The Daily Deal Industry: Too Much of a Good Thing?

The Daily Deal Industry: Too Much of a Good Thing?

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Like so many other people, my email inbox fills up daily with 15 or so deal offers from the likes of Groupon, LivingSocial, WagJag, GiltCity, and Lifebooker. But one of the emails I got today stood out. DealOn, one of the hundreds of daily deals businesses that have popped up over the past couple years, wrote to tell subscribers that it was shutting down. My first reaction was relief – that’s one less email bombarding my inbox every morning. My second thought was, maybe the daily deal market has finally reached its limit, as many have been predicting (and oftentimes, hoping).

Not so, says Jim Moran, cofounder of Yipit, a site that aggregates the deals of other sites and recently began publishing industry reports. He says that DealOn’s shuttering had more to do with the turmoil at its parent company, ReachLocal, than with anything happening in the daily deal space.

In fact, the industry is still growing. In the wake of Groupon’s success, a slew of copycat companies sprang up, taking advantage of the ease of entry into the marketplace and seemingly boundless popularity of daily deals. There are now about 350 daily deal sites in the United States – 350! – according to Yipit data, and their collective revenues rose 13 percent in October.

True, some sites have inevitably shut down. BuyWithMe, the onetime No. 3 behind Groupon and LivingSocial, is the biggest of the bunch to have shuttered, “though many small sites have as well,” says Moran. “If you add up all those smaller sites, they never represented even 10 percent of industry revenue, in aggregate.”

Moran adds that the top 10 daily deal sites represent over 80 percent of all industry revenues – some clear winners have emerged, and for them, there are still areas to tap for growth. Moran cites daily deal smartphone apps as a particularly strong growth area. In addition, daily deals as gifts are an emerging trend: “Holiday season is going to be big,” says Moran. “We estimate $80 to $100 million will be spent in North America on holiday-related daily deal purchases.”

Which means I can forget about waking up to a less cluttered inbox anytime soon.