to the Mammoth Blue Sky Fest, a $55 value. The only takers would be local blues- and rock-music fans who can break away to the mountains for two consecutive days.

To better serve subscribers, and dissuade local merchants from turning to competitor coupon sites, Groupon came up with deal personalization. First launched in Chicago, Los Angeles, New York City, San Francisco, San Jose, and Seattle, Groupon expects it to roll out in all its 80 markets by year end.

Where it won’t appear for the near future is on the daily deal pages created by Groupon for The McClatchy Company. “That’s a really new deal and we first want to make sure we perfect the one deal,” Groupon public relations manager Julie Mossler told us.

The point of deal personalization is not only to make sure that the young male Groupon subscribers don’t get women’s hair-product offers, it’s also to make sure that someone who lives in northwest Phoenix isn’t bombarded with offers from Tempe, 30 miles east.

“Deal personalization is addressing the biggest consumer concern with daily deals,” Mossler said. “The No. 1 reason for not buying is that the consumer wants deals relevant to them. Males tell us the heck with bikini waxes. Deal personalization is a huge opportunity, as we want to retain those customers. We don’t just want to suit the average customer; we want to suit every customer. In addition to personal preferences, deals are now divvied up by ZIP code too.”

The new Groupon technology looks at consumer-buying history for its deals. “The more you interact with our site, the more we will be able to predict what you’re looking for,” Mossler said.

There are two efforts to get subscribers to deal personalize:

Current Groupon subscribers received e-mails offering to help them get more personalized deals, and asking them to provide their preferences in ten categories such as food and events.

When current or new subscribers log into the Groupon site they’re asked if they’d like more personalized deals.

No one is required to provide the information. Those who don’t will get the one basic daily deal, as before.

Deal personalization allows Groupon to “showcase hidden gems,” said Mossler. “Before, we could only handle 100 daily deals. It was a big disappointment.  We have to turn down about seven businesses for every one that we feature, but with Deal Personalization we may offer four or five deals. In addition to featuring the smaller businesses we can now offer more niche items, such as candles, ghost tours, and handmade jewelry. Until now it’s been hard to decide between these and a restaurant, for example. “

Antony “Tony” Lee, CEO and founder of the new social shopping site WeShop (see related story), and former founder and CEO of SafetyZone Catalog and Accretive Commerce, applauds Groupon’s deal personalization.

“What gets most consumers upset is they don’t know what’s getting taken from their online activity and what you’re doing with it. Groupon is being upfront about it,” he said.

Richard Smullen, CEO of AdGenesis and its new Beezag (see sidebar) also founded VC firm, SouthWinston Investments (Pty) Ltd of South Africa. Smullen agrees that deal personalization is smart business.

“Nothing is more powerful and transparent than the consumer themselves offering up info because they want to, because they get a lot more value for it — savings, rewards, and different ways the brands extend offers and appreciate them,” he told us. “Because consumer’s times are more constrained, with e-mail on the go, social media on the go and ubiquitous communication, they don’t have time to engage with anything not related to them. The only way to counter [this time constraint] and get consumers excited to communicate with merchants is to find out what they need and put the brand in front of them because they trust you. The only way you can do that is if you have one-on-one relationships direct with consumers. Not through spying.”

While growing revenue is undoubtedly part of Groupon’s deal personalization mission, its immediate effect on the bottom line, if positive at all is certainly not massive. The value of the deals to Groupon depends in part on the “tipping” point, a merchant decision. As part of Groupon’s viral marketing effort, each deal must be purchased by a minimum number of consumers before any of the takers actually get the offer. Reaching that minimum is called tipping. The right number of tips depends on several factors.

“It really isn’t the industry as much as the size of the market and engagement,” said Mossler. “We did one deal that required 1,000 purchases to tip. It was for rental of a high-end sports car, with a very high price point. This wouldn’t have been fair to the dealer to do in a 20,000 population market.”

However, delivering the right deals to the people who really want them should please consumers and merchants both, and make Groupon a more efficient, better appreciated, and ultimately more profitable site.

To hear more about Deal Personalization, or working with Groupon for daily deal offers, you can reach Julie Mossler at Julie@groupon.com. Here’s more on WeShop and Beezag.