Social daily deal site LivingSocial recently announced that it will overtake Groupon in January 2012, highlighting that they now control $4 out of every $10 of deals sold on either platform.
While I enjoy using both services, my first reaction was to question LivingSocial’s prediction, simply due to the phenomenal success Groupon has seen over this past year. While LivingSocial’s subscriber base may have increased from 10 million to 24 million in three months, data gathered on Compete.com indicates that Groupon is still king, growing unique traffic visitations over 750% while LivingSocial ‘only’ grew traffic by 545%.
Peaking in January after a wildly successful promotion for Amazon.com, LivingSocial saw traffic decline over 33% the following month. Considering that LivingSocial had basically mirrored Groupon’s growth path over the course of the year, a drop off to pre-January levels indicates that the much-publicized promotion failed to attract too many long-term subscribers.
Slower growth rates and lower brand loyalty indicates to me that LivingSocial will struggle to meet its goal to overtake Groupon in 2012, and I believe their statement was simply meant to generate much-needed buzz around the web. While LivingSocial has quite a few unique offerings that set it apart from Groupon, it’s certainly difficult to unseat the top-seeded player! With over 20% of Groupon’s traffic coming from direct referrals, Groupon enjoys a “top-of-mind” awareness that LivingSocial still needs to work hard at to create (currently only 9.4% of traffic to LivingSocial is direct).
Don’t feel sorry for LivingSocial though, the entry of a new major player seems to have been the catalyst needed to grow the social deal space past its ‘early adopter’ period. Groupon has recently become the fifth largest source of traffic to LivingSocial, indicating that consumers have become more aware of social sales and are beginning to “shop around,” visiting both sites in search of deals. A recent report from daily deal aggregator Local Offer Network stated that group buying will grow 138% to $2.7 billion in 2011, and new estimates from BIA/Kelsey optimistically predict sales of over $4 billion by 2015! With this much cash on the table, I am fully expecting to see more brand-building announcements from both LivingSocial and Groupon in the near future.