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May 1, 2011

Dail Deals Market : Top 10 Research Insights

Over 35 million subscribers Groupon has become a media powerhouse based on the simple premise that advertising IS content. The chart below shows estimated market size for transactional advertising from 2000 to 2015. These data are estimates based on our own data and BIA/Kelsey data. A Brief History of Transactional Advertising: 

























Revenue from online daily deal and discounts sites including Groupon and LivingSocial will top $2.67 billion in 2011, up 138% from $1.12 billion in 2010, projects Local Offer Network Inc., which sells advertising and technology services to group-buying sites.

The company says at least 320 U.S. sites offer daily deals, and that such sites  in total offered 63,000 deals in 2010. That record will almost certainly be shattered this year, as Local Offer Network estimates that the first quarter of 2011 brought 40,000 daily deal offers to U.S. consumers

According to The BIA/Kelsey team The BIA/Kelsey team The BIA/Kelsey team and Yipit co-founder Jim Moran presented some great information on the current state of the deal space along with projections estimating the US deal-a-day market growing from around $850 million in 2010 to nearly $4 billion by 2015

Consumer spending on daily deal offers is expected to reach $3.9 billion by 2015 with Groupon and LivingSocial leading the way, according to BIA/Kelsey. 

The consumer spending  on social shopping is projected to grow from $873 million in 2010 to $3.9 billion in 2015. This represents a 35.1 percent compound annual growth rate.

Among the Largest Daily deal aggregator sites Social Deal Map (socialdealmap.com) has aggregated deals from numerous sites include groupon,livingsocial, the total number of deals in US everyday is around 20,000.


 

According to Jim Moran, Cofounder at Yipit

Proliferation. There are more than 400 daily deal sites, a proliferation Moran attributes to white-label providers. A key factor in this growth is the entry of major media companies.

* Low bariers to entry; high barrier to scale. Players with the larger list are able to sell more vouchers, which leads to more offers, more commissions, more salespeople, more offers, etc. 

Bifurcated Strategies :Operators follow “bifurcated” strategies. Operators are following two paths in how they structure deals, favoring offers with higher deal value, as well as very low value deals that are effective in acquiring and retaining customers

Retention is key. The target retention rate for a successful deal is category dependent, with as low as 10 percent or as high as 19 percent being necessary for a deal to work.  this is because the  heavily discounted deals, it is must for companies to have a high user retention

Some of the other data on daily deal market

Groupon and Living Social are among the In the top 20 markets (February 2011 data):

  • Groupon had $39M in revenues (#1 player)
  • Livingsocial: almost $12M in revenues (#2 player)

  • The most popular types of online limited-time deals in the United States  are those related to Food and drink, which in the fourth quarter of 2010 accounted for 26% of such online discount offers. 
  • Beauty, spa and massage offers continue to hold the second spot, with 20% of offers, followed by fitness and nutrition, 7%, and sports and recreation, 5%
Top daily deal verticals by revenue:

  • Hair removal
  • Food/grocery
  • Massage
  • Outdoor adventures
  • Spas
  • Automotive services
  • Yoga
  • Groupon remains the No. 1 deal site, generating three times the volume of LivingSocial, but Groupon has a lower revenue per deal than LivingSocial.
  • The breakage rate (unredeemed vouchers) on deals is roughly 20 percent.

  • “Hair removal” is the best revenue generating category.
  • Among merchants who have done deals,  93 percent say they would like to do another.
  • Asked if they would shift spend from other media to fund deals, 43 percent said yes
According to BIA/Kelsey, there are a number of variables that will have impact on daily deals such as growth in the number of cities and sites, registered users, transactions per year for the average user and the average price per transaction.
If all the variables come together, then daily deals could grow to $6.1 billion by 2015 – a 47.4 percent CAGR. A conservative outlook pegs the space at $2.1 billion – 19.7 percent CAGR, per Bia/Kelsey.