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Deals Galore, Competitors Abound: A Primer On Groupon-Like Startups

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Lately, group-buying sites and other companies that use discount-deals as the core of their business have become a red-hot trend, with Groupon spreading through cities around the world at a frantic pace and countless competitors and clones trying to catch some of the spotlight. Perhaps the reason for the sites’ traction is that the group-buying model is easy to understand.

For those that haven’t tried them, companies like Groupon find local restaurants, spas, or other businesses that are willing to provide large discounts, provided that their name is spread to a number of new customers. Groupon advertises the business by offering the coupons online, and takes a cut of the money spent on them. However, there are plenty of variations on the model and the differences can be confusing, so we’re going to give a primer on some of them below (note that there are plenty of similar companies abroad — these are some of the big names in the US, though some of the companies below are international too).

Groupon

Groupon is the market leader in the online “group buying” industry, and according to Crunchbase Groupon has raised a whopping $172.8M in funding to date. Available in 140 cities world wide, Groupon offers deals in more cities than any other group buying company. For every city, every day, Groupon presents a discount for a niche market item (such as a spa, restaurant, or a paintball outing), and if enough people sign up for the deal, they get the discount. The coupons are sent to the buyers by email.  Conversely, if the quota is not reached, the deal is off, and no one is charged for what they promised to buy. Of course, if the deal doesn’t work out, the company that Groupon was “advertising” through the discounts, and the people who signed up to buy them will be a little bummed.

Because the success of each deal relies on getting enough people to sign up, Groupon has created some incentives for their users to spread the word about the discounts they offer. Groupon encourages its customers to share news about deals through email, Facebook, and Twitter, and promises that if one of their users sends a Groupon link to a friend, and the friend buys a Groupon (coupon) within 72 hours, the one who sent the link gets $10 worth of Groupon credits in their account. Also, if a user sends a referral to a friend, who then subscribes within 72 hours, the person who sent the referral will get $10 worth of Groupon credits in their account when their friend buys their first deal on Groupon.

LivingSocial

LivingSocial is Groupon’s main competitor, and they serve in 26 cities across the U.S. and have received about $44M in funding. LivingSocial’s model is somewhat different from Groupon’s, as there is no minimum number of people needed to make the deal valid. But like Groupon, the discount can only be activated, and then used, after the deal’s run-time has ended. LivingSocial offers each deal for exactly 24 hours on weekdays, from 5am-5pm.

Additionally, LivingSocial uses a different incentive to encourage more people to sign up for their deals. If a LivingSocial user shares a deal through a link provided by LivingSocial, and then three people join the deal through the link, then the person who shared the link gets their deal for free.

Gilt City

Gilt City, which was recently created as a subunit of Gilt, is only available in New York City so far. Unlike many of its competitors, each of Gilt City’s deals lasts for seven days, and are updated once a week, rather than once a day. Also, rather than trying to sell as many of their deals as possible, Gilt City’s inventory for each of the discounts appears to be limited, and can become sold out, much like the rest of the sales on Gilt.

Like LivingSocial, Gilt does not require a minimum number of people to sign up for the deals to make them valid.

BuyWithMe

BuyWithMe has essentially the same setup as Groupon, with a new deal on display each day, with each the time limit for each deal set for about a week. Though they bring up a new deal each day on their main page, they do run a number of deals in each city (the number of deals running varies from city to city). BuyWithMe operates in 5 cities in the U.S, and has so far received $21.5M in funding.

Tippr

Tippr is another group-buying site, and offers deals in 25 major U.S. cities. Tippr is owned by Kashless, which has raised $5 M since starting up.

Unlike Groupon, LivingSocial, and BuyWithMe, Tippr proudly shows off three deals each day on their main site, with at least one new deal each day. As an incentive to get more people to join the deal, the discounts that Tippr offers get larger for everyone who signs up, as more people sign up for the deal, though there is a limit to how much the discount increases. A somewhat unusual aspect of Tippr is its army of ten patents, which are kept quietly on display at the bottom of the website (though it isn’t clear that these will actually help them beat the competition).

Juice in the City (JITC)

Juice in the City is a niche group-buying site that caters to mothers. This aspect of JITC is what differentiates it from the other companies in this roundup, as each deal that is offered on the site is meant to appeal to women with young children. JITC so far only serves a single deal each day within the San Francisco Bay Area and the Seattle-Tacoma area, and has not yet received any outside funding.

They promise incredible, money-saving deals like the rest, but JITC does not require a certain number of people to sign up for each deal. Each coupon is sent to the buyer via email after being purchased, though they can’t be used the day they were purchased.

We Give to Get (WGTG)

We Give to Get is available only in Chicago, and offers a new coupon (which they call a GO-GO) each day. What makes WGTG special, is that when you create an account on WGTG, you are also signed up automatically for the charity website; www.actofgood.org. As a result, whenever you buy a GO-GO, 10% of the money that is spent on the coupon will be donated to a charity of your choice, as long as it is listed on http://www.actofgood.org. It seems like an unusual idea to connect a money-saving action to a money-giving one, but as they say, “opposites attract”.

Similarly to Juice in the City and LivingSocial, WGTG does not require a minimum number of people to sign up in order to make the deal valid, and the coupon is sent to the buyer by email after the purchase is made.

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