CityPockets Acquires DealBurner for Location-Based Deal Alerts

CityPockets, the site that began as a niche tool for deal hounds to manage and track purchased deals, has taken a big step towards becoming a full-service offers provider, acquiring DealBurner – an application that alerts users of nearby deals via SMS – in an all-stock transaction yesterday. The alerts service currently relies on users to check-in via Foursquare and Facebook (no longer Facebook Places) to receive notifications, but CityPockets co-founder Cheryl Yeoh says that they plan on expanding the service’s functionality.

Yesterday’s acquisition marks the biggest move yet in what has been a busy few months for the New York-based company. In April, CityPockets launched a DealsGoRound-like secondary market, where consumers can buy and sell already purchased vouchers.  Building on a round of funding in late June, the company has dramatically expanded their inventory of deals, introducing a daily deals aggregation feature earlier this month which will be expanded to include instant deals, as part of the DealBurner integration.

“We decided to acquire DealBurner and launch the instant deal aggregation component because the deal wallet remains a niche feature – many users did not think they needed it- so the best way for us to get traction and get people interested was to provide a way for consumers to immediately get value from our product,” explains Yeoh, who co-founded the company with CTO Jhony Fung in the 2010.

Yeoh says that the addition of DealBurner marks a concerted effort by the company to focus on instant deals in the mobile space. ”The problem with local deals,” she explains, “is that most people will not open an app to search for deals around them, but if deals are pushed, consumers are more likely to complete the transaction.”

The hyperlocal serendipity factor – the “oh hey, it’s lunchtime, here’s a place around the corner that’s offering 40 percent off falafel” moment – is contingent on having live deals available in a particular location. The “offer-density” problem has plagued GrouponNow! and LivingSocial Instant, says Yeoh, who argues that, for these services to work, the big deal providers need to have ten times their existing inventory.

Yeoh says that the September update planned for CityPockets existing mobile application will combine instant deals aggregated from across the web with offers from their secondary market place, into one of the largest inventories of local deals currently available.

So what is stopping the big aggregators from cloning CityPockets’ core DealWallet feature? “Little,” says Yeoh, “but the key point is that they still haven’t.” She reasons that services like Yipit are entering into a more data-oriented revenue model, in which the incentives are to keep the data clean and accurate.

CityPockets may be one more competitor in what is already an over-crowded consumer deals space, but the growth from niche tool to full-service company remains an effective entrant into a competitive market. Yeoh says the company is in the process of building a recommendation engine, which serves consumers with relevant deals based on purchase history data from the deal wallet and — with the DealBurner acquisition — social check-in behavior as well.