This is a guest post by Shane Hayes, founder of Daily Deal Aggregator Siftie.co.uk. He reports on the UK Daily Deal market size and speculates as to whether a major acquisition is imminent. Siftie.co.uk is a graduate of the Launchpad accelerator programme at the NDRC.
In a Techcrunch article in April of 2010, Tim O’Shea, founder of Blurtit, wrote about his experience of trying to launch a Groupon Clone in a Hyper Competitive London market in the first quarter of 2010. At that time, MyCityDeal (who were later to be acquired by Groupon) had just launched and a variety of players ranging from cash strapped start-ups to spin offs from major companies were all hoping to become the next Groupon. Livingsocial was still based in the US and would not arrive on the scene until Q2 that year.
Tim’s article is a good read. One of his predictions was that there would be two market leaders and that there would be a gulf between them and the rest of the pack. We now have the data to see how his observations and predictions fared out.
At Siftie we aggregate Daily Deals into a single email and maintain a database of all the deals offered by the major UK operators. Our data shows that Groupon is trouncing its two main competitors with over three quarters of the total market. Groupon sold £24 million worth of vouchers in the UK in July, compared to £2.5 million for KGB deals and £1.7 million for Livingsocial. It came as a surprise to us that Groupon is outselling its arch rival Livingsocial fourteen to one in the UK. Another surprise is that KGB is outselling Livingsocial three to two.
O’Shea’s prediction of two major players has borne out all right, but in North America and not in the UK. Most people would agree that there are two gorillas in North America, with Groupon being a couple of hundred pounds heavier than Livingsocial. But in the UK, there is one genuine 800 pound gorilla and it is the big G.
So how did Groupon do it?
Many commentators have pointed to execution and we have to agree. In the article above, O’Shea describes some of the smart moves made by CityDeal in the early days in the UK. A classic was a £1 film voucher that sold 27,000, mostly to new subscribers and which generated huge publicity. This particular offer was straight out of the CityDeal playbook where a similar offer in France sold 75,000 as described by Jonathan Besnainou.
A cinema deal has become something of a Daily Deal launch staple, with the latest to repeat it GrabOne, who sold 8,000 when they launched in Belfast. Not bad for a relatively small market.
Groupon’s successful execution has resulted in a large disparity in the quantity of deals being offered by Groupon versus its competitors. On a typical day this week in Greater London, Groupon offered 40 deals to Livingsocial’s seven, while KGB offered eighteen. In addition Groupon serves far more markets than its competitors with deals offered in 45 cities (we count London as one city) versus 19 by Livingsocial and 23 by KGB. In addition, Groupon offers multiple deals per city (and indeed City Quarter such as London North, London South, etc) whereas Livingsocial and KGB tend to offer just one, or in some cases two.
Quite why Livingsocial has not responded to this competition is perplexing. At Siftie.co.uk we have historical data and analytics for Ireland also where we see Livingsocial giving Groupon a good run for their money; achieving about half Groupon’s sales and gaining market share at the expense of smaller players.
I have two theories.
The first is that Livingsocial are focussing on quality rather than quantity in the UK. Perhaps they are hoping to build a differentiated brand that can survive whatever changes the marketplace will bring.
The second is that they are going to acquire another UK Player. The only problem with that is that the only acquisition target worth acquiring is KGB. However KGB is a big player in the US so acquiring them would leave them with duplicated operations rather than filling geographical holes.
Perhaps readers can speculate in the comments.