Offers Market Analysis

© 2013 Karthik Ethirajan, all rights reserved
Offers & Daily Deals Market Study
Karthik Ethirajan
August 2013

Agenda
2
1. New Paradigms in Mobile
2. Value Chain Explained
3. Daily Deals vs. Offers
4. Business Practices of Offers & Deals Providers
5. Market Examples
a) Deals Providers
b) Offers Providers
c) AT&T Alerts
d) Verizon Selects
6. Summary
e) Groupon
f) O2 More
g) O2 Priority Moments
h) Google Offers

New paradigms in mobile intersect with Web 2.0.
Estimated $1-2B market each in U.S. growing rapidly.
3
Identity /
Cloud
OTT
Messaging
AdsCommerce Health APIs Big Data
Cloud Distribution Analytics Charging
Privacy Merchant Portal SDM
Security
Strategic
Partnerships
Others
Investment in the platform capabilities can be leveraged to stand up
or enhance many different services
ServicesPlatform
B2BB2C
Eureka

The complexity of an Offers product value chain varies
with functionality
4
Offers products are offered by carriers, domain specialists (e.g.,
Groupon, Yipit) and digital generalists (e.g., Google, Amazon)
Aggregator
Direct
Sales
Care
Offers
Deals
Reporting
mWallet
Email
App
Web
SMS
Notification
Ad
Pull Push
Subs
Non-Subs
In-App
Online
Store
Redemption
Merchants Merchant
Portal
Distribution
Campaign
Targeting
Technology Partners
[Social Integration]
•Local Commerce
(Long Tail)
•Big Brands
Business Model
•CPM / CPC
•Revenue Share

Distinction between Daily Deals and Offers
5
Daily Deals given its unique characteristics will co-exit with Offers
50%
20%
8%
8%
8%
6%
Groupon Living Social
Google Offers Amazon Local
Travelzoo Others
U.S. Daily Deals Market Share
Highly crowded market place
with hundreds of companies
coming in and going out in the
long tail of the business
Daily Deals Offers
Product
Pre-paid voucher for a product or
service at a merchant in
exchange for a steep discount
A discount coupon applied at
POS
Characteristics
• Small inventory
• Shorter campaigns (few days)
• Deeper discount (50% or more)
• Higher price points
• Large inventory
• Longer campaigns (few weeks)
• Smaller discounts
• All price points
Distribution
• Email (push)
• App (pull)
• Web (pull)
• SMS (push)
• App (pull)
• Web (pull)
Consumer
Targeting
• Zip code
• User preferences
• Real-time location
• User preferences
• Behavioral
Merchant
Targeting
• Typically local commerce • Both local merchants and big
brand retailers alike
Performance
• Quick way to raise consumer
awareness
• Helps dial performance at
micro-level (e.g., boost foot
traffic at the lunch hour)
• Tend to attract bargain hunters
• Promote brand loyalty
• Works for many campaign
types (acquisition, retention,
new products, branding, etc.)
• Brings &retains value-shoppers
2012 U.S. TAM $2.7B

Offers & Deals providers bear similarities and
differences in their business methods and operations
6
 Location-based offers and mapping functions
are widely implemented
 Passbook integration is picking pace
 Most Deals-only sites have no mobile presence
 A few Offers-only apps have no web presence
 Differentiation comes from,
 Product categories (e.g., Travels)
 Customer segments (e.g., Moms)
 Merchant type (e.g., Local)
 Platform capabilities (e.g., Analytics, Data)
 Discount size (e.g., >50% off)
Deals/Offers
Sourcing
Checkout
Experience
Market
Examples
Pure Play Internal Internal
Groupon, Living
Social
Quasi
Internal
/External
Internal
Google Offers,
Amazon Local
Aggregator External External Yipit, Dealupa
Offers & Deals Provider Types
 Offers & Deals are sourced from local
businesses and national brands
 Many offer an affiliate program for the
long tail of small publishers
 Affiliates are typically paid 10% commission
on a CPS basis
 Deep links with an unique key identifier are
used for tracking sale
 A few specialize in being a platforms, big
data and/or analytics providers, besides
providing Offer content
 Most Deal sites/app keep checkout
experience contained within their portal
 Aggregators always redirect to the source
site for checkout
 Most Offers sites/app provide a
coupon/promo code or barcode for
checkout
 Social media & review sites integration is
common
Offers & Deals Provider Summary

Market examples of Deals providers & Aggregators
7
 Outdoors Deals
 Travel, gear, local
experiences
 Call center
 Discounts > 50%
 7% conversion
 10% commission for
affiliates
 Heavy promo on
social media (FB ads)
 Quick payments
 Exclusive Deals
 4M subs
 75% actives
 10 big markets
 Campaigns are
usually 1 week
 Targets affluent
$100k+ income
 Local-only Deals
 13 cities
 Partner with 4Square,
FoodSpotting
 Vintage look
 Cool handpicked local
experiences
 Software for
Marketing / Analytics
 NY local
 For moms
 $8 for friends referral
 Subsidiary of
Kidsville Stores
 Buys deal sites
 Developer program
 For moms
 Acquired Chatterfly (mobile
loyalty program) & Doodle
Deals (east coast
presence)
 Sales force is all moms
 Social sharing
Aggregators
 3 level preference
(like/maybe/dislike)
for better targeting
 Numerous categories
 Yelp reviews
 Big Data / Analytics
 Pure aggregator
 Deals from all major
players
 No registration
required
 Easy-to-use category
filters & sorting
 Travel Deals
 26M subs
 11 countries
 US top 5 deal sites
 Reviews from
TravelExperts
KEY:
Differentiation Stats Comments

Market examples of Offers providers
8
 Groceries /
Consumables
 Save to store cards
 Closed loop tracking
 Popular Grocery IQ
app
 Groceries
 15% redemption
 7500 merchant
locations
 2M subs
 Save to store cards
 Work with many
carriers including
Boost & Virgin
 National brands & local
 13 cities
 Cool app with great UX
 Passbook integration
 Location & map
integrated
 Social sharing
 National brands
 2000 brands
 100k offers
 Focused on selling platform
capabilities such as loyalty,
product list, offers inbox,
geo-fence, social sharing,
etc.
 Gift cards and credit card
offers
 Redirects for redemption
 Mediocre app & UX
 Brands & Groceries
 Blog
 Valpak is a recognized
household brand
 640M offers viewed in 2011
 3.6M coupons printed
 All major brands
 Excellent app
 Passbook integration
 Mall based coupons
 Mail sets of coupon out
 Partners include Roximity
(connected car), YaSabe
(spanish search for local
business, YellowBot (business
data source), GeoQpons
(LBS), Coupon Cabin
 A Whale Shark Media property
 $140M revenue in 2012
 $1.7B in merchant sales in 2011
 100k merchants
 5M downloads
 20% mobile traffic, growing
rapidly, expected to reach 50%
 Inventory of 0.5M coupons, 40%
crowd sourced
 Operations in Europe, U.S.
 Provides coupon / promo code
KEY:
Differentiation Stats Comments

9
MNO participation in US is in its infancy while European
operators have been in this market for sometime
Product
• Send SMS offers to AT&T subscribers who opt in to participate in the program
• Web portal also available for registration & setting preferences
• A-list merchants
Highlights
• No downloads required. No mention of an application
• Text JOIN to ATTalerts
• Geo-fence (using tower data, not GPS)
• Incentive to join: $5 coupon off of $10 purchase at att.com
• iPhone5 not supported at launch
• Bolster ShopAlert messages with custom content like weather, traffic, etc.
• Starbucks campaign: $5 eGift card for first 20k to signup, confirm registration and
share location (via double opt-in)
Launch: Dec 5, 2012
Pilot: Feb 2012 in NY, LA, Chicago,
SF
Technology Partner:
Placecast
Merchant Partner:
Gap, Staples, Zales, Last Call by
Neiman Marcus, Duracell, Motorola,
Discover
Product
• Send offers to Verizon subscribers who opt in to participate in the program
• Web portal also available for registration & opt-in
• Call center
• Distribution: email, text, advertisements, postal mail
Highlights
• Targeting based on location, clickstream, app usage, CDR, CPNI, FIOS account
(email and text content not used)
• Subscriber data further enriched through data from 3rd parties
• No corporate or government accounts allowed
• Privacy: 3 year browsing & location data maintained. Users can delete anytime.
Launch / Pilot: Dec 3, 2012 in select
markets
AT&TAlertsVerizonSelects

10
Simple Registration
Flow
Promotional Video at
https://alerts.att.com
Verizon Opt-in

11
Mobile’s share of Groupon’s revenue is growing and is
pivotal to all its new growth initiatives
Revenue by
Product Type
Company
Launch Nov 2008
Reach 47 countries
Revenue
$2.3B (40%
international)
US Daily Deals M/S 50-55%
Subs 35M
Merchants 250K
Operational Metrics
Ave. Rev/Campaign $11K
# of Campaigns/year 160K
Customer Acq. Cost $30
Transaction Share 40% Mobile
Product
• Pioneer and market leader in the daily deals space, delivered by email (1/day)
• Introduced many different types of deals products (see graph): Daily Deals,
Marketplace (pull/search), Goods (consumer products), Travel, Concerts, Reserve
(high-end)
• Groupon App is consistently among top 5 lifestyle apps alongside eBay and Amazon
• With Merchants App & GrouponPayments, Groupon strives to become the “OS for Local
Businesses”, competing head-on with Square and Paypal
Highlights
• Pure play Deals provider (no offers)
• Recently added targeting based on user address and preferences called SmartDeals
• Rewards based loyalty program earns GrouponBucks
Company
• Active M&A. BreadCrumb and Savored are recent prominent ones.
• Strategic partnership with Expedia and Live Nation for travel and events products
• Huge sales force of 5100
• Mobile users spend twice the time on Groupon as their PC counterparts
• Business Model is a 60/40 revenue split in favor of merchants. Merchants are paid in 3
installments over 2 months. Marketplace (Now!) has lower commission (15-20%).
Groupon product mix
became more diversified
and niche markets
identified to spur growth

12
Product Types
Merchant
Analytics
Groupon
Payments
A Local Deal
Number of
Deals Sold
Time Left
Card Reader
via Audio Jack
Referral
Program
Social
Integration

13
O2 is finding success with two offers program, push-
based O2 More and pull-based O2 Priority Moments
Product
• Send SMS offers to O2 subscribers who opt in to participate in the program
• Web portal also available for registration & setting preferences
• A-list merchants
Highlights
• Frequency: 1 SMS/day between 8am – 6pm
• Offers could be coupons or ads
• Targeting based on location and user preferences
• Simple 3 step registration flow
Launch: Nov 2009
Users: 10M in May 2012
% Subs: 45%
CTR: 2.3%
Frequency: 6 SMS/week/sub
Product
• App containing a repository of offers organized category wise and by proximity
• PM is one among the portfolio of Priority products (Sports, Tickets, others)
• Simple web portal has affiliate content and mimics offers from apps
Highlights
• Primary function as loyalty program for churn reduction. Many offers are free.
• Many different offer types including coupons, rewards, experiences, others
• Text MOMENTS to 2020
• Integrated map
• Integrated Facebook functions such as posting to wall
• No targeting (but serve holiday-specific offers)
• Seek exclusive offers as a means to differentiate
• Merchants are featured in O2 ads in exchange for partnership and other benefits
• O2 cannot track offer redemptions
• Business models include CPM, CPC and rev share
• A primitive self-reporting tool is available to merchants
O2MoreO2PriorityMoments
Launch: July 2011
Brands at Launch: 30
Users: 5.5M
Lifetime Offers: 1B viewed
Redemption: 7200/day
Conversion Rate: 60% (accept to
redeem)
CTR: 0.2%
7-Day Active Users: 30%
Online vs. Mobile Users: 50/50
Avg. Subs Life: 6 months
Organization: 6 Sales, 15 Campaign
Managers

14
O2 More
Registration Flow
Minicode Used for
Offer Redemption
(Barcode coming!)
PM Offer List with
Discount and Distance
indicators
Offer with Map
Integration
PM App Home screen
with Holiday Theme

15
Google products, Offers and Groupon-style Deals, are
well differentiated operationally and strategically
Product
• Google Offers app, an evolution of Google Shopper, displays both offers and deals
• Web portal displays offer content as well
• A self-serve portal for merchants (just like AdSense) to setup campaigns with integrated
analytics
Highlights
• Google Offers is integrated with Google Maps, Google Wallet and Google+ (as well as
Facebook, Twitter, etc.) providing a closed loop experience to consumers
• Distribution is via mobile apps, web portal, email and push notification
• Offers are displayed across multiple Google properties (Offers app, Maps app, AdSense
ads, web, etc.)
• Targeting is based on location and user preferences
• Touts fast responsive call center help for merchants
Company
• Google functions as a hybrid using both aggregators and direct sales for sourcing offers
& deals
• Google deals directly with marquee accounts such as REI, Fandango, Amoeba Music,
and others
• Business model seems to be CPM/CPC ad-based and not a revenue share with
merchants. Merchants are paid within 4 days.
Launch: May 2011
Aggregator Partners:
Dealfind
DoodleDeals
Gilt City
GolfNow
HomeRun
JuiceInTheCity
Kgbdeals
Mamapedia
PlumDistrict
PopSugar Shop
ReachDeals
Active.com
Schwaggle
TIPPR
Zozi
8Moms
APDailyDeals
AT&T Interactive
Boston.com
DailyDeals.com
DoubleTakeDeals
Half Off Depot
Morgan’s Deals
Savored
Signpost
Urban Dealight
Google Offers is the role model of a balanced and well executed
offers program in the industry

16
Local Offers
(Map View)
Banner
Placement &
Featured
Offers
Barcode
Generated in-
app
Offers Show
Up on Google
Maps App
Card Reader
via Audio Jack
Deals
Categories
Deals
(Pre-paid)
Offers
(Post-paid)

Summary of Findings
17
Next Step: So, how should we position a new Offers product ?
Local commerce and location-based messaging are big growth
trends
 Carriers, domain specialists (e.g., Groupon, Yipit), digital generalists
(e.g., Google, Amazon) and a long tail of wannabes play in this crowded
market place
A platform, scalable for features, is important to the Offers and
other products in the new mobile paradigm
 mWallet, for example, is key to standing up Daily Deals product
 Social plug-ins, loyalty, rewards, etc. are nice-to-haves
Mature players are focused on improving merchant capabilities
 Self-serve and aggregator partnerships to bring in more local commerce
 Analytics tool and VAS such as payments
Targeting 101: User preferences & Location are must-haves
 They are key to push-based messaging product, a sweet niche for carriers

18
Source: Luma Partners

Offers Market Analysis

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