In just nineteen months, it's gone from Groupon wannabe to the darling of Atlanta deal seekers. But for the merchants, is it worth the price?
One day in February, a salesman met with Barbara O’Neill and promised to dramatically increase her business. As the owner of the Cookie Studio, set in a Decatur strip mall down the street from the Waffle House Museum, O’Neill has spent the last four years baking cookies, cupcakes, and dessert bars in a white-walled space barely big enough to fit ten customers. The chalkboard menu is limited mostly to what’s baked fresh: Cherry Ginger Explosion cookies, Key lime cupcakes, toffee pecan bars, and chocolate brownies. On the counter sits a tip jar, the proceeds of which go to the day shelter for women and children where O’Neill volunteered after leaving her job at a New York law firm to live a more family-focused life in the South.
Michael Tavani, left, and Dave Payne;
Photograph by Ryan Gibson
The man with the promises, Evan Pease, explained that he worked for Scoutmob. O’Neill had heard the name before. If you live in metro Atlanta and have a smartphone, you probably have, too. Launched in January 2010, Scoutmob is a website and mobile application that provides discounts at restaurants, boutiques, and other businesses. Unlike big competitor Groupon, which requires users to purchase a coupon in advance, Scoutmob doesn’t cost customers a thing. They simply flash the deal to their server or cashier and presto—the bill is reduced by as much as half.
The pitch to O’Neill was simple: Sign up with Scoutmob for no cost up front and we’ll drive thousands of customers to your business over a three-month period. In return you’ll pay us a small fee every time someone clicks on or claims the deal.
By virtually any measure, the Cookie Studio had been a success since it opened; revenues were growing by as much as 50 percent a year, and O’Neill had customers she knew by name. Still, she was eager to bring in new business. She didn’t have the money to advertise in the newspaper or on television, which can cost upwards of $3,200 to $6,000 a month. Scoutmob sounded like a cheaper, easier way to spread the word. Without giving too much thought to what would happen next, she signed on.
At 6:30 a.m. on May 17, more than 250,000 people in the Atlanta area received an e-mail with a coupon from Scoutmob that read, “Everyone has their own version of a pick-me-up: a long walk on the beach, quiet meditation, perhaps a few bad reality show reruns. But no number of beachy strolls or Flavor [Flav] can equal the healing power of the homemade cookie.”
The tease was vintage Scoutmob—conversational, youthful, nostalgic—and the offer to its members was tempting: 50 percent off at the Cookie Studio, for a maximum $10 discount.
At the moment the deal went live, O’Neill was in the shower. Two workers were already at the bakery, preparing dozens of cupcakes and 800 cookies, about 200 more than usual. The shop opened at 9 a.m. By 2:30 that afternoon, the racks were empty and O’Neill and her team were back to baking.
By closing time at 6 p.m., about 3,654 people had claimed the deal via text or e-mail, reserving for them the right to use the coupon at some point in the next three months. For each of these, O’Neill was charged fifty cents. That meant she was going to owe Scoutmob a minimum of $1,827 for that day alone. That didn’t take into account the number of times the coupon was redeemed via smartphone, which would cost her $3 a pop. And the number was only going to rise, because the smartphone deal wouldn’t expire for three months. (By the end of May, 172 smartphone users had redeemed the deal.)
“I didn’t think about the repercussions,” she says.
She didn’t realize that in less than two years, Scoutmob had gone from a two-man operation in Castleberry Hill to a juggernaut in thirteen cities. Along the way, the deal maker helped transform the relationship between business owner and customer with its message: Bargains are your birthright! And the message to merchants is just as crystalline: Sign up with us for free and we’ll boost your business. But what some merchants are learning is that when Scoutmob takes them from slow to slammed, it’s for better and for worse.