Google Ventures-Backed Signpost Brings Repeat Business to Daily Deals

4/12/12Follow @jpruth

The daily deals sector may be overcrowded and highly competitive, but New York’s Signpost is leveraging a different approach to help attract customers to small merchants.

The two-year-old startup operates as an advertising platform that gets deals published online on behalf of cafés, spas, restaurants, and other retailers. On the surface that sounds like the same pitch as Groupon and Living Social. What makes Signpost different is it serves as a marketing middleman between small retailers and more than 1,200 Web publishers such as Yellow Pages, Dealster, AOL, Yipit, and Patch, where deals are offered. Now Signpost is rapidly widening its coverage by collaborating with another growing daily deals site.

Last month, Signpost entered a partnership with Google Offers to post deals from its clients. The partnership comes at a time when Google Offers is expanding into new markets such as Philadelphia, Miami, Austin, and Houston. The agreement also deepens Signpost’s relationship with Google, which backs the startup through Google Ventures.

Other investors in Signpost include Spark Capital and angel investors such as Thomas Lehrman, co-founder of Gerson Lehrman Group; entrepreneur and blogger Jason Calacanis, and Jack Herrick, founder of wikiHow. Stuart Wall, the CEO and founder of Signpost, says his company has raised more than $1 million thus far but would not disclose the total amount of its current funding. If the company’s revenue growth continues, he says Signpost may not need to raise more capital—at least in the near term—to fuel its expansion.

Wall says daily deals offer merchants measurable results from their marketing efforts, as compared with gauging impressions from online ads. However, it can be tough for small businesses to get attention in the crowded field of daily deals. Signpost offers merchants a way to quickly increase their exposure. “We think the big innovation for us is we allow them to access every platform,” Wall says. “We want to play the access role for every market.”

Signpost charges clients $99 per month and offers access to a network of publishers to post the deals. The company primarily works with retail-oriented small businesses, though it may explore other categories as well.

Through the partnership with Google Offers, Signpost’s clients can also be discovered by users searching Google Places, which offers recommendations on local businesses. Wall says his goal is to help businesses attract more repeat local customers than onetime discount opportunists who are just passing through. “Sometimes with daily deals, a number of buyers would never go to the businesses on their own and probably won’t come back,” he says.

Daily deals can come with a few drawbacks, of course, particularly for small businesses. “What we don’t like is they tend to be inflexible,” Wall says. “You can’t set the terms on how many people receive the offers.”

He says another potential problem is a misalignment of goals between daily deals site operators, who want to sell as many offers as possible, and businesses that want more repeat patrons who are not driven just by discounts. Wall estimates that 10 percent of daily deals customers come back to pay at full price.

Signpost began with a business plan Wall drafted in 2009 while at Harvard Business School. His initial idea was to help small businesses who were not already online get noticed on the Web. “If you’re an offline business, it is really expensive and inefficient to advertise online,” Wall says.

He launched his startup, at the time named Postabon, in early 2010 as a platform that invited consumers to post their favorite specials and discounts from merchants, much like a Yelp review. “If we had a lot of information we could get consumers to look at it and then offer premium listings to businesses,” Wall says.

But he soon realized that approach was not effective. “We weren’t closing the loop,” he says. “We didn’t know who was actually visiting the businesses.” Postabon changed its name to Signpost in October 2010 and then in 2011 pivoted to operate as an online advertising go-between. Signpost negotiates rates and alleviates some of the legwork for merchants by suggesting Web publishers that fit their needs. “The average business owner is getting like five calls a day from some of these [daily deal] sites,” Wall says.

Wall says Signpost is avoiding the model of marketing discounts in massive floods, which may encourage consumers to seek offers from many merchants rather than become repeat customers at a select few. “Our objective is getting good customers to our businesses, not selling the most offers possible,” he says.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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