|Deals Fatigue Settling In, Some Best Practices to Bear in Mind.|
By Ken Barna - Web in Travel
Monday, 31st October 2011
If you are one of the 115 million subscribers of Groupon’s daily deals email, you expect that every morning when you awake you can grab your coffee and see what offers are available in your area.
You may have also noticed the utter saturation in the marketplace with the amount of deal websites that have sprung up in the last 2-3 years.
A recent Wall Street Journal article, “Get ‘Em While They Last: ‘Daily Deal’ Sites Dying Fast” cites that 170 of 530 deal websites have shut down or been sold so far in 2011. Even through this apparent consolidation, that means that over 360 deal Websites still remain.
Group buying or private/flash sale channels provide an opportunity to quickly move an influx of short-term inventory.
Typically, a block of inventory is secured from the advertiser in the form of room nights, restaurant credits or spa services. The inventory is then discounted 40-60%, the sale will take place for generally 48 hours and the publisher will keep a commission of 30-50% of the total gross sale. The resulting financials of the sale is net revenue to the advertiser of approximately 25-40% of the original retail cost.
With new customer acquisition costs drastically increasing for big players like Groupon, it appears that both advertisers and users alike are becoming more wary and discerning of what is really a ‘deal’ in these marketplaces.
Due to the vast number of sites vying for their business, advertisers are slower to jump at these opportunities for fear that overusing these channels will erode their retail rates.
The saturation of these websites paired with higher user acquisition costs, leads one to believe that even pioneers like Groupon may be ‘over-the-hill’ as it relates to their current business model.