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March 23, 2011

The Future of Daily Deal and Social Shopping

Deal-of-the-day sites, often featuring a group buying component, have taken off over the past year, with startups like Groupon getting big fast and major internet properties like Google and Facebook looking for their own ways to get in on the action.

Consumer spending on deal-a-day offers is poised to grow more than 35% to reach $3.9 billion in the US by 2015, according to a March 2011 forecast by BIA/Kelsey. Deal sites like Groupon, LivingSocial and others have become popular among users who are getting accustomed to receiving deals packaged conveniently in one daily email, eliminating the need for hunting around on the web

 BIA/Kelsey projects that daily deal sales could exceed $6 billion by 2015, representing a 47.4% compound annual growth rate. The bullish forecast seems entirely plausible, given Groupon’s meteoric growth from sales of $33 million in 2009 to $760 million in 2010, said eMarketer principal analyst Jeffrey Grau.

A pre-holiday 2010 survey by deal site Eversave suggested consumers’ keen interest in using daily deal sites as they prepared their holiday shopping. The survey revealed that 66.8% of US online buyers said they would use a daily deal website for online holiday shopping and 46.2% for restaurants. 

Strong consumer interest in the convenience of such deal sites and the entry of new players, including AT&T and The New York Times Co., into the space will only add more options. That could also potentially dilute revenues by making the pie smaller.

“What could derail the market is that people get tired of daily deals,” Grau noted. “People were very excited by the novelty of eBay’s online auction marketplace in its early days but that enthusiasm eventually waned causing eBay to build up its fixed-price sales.”