Think we made it past the “ridiculously crazy fad” phase

imageAbout 2+ years ago we’ve seen group deals rocket into popularity. Groupon went public, LivingSocial snagged a huge investment from Amazon. Every person was wining and dining, rock climbing and hitting up hot yoga classes with their Groupon printouts. 

2 years later we’ve seen a fury of critical stories addressed at the group deal business model, and loud chants of Groupon’s impending doom from Wall Street all the way to Silicon Valley. Businesses have cited lukewarm results. Customers have complained about shoddy deals and negative experiences. It seemed inevitable that the group deal fad was finally over. Well Thank God.

This will be the most fascinating period in time for the industry as the market adjusts and the players innovate. We didn’t see any Groupon ads at the Super Bowl, great! Let’s hope they’re spending that marketing budget on R&D and fine-tuning their customer experiences.

At CakeDeals, we’d like to thank all the loyal deal hunters that visit our site on a daily basis. Your support has kept us going for over two years and the return visitor rate convinces us that group deals will always have a place in the market. As always we’re cooking up some new things for 2013 to hopefully help you guys save money and discover some great deals and great experiences.

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For September 2012, Groupon’s travel deals rank top in gross revenue

We pulled stats for the top 5 deals in terms of gross revenue for September 2012 (Vancouver, BC, Canada). Groupon’s travel deals have increasingly crept up the leaderboard. Though, the numbers may be a bit misleading, as the profit margin of travel deals most likely are lower than that of the traditional spa/restaurant deals that Groupon offers.

What is interesting is that by partnering with Expedia, Groupon has steadily become an attractive resource in booking travel deals. Back in their Q2 earnings call, Groupon CEO, Andrew Mason confirmed that much of their revenue growth can be attributed to their increased selling of travel deals and discounted physical goods. 

To double check on that we looked at our September 2012 data, and it does appear that the Travel and Shopping classifications remain the most popular types of deal that people purchase. Spa & Beauty and Food & Drinks follow closely behind. It remains interesting to observe how Groupon and its competitors will spread themselves further for new revenue sources.

Most of the media and industry analysts have been writing about the end of Groupon for ages now. Groupon’s largest competitor, Living Social has had its fair share of bad press recently, reporting a drop of 10% in revenue from the last quarter. The Wall Street Journal also expects Groupon to potentially miss its third-quarter revenue forecast due to signs of declining sales. Groupon reports their third-quarter earnings next week, be sure to tune in if you’re interested.

Although the general outlook for the group deal industry has been bleak, we remain optimistic as our user activity on CakeDeals remains steady, signalling an obvious continued interest towards the finding amazing discounts and coupons. It doesn’t matter if deals come from Groupon, Living Social, or any other source, as an aggregation platform, our job is to discover them and bring them to our users.

Analytics: What types of deals are catching attention?

Travel Deals by Groupon

In last week’s post we identified interesting changes in the public’s daily deal habits over a given year. Specifically we looked at the top deals in Vancouver B.C. Canada for April 2012 and April 2011. We pulled a few more stats on the types of deals that are dominating the charts.

For April 2012:

From the data, it shows that the top 3 categories have been dominated by Shopping, Travel and Food & Drinks. In our Classification rules, Shopping is defined as a product-based deal. These products range from iPhone cases to electronics, appliances or apparel. Travel deals have recently made an enormous surge, especially with Groupon’s partnership with Expedia on their Getaway deals. What is interesting is that the revenue brought in by Shopping and Travel deals far outweigh the numbers associated with other categories. Both categories brought in over $3 million CAD each. 

What did the same picture look like a year ago? April 2011 brought in the following stats:

As expected, Spa/Beauty, Food/Drinks and Activities were the major categories of deals a year ago. How many times have we heard people say they were “sick of Spa deals.” However, even though Spa/Beauty deals dropped on the ranking in 2012, it still raked in a significant number at over $800,000 CAD. Such deals continue to pull in interested Deal Hunters, but it has become obvious that people are increasingly spending more and more money per purchase through Daily Deals with the increase in popularity of Travel and Shopping items. 

It remains exciting to see where the trend steers towards as the year heads toward its latter half. With Groupon’s stock closing at single digits last week, things look precarious for the industry as a whole. However, it is obviously tough to draw any clear picture of the market especially with the instability of the global economy.

CakeDeals Analytics is based on data collected by CakeDeals.com on the Daily Deal Industry.

Insights on the recent top performing deals

According to CakeDeals Analytics, in April 2012, the top 5 deals in Vancouver, British Columbia were as follows:

The top 5 deals accounted for 3590 coupons sold, bringing in a total revenue of over $2 billion CAD. The top performer was Canada’s own Dealfind.com with over 1990 coupons sold for deal on a DeWalt Cordless Combo Tool kit generating an approximate total of $595,010 CAD in revenue. Though the types of products and services featured on Daily Deals have become more varied as the market matured, it seems that there is still plenty of interest in the Canadian population for daily discounts. Another surprising point is Dealfind’s rigorous success in competing against the 2 giants of the industry, Groupon and LivingSocial. Dealfind has long claimed to be the third largest deal site in North America

One point that critics of the industry frequently bring up is the diminishing quality of deals that are being offered. The top 5 deals of April 2011 for Vancouver are listed below:

Though total sum of revenue is significantly lower than that of this year’s ($897 million), this can be caused by a majority of factors. What is interesting is to take a closer look at the merchants involved. In April 2011, the quality of merchants seem to be significant, including The Body Shop, Running Room, Whistler Golf Club, and the top-rated C Restaurant. The top performing deals in April 2012 were dominated by travel-oriented deals and few well-known merchants. It appears that the frequency of travel deals have increased significantly and pushing the popularity of other deals further down the ranking. We took a a further look at the top 10 deals for both years the same trend exists. The highest grossing deals in 2012 were largely travel-related. Other types of merchants seemed to have a weaker performance.

However, given the number of purchases and revenue generated, there seems to be no shortage of people interested in a bargain. Though the types of deals have indeed changed over a year, this merely reflects the maturity of the market and shows that consumers have no problem committing to purchasing a variety of products and services via daily deal sites.

CakeDeals Analytics is based on data collected by CakeDeals.com on the Daily Deal Industry.

Tags: analytics

Deal Hunted: Pretty damn good pasta for half price.

The other day I headed down to Langham Place in Mongkok to use a coupon we bought through BeeCrazy. It was for Caffé Superiore, a bustling pasta restaurant inside Mongkok’s largest mall. 

I just wanted to write a quick “review” if you will. I mean, of course we use Groupons as well. Why not share our experience now and then? I think one of the reasons the whole Group Commerce industry is getting a bad rep is because a lot of the bad experiences get publicized. Most experiences that are mainly just “pleasant” don’t make really great headlines.

So Caffé Superiore. When we arrived there was a decent sized queue. The place didn’t take reservations, so that wasn’t all too shocking. The wait was fine though. The turnover at the restaurant was fairly consistent and quick. By the time we sat down and waited for our pasta and coffee/tea to arrive I was pleasantly surprised about the service. Even with the bustle of Deal Hunters the staff at the restaurant remained kind and professional.

When I finally dug into my seafood spaghetti, I was again really happy with it. I admit! I was expecting over-cooked spaghetti in mediocre portions. However, it was pretty damn good. Pasta was cooked just right (firm not hard), the sauce was tasty, and the seafood was fresh. I washed it down with a coffee and was very satisfied with the whole meal.

So here’s the final conclusion.

Will I return and pay full price? Yes I would.

Groupon Getaway contest officially closed!

We’re tallying up the results, but our official winner will be notified and announced soon. Our official winner will receive one Groupon Getaway deal of their choice (maximum value of $500). Thanks everyone for participating.

We’re running a follow-up contest right after this one that’ll be a bit faster-paced, so make sure you follow us on Twitter (http://www.twitter.com/cakedeals) and Facebook (http://www.facebook.com/cakedeals) to make sure you’re notified when it happens.

http://www.cakedeals.com/contest

Update: Winners have been contacted! Our winners racked up 800 and 500 points respectively. Thanks again everyone for participating!

Follow us on Twitter for our next Retweet contest!

Introducing Search and Insights

At times I stare at the CakeDeals list and get a little intimidated by the 100+ deals that I need to sift through. I’m sure it has scared off a couple of our friendly visitors. Well, in order to calm some nerves, we rounded up the team, put our heads down and built a Search Engine for Daily Deals. Now, on any given day, if I’m curious to see if there are any “sushi”, “pizza” or “hot air balloon” deals, all I need to do is search for it. It works great. You can even further filter down by Categories. Curious about the history of deals? Our search results display deals that occurred in the past as well. Try it out in your own city: http://www.cakedeals.com


A second happy announcement we have is an experiment we are calling CakeDeals Insights. It’s an interesting report we built on top of the data that we aggregate. The report reveals the top categories of deals, pricing overviews, and top performing deals for the month. Our partners love it, as it helps them get insights on the entire market. You can access it for free by creating an account on our site and logging in. Are you looking for a bit more meat in the data? If so, give us a shout at advertise@cakedeals.com.


Lastly, notice the little star on each deal beside the Bookmark link? This is meant to help you. Whenever you purchase a deal, remember to Bookmark it as well. This way you can keep track of deals you have purchased across different vendors.


Enjoy and have a great day.
Andrew

An oldie but a goodie: Paul Graham on fundraising vs bootstrapping

Y-Combinator founder Paul Graham has a great essay written a few years ago: A Fundraising Survival Guide

We have a number of friends and colleagues that are bootstrapping their startups with a day-job and considering a fundraising process. Some points made by Graham that linger in me:

Bootstrapping sounds great in principle, but this apparently verdant territory is one from which few startups emerge alive. The mere fact that bootstrapped startups tend to be famous on that account should set off alarm bells. If it worked so well, it would be the norm.[3]

Bootstrapping may get easier, because starting a company is getting cheaper. But I don’t think we’ll ever reach the point where most startups can do without outside funding. Technology tends to get dramatically cheaper, but living expenses don’t.

The upshot is, you can choose your pain: either the short, sharp pain of raising money, or the chronic ache of consulting. For a given total amount of pain, raising money is the better choice, because new technology is usually more valuable now than later.

Check out the article for some more great points.

Why would local businesses not use Groupon when discounting?

It has been over a year since Groupon’s shoot to fame, as one of the fastest growing businesses in history. The daily deal industry has exploded with competitors and despite recent stabilization, no end is in sight.

However, as it has become obvious, the future outlook is not as optimistic. Many critics including bloggers over at Harvard Business Review and TechCrunch have weighed in on how Groupon’s current business model is unsustainable. Specifically their arguments generally lie on the fact that deep discounts are painful for local businesses. Continuing to offer daily deal coupons could spell certain doom for the innocent mom and pop shop especially if repeat customers can not be generated.

I think the concerns about Groupon, Google Offers, and the entire daily deal industry is valid. There are troublesome trends, but there are a few points to consider. Many critics assume that local businesses need to fork out deep discounts at 50% or more in order to run a daily deal. This may be the initial selling factor that led to the industry’s growth, but it might not need to stay this way for deal providers to continue operating.

Additionally, it is assumed that daily deal providers need to take a significant cut from each coupon bought. The number floating around for Groupon is 50%. But this is a value that can also be adjusted. Payout schemes can also be adjusted.

An interesting question to ask is whether or not these daily deal providers can survive even after businesses offer lower discounts, and providers take a smaller share. It depends on their operating expenses, and from Groupon’s S1, this can be enormous, but why can’t such expenses be controlled and stabilized?

If we take a step back and take a look at what the industry has become instead of lasering in on specific assumptions and numbers, there is an interesting picture to consider. Discounting and coupons have existed for ages and what Groupon has accomplished is standardize the way that discounts and coupons can be offered. There now exists a structured framework and network for local businesses to promote discounts when they need to.

Think back to the days before Groupon. Businesses still offered periodic discounts and coupons in order to attract a larger volume of customers. They advertised this deal through newspapers, flyers, radio, signs on their windows. Conversions on traditional forms of advertising are known to be difficult to measure. Coupons purchased on a Groupon site are instantly measurable, and by leveraging a daily deal site’s audience (as well as that of any deal aggregator), a local business has a far superior chance of promoting their business and measuring the success of the campaign.

Critics also make a point about the lack of repeat customers, even providing analysis on the reputation of local businesses that participate via Yelp reviews. It’s been known that the product or customer service suffers due to the huge influx of customers that flood a business during a coupon offer. However, this is also a value to be adjusted by the daily deal provider. Fine-tune the maximum number of coupons available.

Groupon and its competitors’ astronomical growth perhaps is limited, but its ability to tweak its terms and business model to reach stabilization is a wide open opportunity. Besides being possibly spooked by a bad partnership or experience, the question becomes why wouldn’t a local business consider Groupon as a great opportunity to advertise a discount, especially if the terms are mutually beneficial? As long as daily deal providers keep up technologically and continue to strengthen its network and audience, is there really any end in sight?

{Andrew}

Daily Deal Fraud

Recently in Hong Kong, Macau Dragon a company that offers ferry services to/from Macau filed for bankruptcy. Prior to doing so, they participated in a daily deal campaign that sold close to 150,000 tickets (http://bit.ly/q0uN9n ). Authorities are investigating the issue, but luckily the deal vendor has agreed to offer full refunds to customers.

More than ever, consumers need to be extra careful on choosing deal vendors, as businesses may aim to exploit the daily deal model. Obviously the prominent players such as Groupon and Living Social promise full refunds in case of such occurrences. However, whether smaller vendors will do the same remains unclear.

To help our users differentiate between the many sites, CakeDeals will begin tracking and marking sites that offer a refund service. On our deal listing, you will soon see an icon beside the Source Name signifying that the deal site provides a refund.

Note that CakeDeals does not sell any deals itself, we only display deals sold by the deal vendors. Therefore, all available refunds are processed by the deal vendor only, and not CakeDeals.

A note to the vendors that work with us, we will be doing our best to track who has a refund policy and who doesn’t. However, to assist us in this, feel free to send us an email at general@cakedeals.com to let us know that you indeed have a refund policy.

As a user, if you have any further questions on this, feel free to email us as well.