Daily deal sites were once thought to be another fad to hit the internet. Some still feel that way about trendy sites like Groupon, LivingSocial, and BuyWithMe. One thing that cannot be ignored however is the fact that digital media is changing the way consumers shop online. It’s easier to get a great deal or discount now than it ever has been. Personally, I’m a huge fan of the social group buying concepts. I’ve seen it work for businesses trying to increase awareness for their restaurant and I’ve seen friends flock to a great 60% deal for something fun they’ve never done before. What has been interesting is seeing how the daily deal market has exploded over the past 6-8 months.
The market has been truly flooded with daily deal sites in every niche and market across the country. If your city doesn’t have a daily deal site, you soon will. Many of these sites started with the hopes and dreams of being as large as Groupon someday. What they’re soon finding out though is that it’s not like the ‘Field of Dreams’ in the daily deal group buying world. If you build it, they will not always come. Fly by the night companies trying to create their own brand and identity as a hyper-local daily deal provider are soon realizing that it’s difficult creating a cult-like following from scratch.
The operational costs to run a daily deal site are minimal but there does come a time where these new daily deal sites are realizing that it’s much more difficult than it looks, and a once unattractive acquisition offering now becomes their main option for survival or exit strategy. Recently there has been significant acquisition activity in the daily deal space. The common trend you will see in these acquisitions are, in most part, is a strategic play for market share by the purchase of group buying email lists and existing consumer data.
This acquisition makes sense because Sugar Inc. is a lifestyle, entertainment, fashion and shopping network for trendsetting women and FreshGuide.com is an online women-focused city guide that provides access to exclusive daily offers. Their challenge will be with the local penetration it plans to get. I assume their website traffic is significant, but I’d be interested to find out exactly where the majority of those viewers reside. I’d estimate that it would be in a trendy city like New York or Los Angeles. I doubt they’ll have success in local areas in middle America. National brands adopting a hyper-local approach will learn just how hard it truly is to complete.
Tippr’s acquisition of FanForce is somewhat different than Sugar/FreshGuide in the sense that Tippr is positioning themselves as not only a daily deal site for consumers, but also a platform for companies to host and run their own daily deals. One would think that powering your own daily deal sites and offering the ability for others to build their own platforms would cannibalize the market. Strategically they probably won’t have dueling daily deals in one market, but you never know.
Tippr also purchased Chicago based ChiTown Deals. This purchase was listed as an undisclosed amount, but my prediction is that it was relatively low considering the limited reach ChiTown Deals has. They were averaging only 20-30 sales per day (if that), so they couldn’t possibly have that many email addresses. A local start-up like that in Chicago is challenging in itself, mainly because that’s where Groupon started. What should be interesting is what happens to their sales after the acquisition of Tippr. Will the sales increase? Will the deals get better? Only time will tell.
A smaller acquisition was announced several months ago, that being DealOn’s purchase of St. Louis’s CitySteal group buying site. They were again relatively smaller in size only averaging about 50-60 sales per day. Now they’re branding and technology is powered by DealOn. In the article above it also mentions that as part of its strategy, DealOn will continue to acquire daily deal sites.
In the foreign market, acquisitions seem to be heating up as well.
Sources estimate that a capital investment of $3.5 million was also a part of this deal. One thing is for sure and that’s once a group buying site is solidified and consistently pumping out sales – their evaluation is significant.