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LivingSocial Tries To Learn from Groupon: Some Publicity Really Is Bad

Daily deal company LivingSocial has a new motto: If at first down you don't succeed with an ad, try, try again. The spot it ran during the Super Bowl didn't get the acceptance the company hoped it might. In the ad, a man uses daily deals to become a transvestite. As the New York Times wrote, "Yes, in 2011, advertisers still believe that transsexuals or cross-dressing is something to laugh at." The company's Oscar spot will be, um, lower key.


But the problems that LivingSocial faced were nothing compared to the criticism and even fury that the ad from competitor Groupon raised. Although many people have bought into the concept that there's no such thing as bad publicity, it's demonstrably wrong. Bad PR is painful and damaging, as a look at Groupon's web statistics, provided by Compete.com, shows.

According to Business Insider, Groupon was forced to run an ad because its competitor, LivingSocial, the second biggest daily deal site after Groupon, had decided to buy a pre-game ad. The risk was huge:

There's no testing here. It's a huge, $3 million, one-time ad buy with little understanding of how that will convert in terms of users and whether those users will purchase deals.
Groupon actually ran three ads. It should have stopped at two because the third was the killer:
When deal-of-the-day marketer Groupon's Super Bowl ad hit the air, it was supposed to be a parody of a celebrity public service announcement for a noble cause that actually talked about supporting your own cause by saving money. The company even hired Academy Award-winning actor Timothy Hutton as the spokesperson, who segues from the people of Tibet being in trouble and their culture in jeopardy to, "But they still whip up an amazing fish curry."The gag flopped like a dying cod on the deck of a fishing boat. Shades of that Kenneth Cole tweet trying to use the Egyptian uprising as a sales hook.
Groupon CEO Andrew Mason blogged a seeming apology that wasn't. Anger mounted. Mason wrote a second note that was more contrite. Finally things calmed down.

If the company believed that it had done nothing wrong, why did it apologize? In addition to people demanding it, it looks as though the ad had a negative influence on traffic trends. At BNET's request, Compete.com, which measures site activity, put together some data measuring Groupon.com's reach, or "how many people visit a website as a percentage of all U.S. Internet users online." Look at the graph that runs from early December to about February 22 (click to enlarge):


Traffic had been moving along, declining from mid- to late-January. See that big spike -- the beginning of what looks to be an improvement? That was pre-Super Bowl buzz. You'd expect the actual ad to drive even more traffic. Instead, traffic came up some and dropped. There was another small lift on 2/9, and then a bigger drop.

Even spending millions of dollars on a Super Bowl ad, the company couldn't coax as much traffic as came by right before the game, and it barely got to the point it had reached in early January. Here's a year's worth of data from Compete:


What had been a general trend upward got derailed. Things have finally begun to recover, but no thanks to the expensive Super Bowl ad. Even a well-funded young company needs to consider how it spends resources. Other than the money, there is time, management attention, and creative work. Although the move probably didn't permanently damage the brand, it shows how bad PR can hurt.

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