The Groupon clones are coming …

MSN and PBL launched their Groupon clone yesterday. Looking at the site it’s basically with a few small aesthetic touches.

These sites are interesting. Basically they bring the idea of coupons (think the Entertainment book that sells in Melb and Syd) online and rely on the power of social networks and the passability factor to ignite offers.

Groupon is on track to be the quickest company in the US to hit $1b of revenues – and in the US is the hot digital play right now.

The premise is simple. If an offer gets enough people to opt in – the offer is ‘on’ … this is a figure generally set by the retailer and the site.

Cudo is one of numerous groupon type websites in Australia. Spreets is another. Jumponit is another. It’s not a ridiculous claim to assume all are looking for relatively speedy exits – ideally from a cashed-up groupon who will no doubt buy global distribution (as it’s generally easier than setting up in local markets). None of these would be long term plays – they want to do the initial heavy lifting, become cash positive and exit at a strong multiple. They will run super lean.

My feeling is we will see these coupon/groupon sites from ALL the major players. News Limited will have one. Fairfax will have one. Telstra/Sensis will have one. Yahoo!7 will have one. Netus would be looking at this sort of model. It’s just a matter of time. There will be 10-15 of these all giving Australia a solid crack.

Cudo CEO Billy Tucker blogged about the phenomenon of group buying sites a few months back –

“Chances are a number of poorly funded Group Buying pretenders will come and go over the coming months, it will no doubt be fascinating to watch!”

Why? Because if this sort of business scales it becomes a very attractive proposition.

Word is groupon takes between 30-50% of the revenue generated from sales on the site. So if a retailer offers $100 of store credit for $50 … groupon will take between $25-$15 of the transaction. The sell for groupon is they deliver relevant customers in high enough volumes to create a meaningful marketing impact for a business.

So, today on Spreets in Sydney the offer is a $642 makeover for $99. 129 people have taken the offer up.

Let’s assume Spreets are taking $50 of the transaction … this results in about $6450 in revenue.

Not bad when you think about it. Over a year this is just under $2.5 million in revenue. For one city.

If you can duplicate this in 5 capital cities the revenue is just over $12 million. It’s not unreasonable to assume there will be a group buying business in AU with revenues around $30m within 12 months.

For any investor or media company looking for growth and positive revenue momentum, it’s a space worth having a shot at. It is much more appealing than putting another content play into an already crowded market.

But what do you need to make it work?

1/ Great offers that will generate interest and buzz
2/ The sales team to go and generate the offers and convince retailers and make sure it all functions well and retailers are well educated around the space
3/ The distribution to reach large amounts of people daily and scale quickly
4/ The marketing clout to go and generate awareness
5/ Exceptional execution and the ability to make something that could be complicated logistically, work smoothly

All are difficult. 3 can be bought through alliances and channel deals. 4 requires cash. 1 requires strong foresight and 2 and 5 require excellent people.

If 10-15 of these businesses give AU a shot, one will dominate and 2 will probably exist cash neutral or with a small profit. Like classifieds has played out here.


12 responses to “The Groupon clones are coming …

  1. Andrew Sedgley

    Big Facebook page I am seeing that could replicate this is top Melbourne restaurants

  2. One of those ‘I had this idea last year, but didn’t follow it through’
    If I had more patience we could have had a Les Wood version

  3. have already reached an agreement with groupon by the look of the au domain

  4. Our Deal is one worth checking out as well. They started utilising FB pre-launch building up their customer list….I’ve introduced clients to them and am impressed with their approach and business savvy

  5. It would be very interesting to know how many items these sites actually sell – I wouldn’t trust the counters on most of them, I am sure their backend provides for these to be manipulated and they are not a true reflection of sales.

    As competition hots up there is a real risk that these offers become viewed as a dumping ground – I have been subscribed to a few for the past few weeks and there’s only so many teeth whitening and jet boat sessions I can buy.

    Anyone have some true figures?

  6. talkingdigital

    Julian – interesting observation. BUT – if you’re inflating take up numbers on offers wouldn’t the retailer be a bit suss when the website is saying there’s been 500 sales but you only see 150 or so when you reconcile.

    I think the transparency of the whole thing should keep numbers honest. No point inflating sales as no one wins.

    I agree re the breadth of offers – if it’s just run of the mill stuff you’d never consider buying at walk up price the value is diminished. So far in the US it appears groupon etc are generating good deals … in AU some of the deals aren’t exactly catches!

  7. Ouffer (another clone) had a deal last week offering 2 nights accommodation at a 4 star resort, bottle of wine and $60 dinner voucher and 2 movie tickets. Value was around $400-$500 and was selling for $180. They’d sold 1,600 over a couple of days. $300k+ in sales… even at 30% that’s not a bad couple days work!

  8. Very interesting article. I’ve been watching this space as well.
    Concerns i have are:
    Over selling the vouchers so that the buyer wont be able to receive the service for a long period and at the time they want. I guess its discounted so they shouldnt complain but then the real value is not really ‘real’.
    Potential to get spammy if they dont break down into the categories fast enough.
    Your point 5 is a big concern, seeing a lot of complaints already on the different sites discussions.
    btw: ebay dont seem too far off your 5 points.

  9. The perfect study. Does anyone have idea about the current global penetration of such model and the future projects. Anything published by Forrester, Gartern, or any other. Will appreciate your help.

  10. Cudo sucks – they reneged on a cupcake offer and refunded us all without notice. I don’t think I will trust them again

  11. Pingback: It’s good times for the AU Group-buying fast followers | talking digital – Ben Shepherd

  12. Andrew Sedgley

    I bought 20 summadayze tickets from a groupon site a few years ago
    Best day ever

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