Dead Heat: Groupon Down Another 32% in March, LivingSocial Ties It Up

by: on March 25, 2011
31 Comments

We were all surprised to see Groupon’s US revenue decline 30% in February, but apparently that’s just the beginning.

Yipit, as a daily deal aggregator, indexes offers from more than 400 services, including Groupon and LivingSocial. We ran some numbers from our database, and it turns out Groupon is having an even worse March than February (down 32% in major North American metros).

According to many, Groupon’s decline signals general Daily Deal fatigue – that users are tiring of the 50-90% off value proposition. The only problem is…

LivingSocial is up 59% in March and is now generating as much revenue as Groupon in major markets.

The top 20 markets represents most of Groupon and LivingSocial’s domestic revenue. Already saturated with competitors, the top metros give a glimpse to how things may eventually play out everywhere.

Possible reasons Groupon is declining in a growing market:

Groupon now sharing people’s inboxes with competitors. LivingSocial has more than 25 million members, meaning a growing portion of Groupon subscribers are now subscribed to at least one more deal service. Users who had previously been members of services like DailyCandy, Thrillist, UrbanDaddy, Travelzoo or OpenTable have now started to receive Daily Deals from them as well.

Personalized Deals not working, may be hurting. Groupon has begun emailing multiple offers in major metros, the sorting determined by user preferences and zip code. Today in NYC, there are more than 20 offers to choose from. This is a big step away from the one-deal-a-day user experience that gave Groupon its early success. Further, while more offers allows zip code level targeting, the tradeoff is lack of focus on the best possible offer. I am more likely to forward along an offer from an amazing business than from a less popular one that happens to be in my zip code. LivingSocial’s average revenue per offer is approximately $24,000, while Groupon’s is now $13,000.

Groupon topping out in narrow demographic. Young, single-oriented Groupon has 68% of subscribers between the ages of 18 to 34, while 64% of LivingSocial’s is 34 and above. Groupon’s competitors may have a broader appeal as the Daily Deal universe expand beyond young singles.

As a disclaimer, the data above represents Yipit estimates. We aggregate deals from Groupon, LivingSocial and more than 400 other Daily Deal sites, and recommend them to users based on where they are and what they like. Though every effort is made, it is possible that not all offers are accounted for from either site. These values are certainly directionally indicative of trends for major players in the market. We have not included proceeds LivingSocial’s Red Cross Relief Effort in this calculation.

Jim Moran is co-founder of Yipit, a service that recommends the best daily deals by learning your tastes.

  • http://twitter.com/perryevans perryevans

    It feels to me like Living Social’s shift towards experiential activities (travel + event centric) is giving their brand some differentiation and revenue per deal boost. Curious your thoughts?

    • http://twitter.com/jdmoran Jim Moran

      Agree with that. LivingSocial Escapes seems to be performing well. I’ve even seen the same local offfer run under the standard and Escapes brands simultaneously (spas, etc)

  • Mike Blumenthal

    Kind of puts a damper on an IPO, no?

  • eleanorkay

    Yipit is the Bloomberg News of the Daily Deal Space.

  • http://profiles.google.com/robertdroe Robert Roe

    This suggests a glut of offers and points to the value of a service that improves targeting. We really need a more efficient exchange to broker between consumers and merchants that maximizes the number of successful transactions per offer. Otherwise the whole daily deals market will start to resemble display advertising back in the last bubble. It’s the equivalent of continually falling display CPMs: not a healthy sign for an emerging space.

  • http://www.daviddalka.com/ Dalka

    Demographics matter.

  • Anonymous

    They both will soon dwindle away to much smaller ideas of user controlled targeting, rather than seller controlled.

  • Anonymous

    google should aquire living social

  • Anonymous

    Wow, sounds like they might just be onto something there. Wow.

    http://www.privacy-online.it.tc

  • http://pulse.yahoo.com/_RRQY5R52U2SHDZEXVF7S62P2KU Kristin Land

    Have you guys heard of Moolala?

    It’s a daily deals site that could start giving Groupon and Living Social a little competition! You get paid commission on every deal bought by someone you refer…FOR LIFE!!!

    Tons of people have already joined and are already making money. It’s 100% free. Don’t get left out!!!

  • http://twitter.com/localseoguide Andrew Shotland

    Excellent linkbait Jim! :)

  • http://twitter.com/ystocks2 ystocks2

    Oh and more and more businesses are realizing that doing a Groupon is not necessarily a good thing for them AND the ones it was good for (those desperate because otherwise they would shut down) have already…shut down. I use Groupon as a “business health indicator” if an “established” business has to use a Groupon, they must be doing very poorly.

  • Ben

    i think you should recheck your sources…

  • http://www.motmaitre.com Motmaitre

    Should have sold to Google when they had the chance. Their hubris will haunt them forever. Any profitable new market invariably invites new entrants, who bring extra capacity, taking market share and driving down margins. We’re witnessing the commoditisation of the business model.

  • http://twitter.com/CptCracker Brian Richards

    Living Social simply gets better deals. I have yet to purchase anything from Groupon but LS delivers me at least one thing a week that it’s hard to pass up.

  • Ted

    After two or three tries, I learned that Groupon restaurant deals in San Francisco are probably not worth the money. I won’t be returning to dine again, and I no longer trust Groupon to bring me quality product.

    For the non-restaurant offers, how many spa days can I reasonably purchase for my wife? Once I’ve bought two or three I’m saturated for quite a while. There was a big initial punch as people jumped on the new shiny, but now we need newer shiny.

    That said, I think the “I’m Hungry” and “I’m Bored” buttons are sheer brilliance. If they can effectively bring those to market then Groupon will be like Amazon, eBay, or Etsy: such a leader in their space that there’s little reason to compete.

  • http://www.unrelentingtech.com Don Lewis

    I guess Groupon’s COO stepping down makes a little more sense everyday.

    –
    Don Lewis
    http://www.unrelentingtech.com

  • http://twitter.com/rohi81 Rohit Nallapeta

    This is an amazing uplift for livingsocial and a great inflection point indicator for groupon. It’s time groupon did some innovation around the group buy model, last I heard they were talking to cash registers to enable groupons…so everything has a limit, huh?

  • http://twitter.com/malcolmlewis malcolmlewis

    Re Deal Fatigue: I’d be curious to know what the total market did Jan > Feb > March – assuming the total market is materially more than G+LS. If the total market is up then either no deal fatigue or the number of highly engaged new consumers offset the declining engagement of the early adopters. Be interesting to know which.

  • http://profiles.google.com/sierrasullivan Sierra Sullivan
  • http://www.marketing-with-email.com www.marketing-with-email.com

    Frankly it’s not a big surprise when you look at the business model. The business model does not revolve around long term residual income because many businesses will use the service once in order to bring new customers through the door but once that is done what is going to keep the business to come back to Groupon month after month ? Certainly not the high fees that Groupon is bringing to the table which in some cases led to businesses loosing money on the campaign.

    Creating long term business clients takes more then charging high fees. It takes positive ROI for campaigns that are created on behave of the clients.

    It’s my prediction that many of these group buying sites will either go away or major consolidation will have to take place within that industry. The reason I say this is because of the low barriers that exists to enter such a business (group buying sites) which translates to lots of competition. Long term this most likely generates lower ROI due to the fact that as competition increases the fees that group buying sites charge customer to retain market share decreases.

  • http://twitter.com/aptlistings Apartment Listings

    Boycott sites like Groupon and Living Social. Pay full price and stimulate the economy and not the pockets of Groupon and Living Social who are getting filthy rich offering not-so-great deals and encourages people to pay less than retail for everything. Quality and Service will always decline when businesses are getting pinched by companies like these.

    Pay full price, frequent your favorite local places, and share your positive experience with your friends to drive more business to the places you like. That’s the best way to help a business. If you’re snatching up all sorts of Groupon and Living Social deals, you should ask yourself first if you really need any of there useless deals, because I’ve yet to see anything in the past year that I absolutely need.

  • http://www.spaboom.com Seth Gardenswartz

    I thought the 30% down figure was debunked by TechCrunch. http://techcrunch.com/2011/03/25/groupons-real-u-s-revenue-numbers-for-february/

    • http://twitter.com/jdmoran Jim Moran

      Those were February numbers (and not in the top 20 metros).

  • http://www.facebook.com/people/Benjamin-Wolf/100002238118408 Benjamin Wolf

    It’s really all about quality. Take a look at the quality of the deals Groupon has been “pushing” lately (especially in smaller markets).

  • Mfahey

    “Living Social’s average revenue per offer is approximately $24,000, while Groupon’s is now $13,000.’

    Where do you come up with ‘average revenue per offer’ number?
    I believe the ACTUAL NUMBERS are way lower than you think.
    Groupon is in less than 200 cities and it is rare when any “deal” goes above $10,000 total sales in markets other than Chicago, New york, San Francisco, LA, Boston.

    Just check their smaller market pages- NONE of them come close to 10K. By far the numbers look like $3500 total sales per deal.

    So i think what we have here is smoke and mirrors.

    Michael Fahey
    http://www.mingamo.com

    • http://twitter.com/jdmoran Jim Moran

      Hi Michael,

      I just ran a report and the mean gross revenue of all deals ending yesterday from Groupon was $17,231. That’s likely higher than average since those deals ran all weekend.

      You can also eyeball it by taking a look at Yipit towards the end of the day. Happy to share more data too if you have specific questions.

      Note that we’re only tracking the top 30 metros on Yipit currently, and it’s possible that smaller, newer markets have a lower revenue per deal.

      Jim

  • Anonymous

    Are you calculating net or gross revenue? If gross, then it doesn’t capture how effective each company is in negotiations with small businesses.

    • http://twitter.com/jdmoran Jim Moran

      Gross. You’re right, doesn’t fully represent actual profitability.

  • http://www.marketing4smallbusinessowners.info Jerry

    All the negative publicity is about groupon while Living Social is flying under the radar.

  • Lee

    Does Yipit make money from Groupon and Living Social as I read they do not deal with Aggregators? 

    http://www.DailyDealWebsites.com