Daily Deals on the Downside: Groupon and Livingsocial Continue to Slide

Image from: Merkushev Vasiliy/Shutterstock

Group buying/daily deal sites seem to be losing their shine – witness the recent layoffs at Buywithme.com (which has recently merged with Gilt Groupe) and the repricing of the Groupon IPO due to concerns with their model (and other issues).  From my perspective, I’ve long thought that the daily deal space was overcrowded and people were starting to ignore the offers – deal fatigue setting in.  We can actually see some of this in Compete PRO’s data.

But where it gets interesting is to look at the daily deal aggregators websites – let’s look at Yipit.com (my personal favorite).  On Yipit, we see continued, continuous growth (albeit off a small base):

The data on Yipit seems to indicate that people are still interested in daily deals, but that they may be turning to aggregators to deal with the large number of companies and deals.

Now, I don’t think daily deal sites are going away – but there are clearly too many of them right now, and deal quality has been sliding as merchant get more weary of the deals.  That will likely lead to margin compression – businesses may not be as willing to jump at deals where Groupon gets 50% of the revenue.  Bottom line, I would expect more of these companies to go under or get bought up in firesales.

This all may, in fact, be good news for Groupon and Livingsocial – the two biggest players in the space.  As industry consolidation happens, it may give them the ability to hold onto more consumers and therefore have more pricing power with merchants to keep margins up.  It’s been an exciting space to watch for the past year – I’m looking forward to updating this post in another 6 months to see what actually happened.

Are you still looking at daily deal websites?  How often are you using their services?  Let us know in the comments!

About Damian Roskill:
Damian Roskill is the Managing Director of Marketing at Compete. Before Compete Damian was head of products for a video start-up and has worked in start-ups for most of his career. Damian's career aspiration is to be at one with the advertising universe. Damian can be found on Twitter as Droskill, or connect with him on LinkedIn at http://www.linkedin.com/in/droskill

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  1. howie at sky pulse media

    When Groupon got popular a lot of the Finance folks like me crunched the numbers and looked at barriers to entry.

    I have refused to let one client use any of these offer services. they are fully negative ROI and wasteful for most cases. There are exceptions but they are the exception vs the rule.

    And now the proof is in the end result. Should of taken the $6b Groupon!

    Reply

  2. Sol Orwell

    So Groupon loses 15 million, LivingSocial loses 7.5 million (from their peaks), and Yipit gains 30,000 in the meantime? I don’t really even see a correlation, much less the causation.

    Reply

  3. Damian

    Sol – my point is that the growth in Yipit may be due to more people needing to aggregate across daily deal sites – it’s just interesting as you would think the two would be correlated – I’m certainly not implying causation. Thanks for the comment!

    Reply