Deal or No Deal

The ups and downs of the daily deals marketplace

Since Groupon first launched in 2008, daily deal competitors have flooded the market. While some have reached near-Groupon levels of popularity, others quickly fizzled. Success “boils down to two key areas,” says Unaiz Kabani, an analyst at daily deal site aggregator “First is acquiring users. Groupon and LivingSocial had that edge early on, and since then, they’ve been spending enormous amounts on online marketing. [Then] you have to generate demand per deal. It’s becoming too expensive for smaller sites.” Which doesn’t keep them from trying. The following lists illustrate some still going strong more than a year after launching, and others that failed to break through in the marketplace.

Still Going Strong

Bloomspot: Launched January 2010, it has followers in 11 cities and offers high-end beauty, travel, shopping, and restaurant deals. Kabani says it smartly targets a particular customer base “looking for a specific type of deal.” It closed a $40 million funding round this past August.

Gilt City: Luxury flash sale site Gilt City added daily deals in April 2010. Its success, says Boyan Josic, founder, editor-in-chief of Daily Deal Media, is due to a combination of luxury deals, “being in the market early, and access to funding.”

Plum District: This San Francisco-based site has offered mom-focused retail and service deals (as well as activities for their kids) since May 2010. “Appealing to a specific demographic . . . is a time-tested marketing approach,” says Dan Hess, CEO and co-founder of Local Offer Network.

The Big Deal: Subscription site Angie’s List launched a deals site last year for local services like plumbing. Merchants have to have at least a B rating on Angie’s List to sell deals. “One of the issues people have with deals is you don’t always know the quality of what you’re going to get,” says Hess. These businesses “have been vetted.”

Travelzoo Local Deals: The site launched its local division over a year ago. “They already had a relationship with consumers, so they just had to effectively go out and [put local deals] in front of existing traffic,” says CEO Loren Bendele.

Dropping Like Flies

Facebook: It launched deals in five cities last April, and was heralded as a possible Groupon killer. After four months, it was shuttered. “It was strictly a business decision,” says Josic. “They saw they would have to staff up in these cities . . . but they’re more interested in connecting digitally.”

Yelp: The site launched daily deals in August 2010. A year later, with per-deal revenue steeply declining, it dramatically scaled back. “They decided they were better off . . . focusing on what they’re good at,” says Josic.

Scoop St.: New York-based and founded in 2009, it’s one of the many smaller sites gobbled up by bigger competitors after operation costs proved to be too high. BuyWithMe bought Scoop St. in August as part of a recent acquisition spree.

RealNYDeal: Launched in 2009, this small site’s staff found few local business owners willing to offer discounts of more than 50 percent. Shuttered in early 2010, it was re-branded as RealDealGrabber, which provides marketing for retailers and coupon sites, and resells product and local service deals.

We Give to Get: The Chicago site donated 10 percent of customers’ purchases to the charity of their choice. But the site eventually fell flat. “There have unfortunately been a number of sites that have tried and failed to build themselves on a charitable model,” says Hess. “They couldn’t keep these businesses running, especially given consumer acquisition costs.”

Recommended articles