Group deals are gaining popularity among local businesses: 12% of surveyed local merchants say they have offered a group-deal promotion, up 33% (3 percentage points)(PPs) from the 9% who said so in June 2011, according to the seventh annual MerchantCircle Confidence Index. 

Meanwhile, the adoption rate of Facebook Ads has slowed: 23% of local merchants now say they have used Facebook Ads, up just 5% (1 PP) from the 22% who said so six months earlier. 

Traditional marketing channels also remain popular among local merchants: 25% say they use print newspaper ads and 24% use direct mail 

Across other online channels, 18% of local merchants say they are buying pay-per-click search ads and 11% use online newspapers to promote their small businesses.

Below, additional findings from the seventh annual MerchantCircle Confidence Index, which tracks trends in sentiment among US local business and explores how they spend marketing dollars.

Both emerging platforms—group-deal services and Facebook Ads—are enjoying high favorability:

• Among local merchants who have used group deals, 75% say they would do so again.
• Among those who have used Facebook Ads, 62% they would do so again.

Customer Acquisition Top Benefit of Group Deals 

Most merchants have had success acquiring new customers and generating a profit with group deals. Local merchants who would offer a daily deal again cite the following reasons for doing so:  

• Effectiveness for customer acquisition: 61%
• Ability to negotiate effective deal structure: 38%
• Deal profitability: 37% (up from 24% in June)
• Competitors are doing it: 18%

However, among the 25% who would not offer another daily deal, most (42%) say their offer failed to attract new customers; 36% say it was too costly, 34% say they lost money on the deal, and 32% say the deal didn't make a competitive difference. 

Google Offers Gains Momentum

Although Groupon and LivingSocial helped establish the daily-deals market in 2009, both services now face increased competition for local marketing dollars from Google, as well as from niche players.

Google Offers, the group-buying service that launched in the summer of 2011, has quickly gained momentum: 19% of local merchants who have offered a group deal have tried used Google Offers, compared with those who used Groupon (26%) and LivingSocial (21%). The large number of niche daily-deal providers has attracted roughly 43% of local merchants who have offered a group deal.

Looking ahead, an increasing number (32%) of local merchants plan to use Google Offers in 2012, whereas the share of those planning to use LivingSocial is expected to dip to 16%; the use of Groupon among local merchants is expected to remain flat in 2012.

Google Offers' growth will likely be, at least in part, at the expense of its two main competitors: 41% of Groupon and LivingSocial customers say they plan to use those services again, whereas 66% of those who have used Google Offers say they plan to use that service again. 

Google Offers may also benefit from the closing of Facebook Deals. Before ceasing operations, Facebook Deals had been used by 22% of the surveyed local merchants who had offered a daily deal in the past. More than one-half (53%) of those customers say they plan to use Google Offers for their next deal.

Criteria for Selecting Group Deal Provider 

When choosing a deals provider, cost remains the most important criteria for local merchants: 64% of local merchants cite cost as their top consideration, followed by local targeting (57%) and the ability to reach a large audience (52%).