Still Hooked on Daily Deals?

Image: Aaron Amat/Shutterstock

The daily deal industry that seemingly came out of nowhere after Groupon launched in 2008 continues to draw bargain seekers and is projected to bring in $4 billion in revenues by 2015, according to BIA/Kelsey. Despite that, the industry is shrinking and a sizable contingent of those remaining in the business have concerns about how profitable it will be, how to bring in and retain customers, and how to better source deals, a new report shows.

Daily Deal Media just released a media preview of its 2012 Daily Deal Media Industry Report, which looked at the major shifts that happened in 2011, and included surveys of daily deal companies that reveal their outlooks for 2012.

Here are a few of the highlights from the survey of companies in the space.

Bullish About Deals?

Asked how bullish they were about the 2012 daily deals market, 47 percent within the space said they see daily deal companies growing, expanding, and making profits in 2012. A full 41.1 percent were “in the middle” on daily deals, reflecting the uncertainty about the future of the business. Six percent said they’d “stay away” from the market. One thing that made sites optimistic this year: Groupon going public, which 61 percent viewed as a positive for the industry because it assures consumers that this isn’t a trend and gives validity to the industry.

Exiting the Deal Scene

While the daily deals industry saw a big influx of Groupon-inspired startups “by the latter half of 2011, the industry saturation, along with the lack of return on investment, caused investors to pull back on funding,” the report said. Among the sites that fell by the wayside in late 2011: BuyWithMe (acquired by Gilt Groupe), Dealify, and DealOn. The number of daily deal companies operating worldwide fell 7.61 percent, from 10,473 to 9,675, between June and December 2011 alone.The biggest shift came in Asia, which has the most deal sites, with the number of sites operating falling from 5,774 to 4,426, a decline of 23 percent. In North America, by contrast, only 2.6 percent of daily deal sites left the scene, with the numbers falling from 1,840 in June 2011 to 1,791 in December 2011. In Europe, there are now 1,728 sites operating, up 15.7 percent over the June-to-December period, and in the Middle East there are 90 sites, an increase of 42 percent over the same time period.

Go Niche or Go Home

One area that respondents seem to think has legs: niche group buying. People who choose sites that are dedicated and targeted at deals in a specific category are actively seeking them out. As one survey respondent put it, “In vertically oriented sites, where the members have a passion for that vertical, there is no deal fatigue.” Google and LivingSocial, in a tie for which is expected to see the greatest upside in 2012, have each moved into verticals such as travel, while Fab.com, which has been growing fast and attracting investors, is known for its emphasis on design.

Is Deal Fatigue Real?

For 35 percent of daily deal sites, deal fatigue is a real concern, and another 26 percent think the possibility of consumers abandoning deal sites is coming soon. Another 17 percent said it’s just a media buzzword. In a separate survey of consumers conducted by Triton Digital, 48.7 percent of consumers said they'd read or glance at a deal, while 16.8 percent consider them spam and either instantly deleted emails from daily deal companies or unsubscribed. The rest don't subscribe at all.

Sourcing, Subscribers a Worry

In 2011, the industry’s big focus was on mobile integration. This year, 21.5 percent think subscriber engagement will be a big deal. In fact, 62 percent plan to use a deal-sourcing service to find deals. Meanwhile, 20.6 percent believe deal/offer networks like newcomer ChoozOn, which lets its social-network users select the deals they want and scans the deal sites for them, will have a large impact.