By: Mike Boland 13 July 2011, BIA/Kelsey, via @BIAKelsey
Just in time for next week’s Deals 3D conference, we’ve published a new report on mobile deals. The idea is that as deals collide with mobile, it will represent the Act II of the exploding space (although deals go back much further than the recent wave of group buying).
Start-up Foursquare Labs Inc. has a large user base and a $600 million valuation, but unlike social-media stars Zynga Inc. and LinkedIn Corp., it has a big hole on the revenue line. Now, the service, which lets users announce their location to friends by “checking in” at bars, restaurants and other venues via cellphone, hopes to ease its revenue problem with a series of pacts to remarket daily coupon deals from LivingSocial, Gilt Groupe and AT&T Inc. to its 10 million users.
In today’s daily deal market, rigorous performance measurement often takes a backseat to sensational success stories. A fascination with these “blockbuster” deals is understandable; even more than the millions of dollars in revenues they generate, they embody the promise of this emerging space.
As is often the case with new markets, these incredible stories, widely reported in both tech and mainstream media, have helped galvanize excitement around (and entrants to) the deals industry. However, this enthrallment with revenue leads to a critical misunderstanding — namely, that the relative success of a deal can best be measured by the number of deals sold (and revenue generated).
There’s no doubt that businesses and users alike are tapping into the benefits of group buying sites. Not only are they a useful marketing tool for merchants but they also provide precious insights into what a consumer looks like in terms of buying behaviour. It is widely understood that knowing your user is a pivotal part of understanding how to sell to them.
If something is too good to be true, then it probably is. But once in a generation, an idea (or in this case, a business model) comes along that is so disruptive that the old the adage is proven wrong.
That disruptive business model is Groupon and the daily deal industry. There’s a lot of noise coming from skeptics and naysayers who look at the legitimacy, longevity and viability of the model. However, those critics are also overlooking the fundamentals of why daily deals are here to stay.