Daily Deals Biz: A Race to Own Local, Not Coupons?
There seems to be a correlation between Groupon’s falling IPO target and the numbers of words journalists, non-journo-bloggers, pontificators, provocateurs and naysayers (and me) dedicate to the daily deals space. Hey, if we can call Social Security a Ponzi scheme why not the seemingly magical profit-machine of Groupon and others? OK, technically they are not profitable — damn close — but you get the point.
It’s difficult to get a handle on the deals space for several reasons. The incessant stream of contradictory stories coming from the media, in particular the online-only media where the focus is on generating a lot of content quickly is certainly an issue. Sometimes a reader is faced with a headline declaring the deals business is a fraud, local businesses hate and the end is near… in the same space hours later is another take with different facts declaring all’s well and everyone’s about to get richer. It can be maddenning to follow.
And what about the businesses trying to stretch their tiny marketing allotment in a particularly bad economy? Discounts are great for consumers of course but do businesses really see a recurring benefit or is it a one-time jolt, leaving them with half their stock gone at a quarter the take?
These are old concerns (arguments?) and it remains to be seen how all will pan out in the mid term. If you believe our own Alex Salkever there needs to be a shakeout:
We here at Street Fight and other media sources have been calling for a big consolidation in the daily deals market for some time now. But consolidation can take two forms. To date, that has been acquisitions. Going forward, there may be more outright closures. I discussed this a bit in a column about how the middle of the daily deal market would hollow out and small-time mom and pops would survive along with the big guys but not much in between.
So perhaps the scores of smaller deals sites will get gobbled up (as some already have, like Woot) or deflated. Certainly niche selling is an interesting trend, such as selling to moms by moms (Plum District) or delivering revenues for schools (FundsOn). But this too seems to be a means to a larger end.
I think we may be witnessing a race to see who can capture the consumer on his own time and his own turf — and his preferred context — with content (and deals) of specific interest to him a few moments before he realizes he wanted it. The daily deals are just a foot in the door to the broader hyperlocal market. With mobile fully established as a viable means for communicating with customers wherever they are (and for them to express themselves in kind) this race is only more obvious. If you think the end game of Groupon and LivingSocial and their aggressive cousins is to sell coupons I think you’ve not been paying close enough attention.
Whatever territory and mindshare the likes of Patch have, Goup-Social wants.
All this will be chewed on in my panel session at the Street Fight Summit tomorrow, October 25. Key to finding answers will be my guests, Jonty Kelt, CEO, Group Commerce (formerly of DoubleClick); Chad Billmyer, CEO of Dealbird (formerly Petersons.com and StudentEdge.com); and Perry Evans, CEO of Closely (former lead on development of MapQuest, Jabber and Local Matters).
I imagine they may rip up my assumptions, which would be entertaining but more important I think they’ll offer informed opinions on where we’ll be in five years and how you, dear reader, might profit.
Or maybe we’ll just gripe about Groupon.