Consumers can’t get enough of daily discount sites these days. And it’s no surprise, with coupons offering 50% to 70% off anything from restaurants to Botox injections.
In fact, the daily deals market in the United States is expected to blast to over $6 billion in the next four years. That’s up from $873 million in 2010.
Naturally, the surge has investors clamoring for much more than just a cheaper night out with their spouses. But with upwards of 200 players in the space, pinpointing the pack leader could be difficult.
Here’s a quick look at some of the front-runners…
The Daily Dominators
Right off the bat, there are two main firms that dominate the space…
~ Groupon: This is the obvious pick, with the company holding a massive “first-mover” advantage in the market. With a whopping 79% of the daily deals market under its belt, the company’s revenue hit $760 million in 2010 – a 2,200% increase over the $33 million taken in 2009.
Groupon also recently raised $950 million in financing from private investors and hopes to raise another $1 billion from new products in 2011, so it’s trending solidly higher. Given the attention and growth, it’s no wonder that Wall Street likes Groupon. Analysts have slapped a $15 billion price tag on the company’s upcoming IPO.
~ LivingSocial: With just 8% of the market, it’s the distant runner-up to Groupon. However, LivingSocial currently does generate over $1 million in revenue a day and is on track to book $500 million in revenue this year.
While Groupon and LivingSocial aren’t publicly traded stocks yet, Wall Street’s heavy-hitters are swooping in for a piece of the growth.
In December 2010, Amazon (Nasdaq: AMZN) dropped $175 million to partner up with LivingSocial. And Microsoft (Nasdaq: MSFT) recently incorporated daily deals from Groupon and LivingSocial into its Bing search engine.
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However, they’re not the only companies in the daily deals space that are worthy of our consideration.
Truth is, there’s one newcomer to the space that’s flying under Wall Street’s radar. It promises to mirror Groupon’s meteoric rise. And it could hit the public markets sooner than many expect.
Not Just Another Groupon Clone
New York firm Group Commerce entered the daily deals race last Wednesday. Or, as All Things Digital put it, the company came “out of stealth” with “the funding and the pedigree to be a viable contender.”
Unlike other Groupon copycats, however, Group Commerce doesn’t target consumers directly. Instead, it offers a platform for publishers to send local deals to their subscribers. So it acts as a bridge between businesses and online publishers.
As chairman, David Rosenblatt told eMoney, “None of those [Groupon] clones have established publishers. They don’t have brands or trusted relationships, or customer lists.”
This way, when businesses promote their deals, they get instant access to a slew of new users at once. As Group Commerce’s website states, “We’re bringing you repeat customers, not just one-off deal seekers.”
But why don’t publishers just work directly with local businesses? As Rosenblatt puts it, “They have the audience and the brand loyalty, but they are missing the mechanics and industry expertise.”
That’s where Group Commerce comes in. All three of its chief executives worked for advertising software company, DoubleClick. In fact, Rosenblatt was actually CEO when Google (Nasdaq: GOOG) acquired the company for $3.1 billion in 2007.
So it didn’t take much for this trio to start turning heads. Publishers and media companies like The New York Times, Thrillist, Meredith Corporation, DailyCandy and Everyday Health have already signed on. And I expect more to follow suit as businesses recognize the benefit of Group Commerce’s model.
Although Group Commerce isn’t publicly traded yet, this is one area worth monitoring, as Groupon’s impending IPO should open the door for private competitors to go mainstream. And Group Commerce’s unique strategy makes it a perfect candidate for a future offering.