Groupon (GRPN) was a trailblazer in the daily online deals marketplace, presenting discounted local offers to a database of opt-in subscribers. Its initial success was so triumphant, other companies, such as SocialBuy, Travelzoo, DealOn, Google Offers and LivingSocial quickly scrambled to create their own local-deal-sharing success online.
It seemed like a solid venture pre-IPO, but after allegations over a leaked memo and a couple of forecasts that were about as accurate as an NJ-snowfall prediction, the marketplace and its massive list of subscribers may be wary of the local-deal craze.
After analysts responded to many troubling signs in early August, Citi Research analyst Mark Mahaney wrote: “The core daily deals business is sharply slowing.” A significant indication of market apprehension can be seen in stocks, such as OpenTable (OPEN) and Facebook (FB). Both recently decided that daily deals were too costly to pursue.
How does this reflect consumer fatigue? Many have speculated. Here’s what I see…
Groupon began in a time when consumers didn’t just want deals, they needed them. Groupon answered this need in a fun way, connecting businesses and consumers through unbeatable deals. With all the other online dealmakers vying for attention, it’s hard for anything to stick well. Now, more than three years and one IPO later, traffic has already declined 17 percent since the start of 2012, outpaced by Ebay and Amazon.
While this may not seem good for Groupon, MasterCard (MA) is beginning to offer location-based deals to its vast network of merchants and card members. This will likely increase significantly the level of local deals competition. Do you think they’ll succeed?
What’s your take on this daily-deals business and its looming shift? How do you give your customers unbeatable deals online? Weigh in on this subject @InflexionTweets.
