The Daily Deals Industry in Numbers

(picture by Kenny Herman)

Jim Moran, Cofounder at Yipit, took the stage this morning to share with us many interesting quantitative data points about the daily deals industry.

About the daily deals market:

  • It has low barriers to entry. Yipit has identified 400+ daily deal sites in North America
  • That number has been increasing rapidly because of white-label technology platform providers and the entrance of major media companies in the space.
  • The market has high barriers to scale though. You need to scale sales, geographies, salespeople, number of deals, media buying (to advertise your service), subscribers, offer deal personalization and increase conversion in order to truly scale. Jim showed a great slide showing the “virtuous cycle of daily deals”.
  • Looking at a slide that presented the types of stakeholders in the ecosystem, you could clearly see that the next big opportunity is “Merchant Agencies”, that would negotiate deals across providers.

In the top 20 markets (February 2011 data):

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

Top daily deal verticals by revenue:

  • Hair removal
  • Food/grocery
  • Massage
  • Outdoor adventures
  • Spas
  • Automotive services
  • Yoga

From a merchant economics point of view, Yipit found:

  • A breakage rate smaller or equal to 20% (this is the percentage of deals unredeemed)
  • That deals became profitable for merchants if they were able to retain 19% of coupon buyers
  • High merchant satisfaction: 93% said they would use a daily deal site for another promotion
  • Some ad spend shifting: 43% say we’re reducing other advertising spend after running daily deal.

His biggest surprise from the data they collected: the gap between Groupon and LivingSocial seems to be narrowing. You can review his complete presentation here.

Following Jim Moran’s presentation, we heard from Eric Eichmann, COO at LivingSocial. Here are the interesting tidbits from his keynote:

  • LivingSocial describe themselves as “the local commerce expert helping people discover new experiences in their neighborhood”
  • Daily offers is a pivot for LivingSocial (like Groupon). They used to be a Facebook applications developer.
  • Their pillars of success are: local, mobile, social and commerce
  • They like to target neighborhoods as opposed to cities
  • They launched “Instant deals” in their mobile app. They are real-time mobile deals.
  • LivingSocial today: 12 countries, 230 markets, 24 million members, 1200 employees

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