Erick Schonfeld at TechCrunch (and a few others) wrote up a daily deals “year in review” report published yesterday by Local Offer Network. I received the report as well.
In support of the accuracy of its data, Local Offer Network says that it monitors “nearly every deal across the web” (in the US, Canada and beyond) and so has unrivaled insight into the market.
The data in the report only pertain to the US market, however.
TechCrunch also published estimated Groupon revenues from a super-secret, unnamed source. The estimate claims a significant revenue drop (-$27 million) from January to February (from $89M to $61M). Simultaneously Business Insider conducted a non-scientific survey of its users about their use of Groupon. The responses are not representative of US consumers but the results are still interesting.
First the consumer survey data (n=943). Keep in mind that this is not representative of the public as a whole or even Groupon users in the aggregate but may reveal some patterns or attitudes that are taking hold. Here are some of the data:
- 86% of respondents said they subscribed to Groupon
- Just 20% had been doing it more than a year
- 74% said they were now opening “fewer” or “none” of the Groupon emails than when they first subscribed (deal fatigue)
- 36% subscribed to at least 3 deals providers
- 72% of respondents subscribed to both Groupon and LivingSocial (a bit like MySpace and Facebook overlapping usage)
- 41% said they bought no deals from any of Groupon’s rivals
Perhaps the most “interesting” finding was that 68% of respondents report they would be buying fewer Groupon deals in the future than they had in the past. This is consistent with the “opening fewer emails” data point above, and indicates some degree of deal burnout. Previously however Ken Kalb of Analog Analytics said he saw no evidence of deal fatigue in the market.
Jumping to the TechCrunch Groupon revenues estimate . . . it’s hypothetically possible that some sort of deal fatigue is setting in and that is partly responsible for the alleged drop-off in Groupon revenues. However seasonality is probably a more likely explanation if these figures are accurate.
Chart/data: TechCrunch
TechCrunch’s Schonfeld speculates that the pictured decline could be partly a response to the failed Super Bowl campaign. However the Business Insider survey data shows that only 3% of respondents were negatively impacted by those ads. Everyone else didn’t care. Indeed, the deals themselves are what matters to most people.
If the revenue decline does indicate some sort of deal fatigue setting in, others in the industry don’t see it.
Most interesting is the data from Local Offer Network. The company, which is obviously bullish on the market, said that group buying in the US was worth $1.12 billion in 2010. The company estimates the market will grow to $2.67 billion this year.
The Wall Street Journal previously published data obtained from Groupon that showed 2010 revenues were $760 million globally and $475 million in the US. Interestingly, the revenue numbers in the above TechCrunch chart are within spitting distance of that $475 figure.
Below are several additional charts from the LON report about the growth and distribution of offers by city and category.
So is this a market “in its infancy” or one that’s already showing signs of age? Clearly the market is evolving and that will help it remain vital. I don’t believe that the market is in decline already. However I do think that the Business Insider survey data indicate the potential for consumer burnout over time, after initial excitement and a flurry of purchase behavior.
That experience mirrors my own.
See related: McClatchy, a Groupon Partner, Starts Selling Its Own Daily Deals, Too
March 23rd, 2011 at 10:52 pm
Add to all of those numbers that in my Coffee Talk sessions with local businesses and consumers, I have heard this statement many times. “I bought a Groupon last year but I never got around to using it” If that even represents 1/100 of consumers, the long term loss could be huge. Hidden in that point was they said they bought a Groupon.. and didn’t mention the local brand they would redeem it at.
March 23rd, 2011 at 11:08 pm
Yes the redemption rates appear to be falling somewhat from what I understand.
March 23rd, 2011 at 11:51 pm
Greg,
Great post! One additional theory. I would suspect the quality of Livingsocial deals lately would have some affect on Groupon’s recent revenue decline. The Amazon, Redbox and Red Cross deals where phenomenal. Shifting $’s maybe?
-Jeremy
March 24th, 2011 at 1:45 am
Hard to know. As the BI survey show there’s a high degree of overlap between the memberships of LS and Groupon. So you could be right that competition is impacting Groupon to some degree. But that probably wouldn’t explain $30M in negative growth.
March 24th, 2011 at 1:11 pm
great article, Greg.
Do you know if these revenues are based on deals purchased by consumers or redeemed? I assume it’s purchase data, derived from published deal quantities and value modeling? (I suspect if GroupOn goes public, their revenue reporting will be required to hold recognition until redemption occurs.) It’s also worth mentioning, Feb has 28 vs. 31 days of sales being reported.
I’ve long held that the deals being purchased are driven much more on the quality of the individual merchant and their offer, vs. the branded deal source. Obviously distribution still is driver #1, but with the base of deals offered in a marketplace showing a 6X supply increase, it’s natural for deal purchasing to shift out to more suppliers.
March 24th, 2011 at 3:58 pm
Those most fatigued by “deals” are the merchants themselves…
March 24th, 2011 at 4:11 pm
I’ll send you the doc. I assume it’s purchased but not necessarily redeemed.
March 24th, 2011 at 4:35 pm
Greg. Very insightful. Thanks! We used to see tremendous seasonal patterns with prepaid offers sold in retail over the past ten years while we were doing this. Traditional prepaid offers like gift cards are sold mainly during October – December. The pattern has changed a bit as more prepaid offers are in the consumable categories and not just gifted. Though I am sure we will discover more seasonal aspects as the market matures.
I think the following aspects play a role in these numbers:
- seasonality
- broader availability of offers through competitors
- saturation (how many subscribers does Groupon have in US already compared to households online)
March 24th, 2011 at 5:06 pm
Thanks @Perry re shorter month (good point) and @Thomas re the various factors and historical perspective.
@Perry: interesting point re revenue recognition. You may not be right, however, because merchant and Groupon revenues don’t depend on actual redemption — although the long-term health of the business may.
March 24th, 2011 at 10:17 pm
The area to watch is in the groupon clones- here in phoenix we have a service called localdines.com which is just for restaurant deals. This service is very popular as a consumer can pull up a list of 50% off restaurants across the metro area. It doesn’t have to be the deal day for that particular restaurant for the consumer to participate
The merchant fatigue is caused on both sides. Groupon and others don’t share customer data and the merchants don’t capture any customer data when you redeem the coupon. I’ve used several groupon style coupons and never has the merchant captured my email address, phone number, signed me up for their facebook fanpage or newsletter
March 25th, 2011 at 12:17 pm
[...] See related post: Dueling Deals Data: A Growing Market or Already in Decline? [...]
April 16th, 2011 at 12:40 am
[...] were $760 million. They’re on track to be $1.2 to $1.5 billion this year. Local Offer Network previously estimated that the entire segment would be worth $2.67 billion in [...]