Daily Deals<br />David Wolfe – COO – BuyWithMe<br />david@buywithme.com <br />6/13/2011<br />1<br />DMCNY Breakfast Series...
Table of Contents<br />The Market<br />Consumers<br />Merchants<br />Deals<br />Groupon’s S1<br />Future<br />6/13/2011<br...
The Market – “Daily Deals” defined <br />“Daily Deal” platforms provide a way for local businesses to connect with local c...
The Market - History<br />6/13/2011<br />4<br />DMCNY Breakfast Series – [source Yipit]<br />
The Market – Industry Structure<br />6/13/2011<br />5<br />Daily Deal Sites<br />MERCHANTS<br />CONSUMERS<br />Vertical De...
The Market – Traffic & Audience<br />6/13/2011<br />6<br /><ul><li>Buyers predominantly female
Affluent
25 – 40 year olds dominate</li></ul>DMCNY Breakfast Series – [source Yipit]<br />
The Market – Revenue<br />Groupon’s 1st quarter 2011 revenue - 655 million<br />These projections are already too conserva...
The Market – Barriers to Scale<br />6/13/2011<br />8<br />The Virtuous Cycle of Daily Deals<br />More Cities<br />More Sal...
The Market – Key Value Streams<br />6/13/2011<br />9<br />Consumer/viral referrals<br />Consumer life-cycle<br />Marketing...
Consumers – Basic experience<br />6/13/2011<br />10<br />consumer & merchant<br />consumer<br />consumer<br />consumer<br ...
Consumers – Benefits<br />6/13/2011<br />11<br />DMCNY Breakfast Series<br />
Consumers – Acquisition<br />6/13/2011<br />12<br />Groupon’s 1st quarter marketing spend 250 million<br />Industry eCPL’s...
Consumers – Challenges<br />6/13/2011<br />13<br />Over 50% of all revenue producing Daily Deal transactions are the direc...
Merchants – Basic experience<br />6/13/2011<br />14<br />consumer & merchant<br />merchant<br />merchant<br />merchant<br ...
Merchants – Benefits<br />6/13/2011<br />15<br />DMCNY Breakfast Series<br />
Merchants – Acquisition<br />6/13/2011<br />16<br />Local businesses are “sold” deals, they don’t “buy” them.<br />Effecti...
Merchants – Profitability<br />6/13/2011<br />17<br />DMCNY Breakfast Series [source: Yipit]<br />
Merchant – Challenges<br />6/13/2011<br />18<br />Daily deals are an effective customer acquisition vehicle, but are less ...
Deals – Categories<br />6/13/2011<br />19<br />DMCNY Breakfast Series [source: Yipit]<br />
Deals – Revenue/Volume<br />6/13/2011<br />20<br />DMCNY Breakfast Series [source: Yipit]<br />
Groupon’s S 1– Key Statistics<br />6/13/2011<br />21<br />Financial Snapshot:<br /><ul><li>2010 Revenue: $713M
Run Rate Revenue: $2.6B (Q1 2011 annualized)
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David Wolfe Daily Deals

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Overview of the Group Buying/Daily Deals space

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David Wolfe Daily Deals

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

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