Guest Post: The Future of Daily Deals

July 15th, 2011 : posted in Commentary by B Marsh

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There’s no doubt that Daily Deals are here to stay, with daily deal providers sprouting up all over the place on an almost daily (pardon the pun) basis, so I thought I’d take the time to reflect on where we came from, where we’re at now & what the future might hold.

Where we came from…

In my opinion, it all started around 2004 with a popular website in the US called Woot!

Woot! provided one deal a day, everyday. The deal was almost always a product that would be delivered to you: no restaurants, no sky diving, just a great product that is heavily discounted every day.

In Australia, we saw the beginning of the industry in a company called Catch of the Day, which launched in 2006. Catch of the Day leveraged this same principle & built up a huge database of subscribers. You may have also heard of their sister company, Scoopon.

In 2007 we saw the beginning of Livingsocial & in 2008 we saw Groupon enter the market, both companies eventually raising significant amounts of money & hitting the ground running, reporting huge revenues.

Where are we now?

Since the beginnings of the daily deal market, we’ve seen significant growth, both in the size of the larger entities (Groupon, Living Social) and in the emergence of many daily deal sites (for example, there is at least 521 daily deal sites in the US, according to Yipit.com)

As the number of daily deal sites grow, consumers are getting bombarded with choice, not to mention emails! As the number of copy-cats grew, the concept of aggregation arrived, promising a webpage full of deals from all of these providers and/or a daily email digest of deals.

Where are we headed?

I believe that the daily deals market is reaching a critical mass & that daily deal providers, along with aggregators, are going to need to have a major point of difference to survive. The consumer is now faced with hundreds of daily deal sites and dozens of aggregator sites, all of which effectively do the same thing, provide deep discounts.

In this market, there is very little brand loyalty, the consumer is only interested in the quality of the deal and by this I mean the value & relevance of the deal.

You could compare the daily deal space to the early days of the internet. Firstly, we had websites with a domain name we could remember (compare this to the major daily deal sites), secondly we had internet directories & search engines that promised to categorise all these sites for us, which you could compare to the aggregators…

So where are we now & where are we headed? We have Social Networking, which brings relevance to our world & is now more popular than the search engines. I believe that the daily deal space is currently in a “Friendster” phase, but soon enough, we’ll enter the golden era & see the MySpace, Facebook & Google+’s of the daily deal world emerge. Why did these sites gain so much popularity? Relevance.

So where does the daily deal space head to from here? Well we have daily deal sites & we have aggregators, but now I believe we’ll start to see:

  • The aggregators categorise the deals for us (The Dealer is an example of this).
  • We’ll see mashups of location based platforms with deal providers (already Foursquare has secured an agreement to incorporate Groupon, LivingSocial & Gilt Groupe into its platform. Groupon has also produced an iPhone app feature called Groupon Now, aka “I’m Bored, I’m Hungry”).
  • We’ll see the group buying mechanism turned on it’s head. (Why should the deal providers specify who we want a deal from? Why can’t we get together and demand a deal?).

The daily deal companies base their projections on the number of subscribers vs the cost of acquisition. This model is going to get harder & harder to run a huge profit from, the market is going to need to adapt to the high level of saturation & it is only going to come from innovation.

About the Author

CrowdsauceBrendan Marsh is the CTO of CrowdSauce, a daily deal provider with a twist. CrowdSauce uses location based check-ins to allow its users to ask for a deal from their favourite Businesses. CrowdSauce is currently one of the many daily deal providers being featured on The Dealer.