Professional Documents
Culture Documents
March 2011
www.localoffernetwork.com
Local Offer Network
The Daily Deal Phenomenon: A Year in Review 2
www.localoffernetwork.com
Local Offer Network
The Daily Deal Phenomenon: A Year in Review 3
Contents
Executive Summary ............................................................................................................................ 4
Industry Revenue: A Staggering Growth Story .............................................................................. 5
Site Introductions and Expansion: The Land Grab......................................................................... 5
Deal Flow: “One Deal a Day” a Distant Memory ........................................................................... 6
Category Trends: From Burgers to Botox, and Everything in Between ...................................... 6
Prices: Rising Along with Category Diversification ....................................................................... 7
Discounts: Merchants Invest, Consumers Win Big......................................................................... 7
Multi-Voucher Purchases: Sometimes You Can’t Eat Just One .................................................... 8
Market Growth: Now Coming to a Hamlet Near You ................................................................... 8
Deal Duration: You Snooze, You Lose. Sort Of. .............................................................................. 9
Conclusion: Business Models Will Evolve, Momentum Will Continue ...................................... 9
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Local Offer Network
The Daily Deal Phenomenon: A Year in Review 4
Executive Summary
Social commerce, group buying, daily deals, flash sales. No matter which term or variation is
used, the trend triggered by Groupon, LivingSocial, Gilt Groupe and hundreds of other sites is
unrivaled in its meteoric growth. Driven by a dramatic increase in both the number of deal
services, the volume of new offers hitting the market and consumers’ insatiable demand for
quality products and services and great prices, the daily deal market is one of the most
intriguing and dynamic segments online.
Groupon’s success – highlighted by its spurning a rumored $6B acquisition offer from Google
and its expected IPO – is well-publicized. Yet to date there have been few comprehensive
reports of the detailed dynamics of the market in 2010 and expectations for 2011.
Local Offer Network is a leading provider of technology and services to the fast-growing
market for group buying services., The Local Offer Nework Deal Engine™ aggregates more
than 2,000 group buying offers per day from websites in 97 markets worldwide. As one of the
first and only companies to monitor nearly every deal across the web, Local Offer Network has
unmatched insight into how this market is evolving and key trends that will shape its future.
Methodological note: The results in this report cover activity from January 2010 through March
2011, and incorporate analysis and projections based upon:
a database of more than 90,000 offers collected and classified via the LON Deal Engine
actual consumer purchases recorded across a broad spectrum of LON partner sites
financial data provided by group buying sites
For more information, please contact Local Offer Network via contact@localoffernetwork.com.
www.localoffernetwork.com
Local Offer Network
The Daily Deal Phenomenon: A Year in Review 5
2010 2011
To date, LON has monitored more than 320 sites US Group Buying/Daily Deal Market
offering local daily deals in the US. In addition, New Deal Sites Tracked 322
Source: Local Offer Network
approximately 70 sites in the US exclusively
offer national daily deals. New 205
Cumulative
LON has observed site churn of approximately
122 117
25%, driven partially by acquisitions but moreso 97 83
due to business failure or unexplained 61 61
36 25
dormancy. While such losses are unfortunate,
they are in line with expected overall failure
1Q10 2Q10 3Q10 4Q10 1Q11
rates for startup businesses.
The average US deal site operates in more than 10 markets; however, the 24% of sites that
operate in 3 or more markets provide deals to an average of 19 markets per site. This is driven
by both expansion of well-funded sites with local presence and several sites that publish
national or broad multi-market deals
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Local Offer Network
The Daily Deal Phenomenon: A Year in Review 6
www.localoffernetwork.com
Local Offer Network
The Daily Deal Phenomenon: A Year in Review 7
www.localoffernetwork.com
Local Offer Network
The Daily Deal Phenomenon: A Year in Review 8
4%
2%
0%
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Local Offer Network
The Daily Deal Phenomenon: A Year in Review 9
Local Offer Network projects that in 2011, more than $2.5 billion in transactions will occur via
group buying sites in the US alone – a striking level of volume for a group of websites that did
not exist only three years ago. As the market continues to expand, the number and variety of
deals offered will increase significantly, and a wider range of sites publishers will deliver
promotions to their audiences.
While market consolidation and attrition will occur, Local Offer Network predicts that the
overall number of competitors will continue to grow. In turn:
Consumers will enjoy access to thousands of deals a day, bought directly from sites of
all sizes, and cia convenient tools such as deal aggregators and personalized deal feeds.
Merchants will be better-equipped than ever to measure the relative cost of consumer
acquisition from various channels, and will optimize their spending accordingly. Legacy
advertising methods will feel the pinch.
Multi-channel and online publishers of all sizes will be driven to participate in this
market – if they are not already – to protect and grow their advertising revenue.
Increasingly, these companies will create and sell their own branded deal products and
channels to preserve their market relevance.
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Local Offer Network
The Daily Deal Phenomenon: A Year in Review 10
Well-funded, top-tier deal providers will continue to increase the cost of competitive
entry by driving up cost of consumer acquisition. This will in turn force smaller sites to
differentiate their products and find creative and cost-effective ways to create scale.
Geographic expansion will continue. Somewhat ironically, national online retailers may
enjoy the greatest advantage in smaller cities and towns because of the challenge of
gaining critical mass in these markets.
For the foreseeable future, the group buying movement will continue to grow unabated. And
consumers will continue to win, through access to products, services and experiences that may
not otherwise have been within reach.
LON products and services include the LON Deal Wire™, a web-wide distribution network
that allows group buying sites to achieve instant audience scale and publishers to tap new
revenue streams by syndicating offers from those sites; VoucherPro™, an offer creation
platform that enables the creation new daily deal advertising products; and Dealradar.com, a
convenient deal-shopping tool for consumers in the US, Canada, UK and Australia.
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Local Offer Network
The Daily Deal Phenomenon: A Year in Review 11
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