MSN and PBL launched their Groupon clone Cudo.com.au yesterday. Looking at the site it’s basically groupon.com 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 – http://fromdownunder.net/2010/07/29/group-buying-gone-mad/
“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.