Demand will taper off as spending normalizes, though mobile connections will sustain growth
Los Angeles, CA (PRWEB) August 30, 2013
Born from the depths of the recession, the Daily Deals Sites industry has experienced tremendous growth in the five years to 2013, with revenue rising at an annualized rate of 332.0% to $3.3 billion. Industry operators have benefited from a customer base that is short on disposable income and a large number of retailers trying to get customers through their recession-battered doors. Daily deal sites have also taken advantage of the increasingly connected population, with the number of mobile internet connections growing during the five years to 2013. According to IBISWorld Industry analyst Deonta Smith, “while industry revenue is expected to grow 15.2% in 2013, some problems have arisen along the way”. A number of companies entered the industry as a wave of publicity swept the media and excitement gripped the cash-strapped public. In the five years to 2013, IBISWorld estimates that the number of industry firms will increase greatly. However, the industry has already started to experience consolidation. Low barriers to entry, high marketing costs and steep competition have inhibited most companies from gaining a foothold in the industry. These factors have caused many companies to experience a net loss since the industry's inception.
With a large number of players flooding the industry and significant marketing costs, some operators have entered the industry and left at nearly the same time. “Furthermore, the industry's largest players continue to operate at a loss in a bid to gain subscribers and market supremacy”, says Smith. These factors have caused some of the most well-known internet companies to reduce expenditures on daily deal operations, like Yelp, or leave the industry altogether, like Facebook. Nevertheless, niche companies have continued to pop up to target specific demographics. In the five years to 2018, IBISWorld projects that industry revenue will increase but growth will slow considerably from the previous five years, as per capita disposable income rises and consumer spending normalizes. Industry operators will also have an increasingly difficult time finding new subscribers. This factor will lead companies to focus on the bottom line rather than growth.
The Daily Deals Sites industry has a medium level of concentration. Groupon and LivingSocial were among the first to enter the market and were able to scale and export their business models to additional markets much faster than competitors. They have strong brand recognition and institutional investor backing, which has enabled them to grow their subscriber and merchant bases worldwide. Groupon and LivingSocial benefit from scale, as they are able to offer a higher volume of relevant deals to larger subscriber bases, generating higher purchase rates than the industry average. However, while Groupon and LivingSocial have been able to capture significant market share, they operate in a highly competitive industry with a large number of firms that have copycat business models. For example, technology giant Google has entered the market with Google Offers, which has the potential to scale quickly and steal significant market share from industry leaders due to its ability to cross-sell to Google's existing customer base. Over the five years to 2018, IBISWorld expects market share will vary considerably as existing firms race to scale their businesses as quickly as possible to compete with the emergence of new industry players.
For more information, visit IBISWorld’s Daily Deals Sites in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This industry includes operators that offer discounts on goods and services for a given time only (typically 24 to 36 hours). Goods sold by the website are given as vouchers, which a consumer can redeem at local merchants for the physical good or service. The industry's revenue includes the price paid by the customer for the voucher or the coupon; profit is earned after paying an agreed-upon percentage of the purchase price to the featured business.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.