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Another Reason to Stay Away From Groupon/Living Social Clones

This year, 273 new daily deal sites were started and 112 were shut down, according to Yipit - a huge level of turnover that makes participating in a new and unproven offering or model, risky for merchants. Only a handful of the approximate 400 daily deal sites have scaled to a million users and none of them have scaled to double-digit millions of users, Yipit notes. "User acquisition has become too competitive and thus too expensive. While there's no barrier to entry in the space, there’s now a barrier to scale and Groupon has scale. Over time that scale will allow them to develop a better experience on the user side and merchant side (think relationships with credit card companies, partnerships with nationwide brands)."

At the same time, Groupon and LivingSocial, the two inarguable leaders in this space, are battling for market share primacy. According to Yipit, (via Business Week), Groupon's share of online daily deals slipped to 48% in May from 52%. New Models Such figures may lead one to conclude that the daily deal model - especially when trying out new variations to that model, such as real time deal offers - would be best done via one of these established sites.

(Yet another example, coincidentally, of such a twist to the model, just launched: on Monday, June 27, David Gray offered an exclusive daily deal on Groupon for his new live album, Lost and Found – Live in Dublin 2011. The album, a $13 value, was available for the price of $6)

But maybe not, Yipit goes on to say in its post. Groupon Stores, their attempt at self-serve, did not work. Meanwhile, Groupon Now is unproven and a very different business. Based on Yipit’s use of Groupon Now in New York, it believes it may need at least 10 times more deals to really be effective.


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