27
2011
LivingSocial Closing the Gap
Let’s face it, $6 billion is a lot of money, especially considering the hyper-innovation we’re seeing in the social buying space.
In a previous post less then two months ago we analyzed the difference between Groupon and LivingSocial visitors. At the time, visits to Groupon outnumber those to LivingSocial by a factor of 10-1. In that same post we commented that LivingSocial was a site to watch given its strong representation of early adopter visitors.
Fast forward to last week. LivingSocial has closed the gap, now with over half the visits of group coupon leader Groupon.
Sure last week’s surge was due to LivingSocial’s door-busting $10 for a $20 Amazon gift certificate deal, and as the New York Time’s reported last week, the Amazon offer wasn’t a traditional group coupon. In this case LivingSocial purchased certificates from Amazon at an undisclosed cost and then resold them through their service.
Despite some claims of fraud and issues with customer support, LivingSocials 80% traffic surge last week (and Groupon’s 20% decline in the same time period) proves that the race for dominance in the group coupon space is far from over. With LivingSocial still exhibiting a healthy component of early adopters, Google launching a competitive offer and rumors that Facebook might enter the fray, I think I would have taken the $6 billion.
Groupon is a smart business model, with wider economic benefits in its ability to give small independent businesses access to a large pool of potential customers. However, one of these companies comes up with a differentiator, it’s a commoditised market. Unlike a social network, the consumer doesn’t have to invest any time in becoming a member of Groupon, so it’s easy to switch or to be a member of multiple services. If my favourite media brand were to start up a similar service tomorrow, I’d sign up. And I’d probably sign up to each new one that launches.
As a small business owner that has been featured on both Groupon and Living Social, my personal experience is that Living Social offered the better deal and produced better results.
Fantastic data as always, thanks.
Would be interesting to see an analysis of the top players in a given market. In Colorado we have a bunch of local players that seem to be gaining traction – Denver Daily Deals (Denver Post) and Daily Deals for Moms being two that come to mind. Since audience is such a huge part of the equation, I wonder how much competition will end up coming from local publishers versus the big guns.
I would have taken the $6 billion too. Now, the company needs to race its IPO to the market before any realizes that no matter how much money it made last year, it did so with no competition.
The luxury Groupon enjoyed previously was that most people only knew about Groupon, if they knew about these services at all. With Living Social getting mainstream press, and Google deals coming, people will know to “shop around” each day. That means Groupon’s deals will have to compete against other deals and so will its margins. Even if they hang on to be the market leader, it will be of a much less profitable and much more fragmented market.