In the first few weeks after Street Fight launched in April 2011, we ran a series of interviews with prominent luminaries working in hyperlocal, to get their sense of the business landscape and the opportunities that existed. To celebrate our second anniversary, we’ve gone back to a few of those same people to see how their assessment has changed in the intervening months.
When we launched, the daily deals industry was in its fullest bloom. Groupon and LivingSocial had rapidly built themselves into multi-billion dollar companies, and many thought that deals (with their demonstrable ROI) were the future of SMB marketing. Fast-forward to several years later, and both LivingSocial and Groupon have seen their troubles, as investors questioned the long-term viability of their business model. Meanwhile, many smaller deals players have consolidated or folded as the industry shook out, and local commerce and loyalty plays have sprung up to present themselves as better solutions for merchants.
When we initially spoke with co-founder Jim Moran from daily deals aggregator and data service Yipit, he told us that no one was really “winning” in hyperlocal yet, but that various players, including Foursquare, Google, Groupon, LivingSocial, Yelp and Yipit “were all positioned for various aspects of the market.” We caught up with him again recently over email to see how his outlook has changed.
In 2011, we asked ‘What does hyperlocal mean to you?’ and you answered: “Local services help you in the real world. Hyperlocal helps you in your neighborhood, and, ideally, on your block.” Do you still feel that’s accurate? How, if at all, has the definition changed in two years?
Over the past two years, hyperlocal has started to be defined by local marketplaces — and I believe this will hold for years to come. For nearly every local vertical, at least one major player has emerged that’s winning on both sides of the market:
Experiences :: Groupon
Food Delivery :: Seamless, GrubHub
Furniture :: 1stDibs
Health/Wellness :: ZocDoc, Groupon
Home :: ServiceMagic, Angie’s List
Labor :: TaskRabbit
Lodging :: Hotels Tonight, Airbnb, Kayak, TripAdvisor
Dining :: OpenTable, Groupon/Savored
Transportation :: Uber
There are many more of these, but all are creating tremendous value connecting local businesses to consumers in dynamic, live marketplaces. I would not have disagreed with this happening, but the success of these marketplaces has occurred much faster than I would have thought.
Where is the big opportunity in hyperlocal now?
Many of the categories above roughly align with the top yellow page advertising categories: Law, Health, Home Services, Movers, Dining, Beauty, Lodging, Auto, Real Estate, Schools, etc. Over the next few years, I would expect new marketplaces to form or existing marketplaces to expand into the remaining categories.
What surprised you about the daily deals industry?
I think what would surprise most people is that the “daily deal” industry is actually stable and increasing. By this point the vast majority of revenue is driven by repeat customers, both on the consumer and the merchant size. One time users have moved on over a year ago, and the market will now grow as offer quality and user experience continues to improve.
But that’s what would surprise others, so that wasn’t really your question. The only thing surprising to me about the daily deal industry is that we still haven’t been able to agree on a better name for it.
How far along are we on the daily deals industry shakeout?
I think there is too much focus on the number of long-tail players that open or close up shop. It’s like asking how many websites were launched today or closed. What’s important is the growth in total revenue and user base of the overall market, and that’s been holding steady over the past year
Will daily deals continue to exist as its own category (with companies focused specifically on deals), or are they part of something bigger under the label of “local commerce”?
The major companies servicing SMBs are already expanding their suite of services adjacencies like loyalty, booking, CRM, POS, payment processing and more. However, products that help businesses acquire new customers will continue to demand a premium to those that help them keep their existing ones.
Will LivingSocial and Groupon both still be standing in three years?
I think they will. They provide a compelling value proposition to a meaningful segment of consumers and are one of the highest ROI acquisition channels to a meaningful segment of merchants.
Given everything that has happened, do deals companies need some kind of rebranding to get merchants back on board with their services?
I don’t think so. While there’s certainly been a lot of noise, the majority of revenue from these businesses is now generated from happy, repeat merchants and happy repeat customers. They need to continue to improve their product on both ends of the market and thus expand their addressable market.
Noah Davis is a senior editor at Street Fight.