Traditional Deals Model Upended by Scoutmob

19 Apr Traditional Deals Model Upended by Scoutmob

Rebecca

Although the mobile-based deals site is like its larger competitors in many ways, Scoutmob received a flood of publicity recently due to raising a $1.5 million round.

Upon closer inspection, Scoutmob reveals itself to be a radical business model upending traditional group buying. In other words, those who use the site don’t pay for the deals in advance – they are instead incentives for consumers to visit the location.

So, what part of Scoutmob’s business model is radical? The company charges only $2.00-$3.00 for each customer it succeeds in delivering to the business, much like OpenTable. The businessperson isn’t sacrificing large amounts of cash since there is no payment upfront to the SMB.

Scoutmob depends on the Smartphone’s GPS for tracking the consumer’s location and billing the advertiser. When an advertised deal is redeemed in a store, Scoutmob attaches that action with the consumer’s location and uses that information to know when the advertiser needs to be billed.

According to Scoutmob co-founder David Payne, the company owes its growth completely to word-of-mouth advertising. He believes this leads to a higher quality user, instead of the one-time or extremely price-sensitive buyers that often come to businesses through other deal sites.

There are also plans to build a big sales channel, according to Payne, which will be smaller than but somewhat comparable to the commonly-known daily deal sites.