JPMorgan’s Groupon Look-a-Like Will Make Waves
Brendan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I don’t like receiving mass emails or online advertisements, especially when I don’t sign up for them. However, I do enjoy being exposed to relevant, targeted deals and coupons.
With JPMorgan Chase & Co.’s (NYSE: JPM) recent announcement stating that it will purchase Bloomspot for $35 million, JPMorgan customers will likely experience targeted service. Similar to Groupon (NASDAQ: GRPN), Bloomspot partners with merchants to provide deals and coupons to a member base.
Bloomspot offers a variety of programs which can be catered to thousands of merchants’ needs. Daily offers featuring customized deals, exclusive offers featuring one particular merchant, and reserve offers to the highest paying Bloomspot members are a sampling of programs available to merchants.
Further, merchants pay for results. They are only charged for each member that becomes a paying customer for each offer. Bloomspot, now JPMorgan makes money by taking a commission on each sale. When properly executed, the result is simple: Bloomspot, merchants, and customers are all happy.
One of the main reasons JPMorgan is buying Bloomspot is because of future revenue potential from deals. Due to the vast amount of credit card data and personal information within JPMorgan’s database, JPMorgan is poised to offer targeted deals to consumers. Coupling this valuable data and information on each consumer with the services of Bloomspot should lead to higher profits and satisfied customers for the investment bank. In fact, this model is so attractive that other large banks have taken similar steps to offer services similar to Bloomspot and Groupon.
Bank of America (NYSE: BAC) and Regions Financial Corporation (NYSE: RF), for example, each have solicited the firm Cardlytics to draft similar service programs for their respective customer bases. Cardlytics creates customized advertisements for customers that are based on consumer shopping habits. Once consumers make a purchase through the advertisement, rewards are credited to their private Cardlytics account. Merchants like the service because, like JPMorgan’s Bloomspot, they only pay Cardlytics for the paying customer. They pay for performance.
This model is great for the financial organizations to inform audiences of the many banking services and programs they offer. Specifically, banks tend to like these services because they are increasing their brand and product awareness at no cost. The cost that they do incur, though, results in new or repeat customers for each specific advertisement. As a result, you may expect to see an increasing number of online advertisements from Bank of America and Regions Financial Corporation.
Additionally, similar to JPMorgan’s new position, MasterCard (NYSE: MA) owns Truaxis—a provider of loyalty rewards programs. As a result, a potential battle between these two large firms could be inevitable because each offers deals relevant to their consumers’ spending history. However, Truaxis—a MasterCard company—and Cardlytics will likely enter the most fierce competition as they try to attract financial institutions to be merchants. Even with increased competition between these firms, JPMorgan expects high revenues as customers receive relevant, targeted advertisements and deals. I suspect that Groupon, however, is not positioned to take the coming blow that it will likely endure.
Groupon does not have the extensive amount of data available like JPMorgan. For Groupon, ultra targeted deals backed by customer data are rare. JPMorgan’s huge database and Bloomspot’s technology will likely lead to a higher probability of purchases for the bank’s customers. Additionally, the Bloomspot buyout was a good move because JPMorgan’s customers will have the ability to deduct discounts and savings directly from their credit card statement—they do not need to purchase a coupon in advance like Groupon’s business model.
Further, and perhaps most attractive toward JPMorgan’s bottom line is that there is a lower transaction fee for the merchant involved in the process. Current estimates show that merchants utilizing Bloomspot will spend 98.75% less of what merchants through Groupon pay. Therefore, I suspect that Groupon will lose merchants to Bloomspot. Implicitly, merchants also recognize that Bloomspot’s deals are based off of past spending trends of consumers. The result is an overall better opportunity for merchants.
JPMorgan customers: expect more targeted deals and offers through web, email, and even mobile channels. The Bloomspot buyout could be the first major step toward Groupon’s demise and another good step for JPMorgan.
marascobn1 has no position in any stocks mentioned. The Motley Fool owns shares of Bank of America, JPMorgan Chase & Co., and MasterCard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!