Deal of The Day - Industry Outlook

Industry Outlook

While 2010 marked a year of rapid growth, the daily deal promotion industry began to slide in 2011 and through 2012. Regardless, revenue forecasts for the industry continue to foresee strong growth. Analysts predicted that industry revenues will reach several billion dollars at an increasing at annual rates in excess of 100% by the end of 2011. According to a study released by BIA/Kelsey, gross revenues are projected to grow from a current $873 million to $3.9 billion by 2015.

The increase in venture capital injections and startup launches also exemplify the continued growth in the industry. Some examples of such activity are the recent launches of Facebook, Amazon, Google and AT&T’s daily deal sites. Groupon filed for IPO in June 2011 and went public the following November.

Despite positive growth figures, there are studies that suggest that there is a structural weakness to the industry that will have to be addressed in the coming years. These shortcomings fall on both the consumer and merchant side. For example, deal users very rarely return for a full price purchase and large percentage of businesses indicate their disinterest in running another deal in the future. For these reasons, the industry will require some testing and evolution and these daily deal sites will have to settle for lower shares of revenues from businesses compared to their current levels (20-50%) which are not sustainable It is unclear whether industry diversification, increasing competition, and larger revenue shares for merchants will disrupt the major players or cannibalize the industry as a whole.