Group Deal Sites Still Have Strong Appeal

By July 17, 2012

Although a number of studies had been suggesting that daily deal sites were on the wane, their results for the year 2011 so far seem to indicate the contrary.

Last year researchers at Rice University, based in Houston, USA reported that companies
were becoming less interested in making offers on daily deal sites, as they were simply losing
money from this venture. The conclusion was that the sites needed to spruce up their act if
they wanted to attract merchants and their potential customers. In fact this is exactly what
sites such as LivingSocial, AllStarDeal and Pricebuzz have done, making a determined effort
to involve the consumer more in the sales process in order to get the daily deals market to take off again. At Rice, the same researchers have taken another look at the market and come up with very different results. They now say these sites are still growing strongly. These findings are supported by Jonathan Besnaïnou, CEO of OhMydeal, a deal-comparison site, who points out that “you only need to look at the results of the market leader, Groupon, to see that this market is alive and well.”

Growing revenue, increasing loyalty

The new Rice study points out that Groupon figures for the first quarter of 2012 in North
America show an increase in revenue of no less than 75% compared to last year. And
Groupon’s major competitor, LivingSocial, hasn’t been slacking either since its total
turnover has risen by over 170% in the same period. “A second criterion that proves that
these sites are doing well is the loyalty shown by companies who are offering the deals,”
continues Jonathan Besnaïnou. The study reveals that every one of the companies which
have already offered a deal state they are ready to do the same again on the same site
within a short timeframe. And among these, no less than 54% plan to offer exactly the
same deal as the first time around. On top of these expressions of intent there is also the
hard evidence of the profits made by companies during the periods of the various surveys.
While the percentage of businesses making money was reported in Spring 2011 at 55.5%,
and almost unchanged at 54.9% in October 2011, this figure had jumped by around 6
percentage points to 61.5% by the time of the May 2012 sample. There is no indication
here that daily deals business is slowing down.

No need for a radical re-launch

One last observation from the survey that appears to contradict last year’s findings is that
the companies making the most profit from using daily deal sites are those with the lowest
marketing spend. Which indicates that there is no need for a radical re-launch of the market.
Once again Jonathan Besnaïnou agrees with this view, but warns nevertheless that “at a
certain point, sites must diversify - not to rescue a failing market, but as part of the normal
growth cycle,” adding: “this means widening the range of products on offer, as we see
already with travel and entertainment.” The study appears to confirm this view, with the
highest rates of deal success being achieved by photographers - with a 75% rate of profitable
daily deals - tourism-related services (68%), and even doctors and dentists (66.7%). “We also
expect in a second phase to see growth coming from the use of mobile devices,” he concluded.

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