Group buying and Deal of the Day purchases are blazing a fast trail to the predicted 4 billion dollar market that this ecosystem is estimated to be worth. The latest players to enter the arena are two giants, Facebook and Google, ready to battle with the established titans Groupon and Livingsocial.
At this point most consumers are unaware that there is a flood of smaller, agile firms with a lot of local knowledge that want their own piece of the pie, in fact Toronto alone has over 50 companies that fit the bill. This welcome problem has given birth to another sister industry, the daily deal aggregator.
To date, in Canada alone, there are over 30 sites that aggregate and display deals, including my site www.dealwhistle.com. The barrier to entry is small, so a lot of independent start-ups have found themselves in the thick of the social buying market. The value proposition of the daily deal aggregator is simple: cut through the daily deal clutter (who needs 6 different spa deals anyways?), customize and suggest deals based on a user’s preference, and generally organize the deals in a meaningful way. This way the user doesn’t need to read through a million sites or emails in order to find that perfect purchase.
A positive side effect of this new industry is that the smaller players can be listed alongside the bigger ones and benefit greatly from the exposure that normally would not be possible. This presents a dilemma for the primary vendor of the deal. Naturally, they don’t want to display their competitor’s deals, but at the same time they don’t want a deal portal to control traffic to their sites. The two sides are playing nice with each other for now, with companies like Groupon even offering affiliate dollars for channeling traffic to their deals. However, once a few powerful gateway aggregators emerge, and they will once consumers realize the power of the aggregator, this situation is unlikely to continue.
Unfortunately, there will be a lot of casualities in this fresh and fertile market and both a number of daily deal vendors and aggregators will bite the dust. The revenue stream for an aggregator will have to be both diverse and creative as they should not expect any referal or affiliate dollars to continue long term. Preferred deal placements, trend and marketing data, and possibly even hosting the deals themselves will be neccessary to be viable.