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Meet Groupon's new dance partner: Snapchat

CNBC

Online deal site Groupon has enlisted an unlikely ally in its new marketing efforts: Snapchat.

The Snapchat texting app, which lets users send messages to friends that disappear within 10 seconds, has been a consumer phenomenon. In less than two years, the app has climbed near the top of the Android and Apple app stores and lured more than 100 million users, according to The Wall Street Journal. The company turned down a $3 billion acquisition offer from Facebook and is now said to be raising capital at a valuation of $10 billion. That's all without generating revenue.

Groupon is looking to piggyback on that momentum as it transitions from the Web to mobile, where more than half of its transactions now take place. In the first half of 2014, Groupon boosted its marketing expense by 36 percent to $143.2 million, exceeding revenue growth of 25 percent. While Snapchat has yet to introduce ads on its network, there's nothing stopping companies from creating an account and sending promotions to their followers.

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"For now, we're hacking into that space," said Paul Matson, head of social media at Chicago-based Groupon. "There's no transactional functionality yet." Taco Bell and GrubHub are among other brands using Snapchat.

Groupon's efforts began earlier this month, when the company started informing fans on Twitter and Facebook that they should follow Groupon.com on Snapchat for the chance to win exclusive deals. The first was an all-expense paid trip to Wiz Khalifa's album release concert in Colorado on Aug. 19.

Groupon has two ways of using the service. The first is by sending disappearing snaps to followers with a Web address in the message. Because Snapchat doesn't allow embedded links in messages, users have to manually type the address into a browser to check out the deal. The other method is what's called Snapchat Stories, which lets Groupon create a mashup of images on a Web page that exists for 24 hours before going away. Followers, now numbering about 2,000, have to know to visit that page every day in order to avoid missing a promotion.

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For National Dog Day, which was Tuesday, Groupon was giving away a popcorn maker. To participate, a contestant had to take a picture of a dog or grab a screenshot of an image on the Web, draw on it (using Snapchat's drawing feature) and send it back. Other prizes have been a grill and surround-sound speakers.

Groupon is excited about the early results. Matson said that as a percentage of its fan base on each service, twice as many people are checking out the deals when they see them on Snapchat than on Facebook. The numbers aren't all that useful, because Groupon has more than 11.3 million fans on Facebook. But Groupon is encouraged enough to step up its efforts.

Mike Niemczyk, a social media content strategist at Groupon, said the company isn't sure what Snapchat's plans are in terms of formally opening up the platform for ads. Groupon is doing what it can to convince Snapchat that it's a worthy endeavor.

"We share our big wins with them in terms of engagement," Niemczyk said. "They're keeping everything closely guarded."

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Mary Ritti, a Snapchat spokeswoman, said the Los Angeles-based company will provide guidelines to businesses about best practices and help them secure a user name if it's available. Otherwise, Snapchat is so hands-off that she's not even sure how many brands are using it.

"Everything they do is on their own," Ritti said. "It's fun to see brands being creative on Snapchat."

By CNBC's Ari Levy

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