A Rice University study from second-half 2011 found that U.S.
consumers are still excited about daily deals, defined as an email
or mobile notification for a discounted local service or product.
Groupon, which popularized deals, lost its darling status when
its initial public offering revealed no earnings. Still, the
company had more than 33 million active users at the end of last
year, nearly triple the 2010 number.
LivingSocial also remains a major player in the category. And
even though major internet players like Yelp and Facebook have
scaled back or even shuttered their deals products, local media
companies like Belo and the New York Times are still going
Now that the buzz is over, where is the deals industry
The business is headed toward lifestyle companies, said Peter
Krasilovsky, VP at BIA/Kelsey. The trend is toward vertical-deal
categories rather than scattershot offerings of everything from
bikini waxes to skydiving lessons.
Both Groupon and LivingSocial have dedicated travel categories.
Travel site Expedia recently added a tab for Groupon Getaways after
the companies launched those deals last summer.
LivingSocial has expanded its "Gourmet" category for high-end
restaurant deals, and Groupon has tested grocery deals in
partnership with a New England supermarket chain. Groupon Getaways
and Groupon Goods, its consumer-products channel, grew during the
company's holiday push, according to deal aggregator Yipit.
Why should national advertisers care?
Even though daily deals started with local merchants, the
category is no longer just for small businesses. There's also a mix
of national and international advertisers using the service to
target locally. For example, KFC ran a deal with Groupon Hong Kong
for 50% off chicken and egg tarts leading up to Christmas. Last
year, Groupon ran deals with packaged-goods marketers General Mills and
Are local media companies still selling
Trying to cash in on Groupon's success with local advertisers,
many media companies set up their own daily-deal services and
taught their sales teams to market deals. Newspapers, cable
companies and radio stations sell deals along with their own ad
That's exactly where new entrants may find an opening, said Mr.
Krasilovsky at BIA. "Deals are about customer acquisition, but the
question is whether they also extend to loyalty and engagement," he
Daily deals can mean a flood of new customers rushing to get as
much as 50% off a product or service -- but that has not proved to
be sustainable for some businesses.
But media companies have more to offer: advertising, which is a
way marketers can build a relationship with customers generated by