David Wolfe Daily Deals

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Overview of the Group Buying/Daily Deals space

Overview of the Group Buying/Daily Deals space

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  • 1. Daily Deals
    David Wolfe – COO – BuyWithMe
    david@buywithme.com
    6/13/2011
    1
    DMCNY Breakfast Series
  • 2. Table of Contents
    The Market
    Consumers
    Merchants
    Deals
    Groupon’s S1
    Future
    6/13/2011
    2
    DMCNY Breakfast Series
  • 3. The Market – “Daily Deals” defined
    “Daily Deal” platforms provide a way for local businesses to connect with local customers.
    Consumers use the platforms to discover new local businesses , get deep discounts, and share them with their friends.
    Local businesses use the platforms to acquire new consumers on a performance basis.
    A daily deal is an online CPA based marketing campaign for a local business
    6/13/2011
    3
    DMCNY Breakfast Series
  • 4. The Market - History
    6/13/2011
    4
    DMCNY Breakfast Series – [source Yipit]
  • 5. The Market – Industry Structure
    6/13/2011
    5
    Daily Deal Sites
    MERCHANTS
    CONSUMERS
    Vertical Deal Sites
    White Label
    Publishers
    Data
    Merchant Services
    Exchanges
    Aggregators
    Consumer Services
    Merchant Agencies
    SOON…
    DMCNY Breakfast Series – [source Yipit]
  • 6. The Market – Traffic & Audience
    6/13/2011
    6
    • Buyers predominantly female
    • 7. Affluent
    • 8. 25 – 40 year olds dominate
    DMCNY Breakfast Series – [source Yipit]
  • 9. The Market – Revenue
    Groupon’s 1st quarter 2011 revenue - 655 million
    These projections are already too conservative
    6/13/2011
    7
    DMCNY Breakfast Series [source: Silicon Alley Insider & EMarketer]
  • 10. The Market – Barriers to Scale
    6/13/2011
    8
    The Virtuous Cycle of Daily Deals
    More Cities
    More Sales
    More Salespeople
    Improved Media Buying
    More Conversions
    More Deals
    More Deal Personalization
    More Subscribers
    DMCNY Breakfast Series [source: Needham & Company LLC via Yipit]
  • 11. The Market – Key Value Streams
    6/13/2011
    9
    Consumer/viral referrals
    Consumer life-cycle
    Marketing Cost
    • New merchant discovery
    - Positive experience
    Deal life-cycle
    Revenues
    Production Cost
    - New customers
    - Better inventory management
    - New business
    Merchant referrals
    Merchant life-cycle
    Sales Cost
    DMCNY Breakfast Series
  • 12. Consumers – Basic experience
    6/13/2011
    10
    consumer & merchant
    consumer
    consumer
    consumer
    Discovers deal
    Participates in group buy
    Retrieves voucher
    Redeems
    Merchandized deal delivered through notification or app
    Payment authorized & cc stored
    Deal activated & payments captured
    Voucher’s activated for print or mobile access
    redemption processed [mobile or bulk process]
    Daily Deal Systems
    payment processor
    DMCNY Breakfast Series
  • 13. Consumers – Benefits
    6/13/2011
    11
    DMCNY Breakfast Series
  • 14. Consumers – Acquisition
    6/13/2011
    12
    Groupon’s 1st quarter marketing spend 250 million
    Industry eCPL’s : 5 – 10 $ range
    Industry CAC : 10 – 45$ range
    Industry LTV : 30 - 60$ range [annualized]
    Industry Buyer/Subscriber ratios ~ 20%
    Creative themes – general service value prop & business category based (Hungry, Bored), deal specific
    DMCNY Breakfast Series
  • 15. Consumers – Challenges
    6/13/2011
    13
    Over 50% of all revenue producing Daily Deal transactions are the direct result of an email. Can email remain the primary driver of engagement?
    Inbox collisions and email fatigue seem likely
    Little product and user experience differentiation
    Archaic redemption methods
    Adoption of mobile services remains under 20% across industry
    DMCNY Breakfast Series
  • 16. Merchants – Basic experience
    6/13/2011
    14
    consumer & merchant
    merchant
    merchant
    merchant
    merchant
    consumer
    Signs-up
    Co-creates deal
    Consumers redeem
    Retrieves $$ & statistics
    Deal is scheduled
    Deal runs
    Merchant identity & attributes stored
    Deal created & editorial and image assets stored
    Deal inserted into production schedule
    Redemption processed [real-time mobile, bulk voucher]
    Campaign stats in merchant portal. Check sent
    Deal merchandized to consumers & vouchers sold
    Daily Deal Systems
    DMCNY Breakfast Series
  • 17. Merchants – Benefits
    6/13/2011
    15
    DMCNY Breakfast Series
  • 18. Merchants – Acquisition
    6/13/2011
    16
    Local businesses are “sold” deals, they don’t “buy” them.
    Effective merchant acquisition and retention require investment in specific organizational structures - Merchandising, Sales, & Account Management teams
    Deal /campaign creation requires significant hand-holding.
    Groupon’s self-service initiative not very successful to date.
    250-750$ eCPL for small businesses with assisted model
    Large, trained, inside/outside sales force requirement for performance at scale.
    DMCNY Breakfast Series
  • 19. Merchants – Profitability
    6/13/2011
    17
    DMCNY Breakfast Series [source: Yipit]
  • 20. Merchant – Challenges
    6/13/2011
    18
    Daily deals are an effective customer acquisition vehicle, but are less useful for retention and win back
    The only basis of platform differentiation from a merchant perspective are volume and quality of consumer’s delivered
    Return on marketing investment a hotly debated topic. Repeat visitor percentages sufficient for positive ROI not always met.
    Fractured technologies for managing redemption - vouchers & smartphones. Beginning to see innovation around POS and payment systems integration.
    DMCNY Breakfast Series
  • 21. Deals – Categories
    6/13/2011
    19
    DMCNY Breakfast Series [source: Yipit]
  • 22. Deals – Revenue/Volume
    6/13/2011
    20
    DMCNY Breakfast Series [source: Yipit]
  • 23. Groupon’s S 1– Key Statistics
    6/13/2011
    21
    Financial Snapshot:
    • 2010 Revenue: $713M
    • 24. Run Rate Revenue: $2.6B (Q1 2011 annualized)
    • 25. Revenue Growth: 2241% YoY (2010 vs 2009), 1357% YOY (Q1 2011 vs Q1 2010)
    • 26. 2010 Gross Profit: $280M
    • 27. Run Rate Gross Profit: $1.1B (Q1 2011 annualized)
    • 28. Gross Profit Margins: 42% (Q1 2011), 39% (2010), 36% (2009) --> i.e. for every $1 of Groupons sold, the company currently keeps $0.42 in net revenue and passes $0.58 to the merchant
    • 29. 2010 Net Income: -$389M (net loss)
    User & Merchant Statistics:
    • Subscribers (end of period):  83.1M (Q1 2011), 50.6M (2010), 1.8M (2009) 
    • 30. Cumulative customers (unique buyers of Groupons): 15.8M (Q1 2011), 9.0M (2010), 0.4M (2009)
    • 31. Featured merchants (may not have tipped): 56.8K (Q1 2011), 66.3K (2010), 2.7K (2009)
    • 32. Groupons sold: 28.1M (Q1 2011), 30.3M (2010), 1.2M (2009)
    DMCNY Breakfast Series
  • 33. Groupon’s S 1– Media Interpretation
    6/13/2011
    22
    Techcrunch
    • “Why Groupon is Poised for Collapse”
    • 34. “Groupon Was The Single Worst Decision I Have Ever Made As A Business Owner”
    Concerns
    • Traffic is not necessarily profitable
    • 35. Are margins sustainable
    • 36. Will businesses still need to mortgage profits in the name of cash flow
    • 37. What percentage of merchants repeat
    • 38. Fraudulent merchants
    • 39. Dependence on lengthy merchant payment cycles
    Not all press is negative– Yipit
    - “The Reports of Groupon’s Death Are Greatly Exaggerated”
    DMCNY Breakfast Series
  • 40. The Future - Questions
    6/13/2011
    23
    How many competitors can the market support at scale?
    How will Facebook and Google fair?
    When will the competition for qualified consumer’s abate?
    Will email remain king?
    What kinds of product innovations and partnerships will occur in the mobile, location based services arena?
    What kind of product innovations will occur to simplify redemption and create real track-ability?
    Will the capital markets continue to fund “less than profitable” growth?
    How will deal types evolve?
    DMCNY Breakfast Series
  • 41. Thank You
    David Wolfe – COO – BuyWithMe
    david@buywithme.com
    6/13/2011
    24
    DMCNY Breakfast Series