daily deals

Social, Mobile And Deals Categories Led US 2011 Private Tech Investments.

[Published originally on MONDAY, FEBRUARY 20, 2012]

According to the CrunchBase, a venture capital database of TechCrunch, Social, Mobile And Deals Categories Led 2011 Private Tech Investments. (Courtesy of Alexey Tolkachiov at BuzzSparks.org.)

421 Companies with the “social” tag in CrunchBase raised a total of $5.2 billion over the year. Out of this, Facebook alone was $1.5 billion; out of the 1,941 companies that were included in this analysis, Facebook alone raised 7.3% of the $20.5 billion total.

A few other social companies, including Twitter, Zynga, LivingSocial, Kabam, along with Chinese sites 55tuan and Lashou, count for another $2.29 billion. We’ll see how this category looks in 2012 — that is, look for a drop in private funding considering that so many of the leading companies in the category have already raised late-stage capital.

Some of these companies not only social but also deals sites, or game developers. This analysis in some cases double-counts ones that could fit in more than one category. The goal in doing so is to show how companies that are in multiple areas area impacting each of those areas. In any case, this type of categorization problem exists with any such data set.

Moving along… “Mobile” comes in second, with 393 companies raising a total of $2.3 billion. The fundings are relatively less concentrated at the top — InMobi, Square and Rearden Commerce all raised above $100 million, but that’s it. The third-largest category, Deals, is even more unbalanced than social. Groupon alone makes up more than half of the $1.9 billion total.

Louis Rhéaume
Infocom Intelligence
Twitter: Infocomanalysis

US group-buying industry (ie. Groupon) should reach around $3 billion in 2011

[Published originally on SUNDAY, MARCH 27, 2011]

According to Local Offer Network the US group-buying industry (ie. Groupon and LivingSocial) should reach around $2.7 billion in 2011 from $1.1 billion in 2010. The number of deals being offered were about 63,000 deals in the U.S. through group buying sites. Just in the first quarter of 2011, there will be an estimated 40,000. Groupon accounts for less than half of those published deals.

The main categories of products and services are Food and Drink (27%), Beauty, Spa & Massage (19%), Fitness & nutrition (7%), Sports & Recreation (7%), and Home Products & Services (5%). The biggest cities for daily deals are Chicago (where Groupon is based), New York City, San Francisco, Boston, and LA.

The report by Local Offer Network can be found below.

Group Deals Industry Reporthttp://d1.scribdassets.com/ScribdViewer.swf

Louis Rhéaume
Infocom Intelligence

Does Groupon is worth 15 billion in an 2011 Initial public Offering (IPO)?

[Published originally on FRIDAY, JANUARY 14, 2011]

There is recent rumour on the Internet that Groupon will try an Initial Public Offering (IPO), which will value the firm around US$ 15 billion in the Spring of 2011.   It is true that Groupon is the fastest Internet firm to reach 1 billion in revenue in 2 years.  Gross and net margin are very high.  Groupon and number 2 LivingSocial have around 92% of web traffic in the group-buying discount market.   Groupon rejected a $6 billion offer from Google last year.

However, there are more than 500 imitators with the same business model targeting national, regional and international markets.  Most of them have even the same web site design as Groupon.  It is very easy to copy the recipe of success of Groupon.  The leader has already the first mover advantages: it became on important players in many cities to create a critical mass.  They have hundreds of salesperson to get new daily discounted group-buying deals.  They enjoy also temporary winning conditions.  For instance, when web advertising started to be implemented with high-speed Internet, banner ads and video ads were very lucrative. Now with the proliferation of Internet advertising, these online ads are not so lucrative per click.  When it is new, it is more appealing  for a large segment of consumers.  Another example, is the success of virtual goods sold in online video game.  Who wants to buy a virtual good? I don’t understand why am human being would do this, but 6% of the customers of online game did that for $640 million in 2010.  I’m not sure this is a sustainable trend, but it is new and appealing for a segment of the population, so far…

Groupon can create value by personalizing its offering by getting to know better their customers and using social networks with mobile networks.  Once you pre-authorize certain categories of ads you are more willing to receive such ads and with location-based services.

Facebook, Google and others can easily get a larger piece of the group-buying daily deals pie.

Does Groupon is worth 15 billion in an 2011 Initial public Offering (IPO)? There is already an Internet bubble and if the firm doesn’t diversify its product offering and the way to do it, it may face severe competition.

Louis Rhéaume
Infocom Intelligence

What is the hype in Groupon (group-buying local daily coupon offers)?

[Published originally on WEDNESDAY, NOVEMBER 24, 2010]

Launched in November 2008, Groupon features a daily deal on the best stuff to do, see, eat, and buy in a variety of cities across the U.S., Canada, Europe and soon beyond. They have more than 300 people working in their Chicago headquarters, a growing office in Palo Alto, CA, as well as local account executives in many cities. How Groupon obtained $500M in revenues in two years and a valuation around $3-4 billion (according to rumours of acquisitions by Yahoo or Google)?

According to LA Times:

“A new breed of coupons — zapped daily to consumers’ e-mail accounts and offering local deals for spa treatments, restaurants, yoga classes, hot-air balloon rides, stores and even Botox — has transformed the dowdy discounts into a social media phenomenon that’s attracting a new generation of fans. The savings are eye-popping: 50% to 90% off is typical. But there’s a catch. If you want that $40 mani-pedi for 15 bucks, you’ll have to pay upfront with a credit card and you’ll have to move fast. The chance to snag one of these vouchers usually lasts no more than 24 hours (though merchants will honor them for weeks or months).

Bargain-hungry shoppers are hooked. “Daily deals” websites including Groupon, LivingSocial and Screamin Daily Deals have attracted millions of users, a lot of them young, urban and tech-savvy. Many say they love the excitement of waking up in the morning, checking the latest deal online and deliberating with friends on Facebook or Twitter about whether to buy — all while the clock ticks down… The daily deals phenomenon “is a rocket ship unlike anything we’ve probably seen in consumer shopping online,” said Brad Wilson, a discounts expert and founder of BradsDeals.com. “It’s brilliant… Wilson said he’s betting that the trend will survive the economic downturn, in part because consumers simply can’t resist the allure of a bargain. “There’s such a compulsion to it,” he said. “People end up spending more than they intended in the excitement of the countdown of that day.”


Launched two years ago, Groupon is now the leader in this sector. It really takes off over the past year. Groupon offers a way to get important discounts while discovering fun activities in your city. Their daily deals consist of restaurants, spas,massages, theaters, hotels, and a whole lot more, in dozens of cities across the US and Canada. It recently acquired firms outside the USA for expansion.

Yahoo made it known to Groupon executives and backers that it was willing to pay as much as $3 billion to $4 billion to acquire the company. Besides Yahoo, other potential Groupon suitors include Amazon, Google, and eBay. The company is deciding between an eventual IPO, opening itself to acquisition talks with bigger companies, or raising more capital. Last week, Bloomberg reported that Groupon is looking to raise money at a $3 billion valuation. Groupon raised $135 million at a valuation above one billion dollars in April. The company currently has 3,000 employees serving markets in 29 countries. Internally, it is believed to be “many, many multiples larger” than its nearest competitor, LivingSocial.

Read more:

However, Living Social continues to nip at the heel of Groupon; last month, it actually had more unique visitors than the coupon giant. The company currently has 10 million subscribers in the U.S., Canada, Britain and Ireland — said it has saved consumers more than $100 million this year.

Businesses not only have to offer deep discounts but also must give the daily deals websites a big chunk of those sales: A 50-50 split is typical. 

According to Business Insider here are the main reasons for Yahoo to acquire Groupon:

“Yahoo’s most valuable assets is its HUGE lead in email. Unfortunately for Big Purple, the the once-fast growing business it has developed with that traffic – brand advertising – is starting to slow. So how would buying Groupon help? Groupon makes ALL of its money ($400 million this year?) sending mostly local coupons to its users’ email inboxes. Its biggest cost is user-acquisition – buying its way into inboxes. If Yahoo were to buy Groupon, it would eliminate Groupon’s biggest cost AND increase its subscriber base to over 100 million people. Cha-ching!

The kicker? Yahoo is ALREADY making money off Groupon ads in its inbox. See the screenshot of my Yahoo Mail inbox below. But instead of reaping Groupon’s huge margins, Yahoo is just collecting mediocre CPMs for lousy email banner ads. Worse, it doesn’t have any relationships with the local businesses fueling Groupon’s spending.”

Read more: http://www.businessinsider.com/heres-why-yahoo-wants-to-buy-groupon-2010-10#ixzz15Ycr50fv

Thus, Yahoo’s M&A Strategy could focus on Local Commerce Rather Than Content.

Industry outlook

“Right now, Groupon-style group buying is more or less just coupons that get sent to you via email to entice you to sign up. What if you could look at a real-time, auction-style exchange of local offers from merchants or retailers or restaurants in your vicinity — maybe even on your mobile device — and pick the offer you wanted for dinner that evening? You can’t do that now, but that’s one vision of where the local group-buying phenomenon is headed in the future, according to Don Rainey, a partner with Grotech Ventures and an investor in LivingSocial, the number two player in the U.S. group-buying market next to Groupon. Rainey said he sees a day when merchants and potential customers interact through a kind of real-time exchange — like a stock exchange, with buyers and sellers, but for local offers on meals or other goods. “I can see local retailers and consumers bidding in a real-time system for where that consumer is going to go for dinner,” says Rainey. If a merchant is having a slow night, they can put an offer into the system and users can choose between that and multiple other offers, based on location and the time they want to go out. As someone who is constantly looking for new options for places to eat in my local area, this sounds like a winner to me.

Groupon gets all the press when it comes to group buying, primarily because it’s the largest player in that market by far; it has raised more than $165 million in venture financing and has sales that are approaching $500 million. However, LivingSocial is a strong number two in that expanding space, and in some regional markets, it’s a larger player than Groupon, according to Rainey. “

Source: http://gigaom.com/2010/10/27/livingsocial-and-the-future-of-local-group-buying/

One important value added brought by group-buying coupons is that some small and medium businesses who could not afford a decent advertising budget, can now do it for a very small percentage of what it costs before via print, radio or TV.

Recently, Amazon is looking to invest around $100M in Living Social the main competitor of Groupon, which has around the same number of daily visitors on its website.

A big potential resides in the connection between mobile and social networks.  Daily mobile alerts, which can be personalised to customers, would bring value added to both consumers who can make targeted very interesting deals, and retailers who can reach more “offers-friendly” customers.
Louis Rhéaume
Infocom Intelligence
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