In Silicon Valley, success breeds imitation. Witness the glut of doomed e-commerce sites during the Dot Com bubble or, more recently, the plethora of mafia-themed social games on Facebook.
The latest hot trend is group buying. By offering daily deals for restaurants and local businesses, a handful of companies have become profitable middlemen between deal-hungry consumers and businesses looking for new patrons.
Groupon has the early lead, with operations in 80 markets and $135m in fresh funding. It also has plenty of clones — from LivingSocial Deals to Woot to BuyWithMe. Now add another one to the list — Zagat. Zagat, the prestigious restaurant and hotel guide, will launch a dining-focused daily deal service next month in major markets including New York, San Francisco and Chicago.
Zagat is putting a bit of a twist on the Groupon model, which offers a deal at a fixed price to as many people as possible. Instead, “Zagat exclusives will be offered in limited quantities for a fixed sale period,” the company explains.
“No minimum group purchase will be required. Each offer will begin with a fixed price, the price will decrease as more people buy the deal. The lowest price reached at the end of the sale period is the amount each purchaser will pay.”
Lowering the price as more people sign up is a smart move, and will likely encourage users to share Zagat deals with their friends. And Zagat has another thing going for it — brand recognition.
With fine diners already trusting Zagat as a reputable source of information, the company has a leg up on other services trying to break into the daily deals market. And given Zagat’s demographic, which probably skews a bit older and more upscale, the company could well attract new users to this type of service.
“The group buying model continues to gain popularity, and we intend to provide the best possible service for both consumers and restaurateurs,” said chief executive Tim Zagat. “Diners who are passionate about where they eat will have confidence in knowing that these specials will be offered only in Zagat-rated restaurants.”
