Post on 24-Apr-2015
description
04/11/2023 1
Daily Deals
David Wolfe – COO – BuyWithMedavid@buywithme.com
DMCNY Breakfast Series
04/11/2023 2
Table of Contents
• The Market
• Consumers
• Merchants
• Deals
• Groupon’s S1
• Future
DMCNY Breakfast Series
04/11/2023 3
The Market – “Daily Deals” defined
“Daily Deal” platforms provide a way for local businesses to connect with local customers.
Consumers use the platforms to discover new local businesses , get deep discounts, and share them with their friends.
Local businesses use the platforms to acquire new consumers on a performance basis.
A daily deal is an online CPA based marketing campaign for a local business
DMCNY Breakfast Series
04/11/2023 4
The Market - History
DMCNY Breakfast Series – [source Yipit]
04/11/2023 5
The Market – Industry Structure
DMCNY Breakfast Series – [source Yipit]
MERCHANTS
CONSUMERS
Daily Deal Sites
Merchant Services
SOON…
Merchant Agencies
Consumer Services
Aggregators
White Label
Publishers
Vertical Deal Sites
Data
Exchanges
04/11/2023 6
The Market – Traffic & Audience
DMCNY Breakfast Series – [source Yipit]
• Buyers predominantly female
• Affluent
• 25 – 40 year olds dominate
04/11/2023 7
The Market – Revenue
Groupon’s 1st quarter 2011 revenue - 655 million
These projections are already too conservativeDMCNY Breakfast Series [source: Silicon Alley Insider & EMarketer]
04/11/2023 8
The Market – Barriers to Scale
DMCNY Breakfast Series [source: Needham & Company LLC via Yipit]
• The Virtuous Cycle of Daily Deals
More Sales
More Conversions
More Deal Personalizatio
n
More Deals
More Subscribers
Improved Media Buying
More Salespeople
More Cities
04/11/2023 9
The Market – Key Value Streams
DMCNY Breakfast Series
Offer Deal
Purchase Deal
Redemp-tion
Match &
value creatio
n
Deal life-cycle
Acquire• Ads, Social, Branding
Convert• Web site, deal presentation
Retain• email, loyalty programs
Acquire• Merchandising, Boost Your Biz
Convert•Sales, Editorial
Retain•Account Management
Consumer life-cycle
Merchant life-cycle
- New merchant discovery - Positive experience
- New customers- Better inventory management- New business
Revenues
Consumer/viral referrals
Merchant referrals
Marketing Cost
Sales Cost
Production Cost
04/11/2023 10
Consumers – Basic experience
DMCNY Breakfast Series
consumer
Discovers deal
Participates in group
buy
Retrieves voucher
Redeems
Merchandized deal
delivered through
notification or app
Payment authorized
& cc stored
Deal activated & payments captured
payment processor
Voucher’s activated
for print or mobile access
redemption processed [mobile or
bulk process]
consumer consumer
Daily Deal Systems
consumer &
merchant
04/11/2023 11
Consumers – Benefits
DMCNY Breakfast Series
Key Benefits Key Risks/Liabilities
New experiences Printed voucher
Local experiences Deals not always relevant
Significant discounts Too many emails already
Easy to share and take advantage with friends
Pre-payment required
Discovery experience
Passive [not searching]
Active or intent- driven
[searching]
User – Anonymous
[unknown]
User – Identified [segment known, behavior known]
04/11/2023 12
Consumers – Acquisition
DMCNY Breakfast Series
• Groupon’s 1st quarter marketing spend 250 million• Industry eCPL’s : 5 – 10 $ range• Industry CAC : 10 – 45$ range• Industry LTV : 30 - 60$ range [annualized]• Industry Buyer/Subscriber ratios ~ 20%• Creative themes – general service value prop & business
category based (Hungry, Bored), deal specific
04/11/2023 13
Consumers – Challenges
DMCNY Breakfast Series
Over 50% of all revenue producing Daily Deal transactions are the direct result of an email. Can email remain the primary driver of engagement?
Inbox collisions and email fatigue seem likely
Little product and user experience differentiation
Archaic redemption methods
Adoption of mobile services remains under 20% across industry
04/11/2023 14
Merchants – Basic experience
DMCNY Breakfast Series
merchant
Signs-upCo-
creates deal
Consumers
redeem
Retrieves $$ &
statistics
Merchant identity & attributes
stored
Deal created & editorial
and image assets stored
Deal inserted
into production schedule
Redemption
processed [real-time mobile,
bulk voucher]
Campaign stats in
merchant portal. Check sent
consumer &
merchant
Daily Deal Systems
Deal is schedule
d
merchant merchant merchant
Deal runs
Deal merchandi
zed to consumers
& vouchers
sold
consumer
04/11/2023 15
Merchants – Benefits
DMCNY Breakfast Series
Key Benefits Key Risks/Liabilities
Acquire new customers Management of multiple paper vouchers
Ultimate performance based advertising model (only pay if they transact)
Cant track repeat behavior of new customers. Questionable ROI
Move distressed inventory Some customers discount hunters
Build brand awareness with local community
Cant manage flow & timing of new customers
Increase up-front cash flows
Cant always maintain positive margins with discounts
Leverage social networks for promotion
Sometimes cannibalize existing users
Redemption method limiting
04/11/2023 16
Merchants – Acquisition
DMCNY Breakfast Series
Local businesses are “sold” deals, they don’t “buy” them.
Effective merchant acquisition and retention require investment in specific organizational structures - Merchandising, Sales, & Account Management teams
Deal /campaign creation requires significant hand-holding.
Groupon’s self-service initiative not very successful to date.
250-750$ eCPL for small businesses with assisted model
Large, trained, inside/outside sales force requirement for performance at scale.
04/11/2023 17
Merchants – Profitability
DMCNY Breakfast Series [source: Yipit]
Merchant Profitability Per Voucher
Drivers Gross Profit / VoucherDeal Assumptions Existing CustomersDeal Value $50 Revenue from Groupon $2.2
Deal Discount 50% Revenue from Overage1 1.1Deal Price $25 Revenue from Existing Customers 3.2Overage % 14% Less: COGS 3.4Commission % 40% Less: Cannabalized GP 1.8Cost of Goods Sold % 40% GP from Existing Customers ($2.0)Credit Card Fee % 2.5%
GP from Breakage $2.9Buyer Mix AssumptionsUnredeemed (Breakage) % 20% New CustomersCurrent Customer % 20% Revenue from Groupon $8.6
New Customer % 60% Revenue from Overage1 4.2Revenue from Existing Customers 12.8
Repeat Visitor Assumptions Less: COGS 13.7
Conversion to Repeat %23 19% GP from Existing Customers ($0.9)Repeat Visits 3Vouchers per Customer 1.5 New Repeat CustomersCurrent Customers Already Going % 25% Revenue from Repeat Customers $13.0
Less: COGS 5.2GP from Existing Customers $7.8
Incremental GP / Voucher $7.9
04/11/2023 18
Merchant – Challenges
DMCNY Breakfast Series
Daily deals are an effective customer acquisition vehicle, but are less useful for retention and win back
The only basis of platform differentiation from a merchant perspective are volume and quality of consumer’s delivered
Return on marketing investment a hotly debated topic. Repeat visitor percentages sufficient for positive ROI not always met.
Fractured technologies for managing redemption - vouchers & smartphones. Beginning to see innovation around POS and payment systems integration.
04/11/2023 19
Deals – Categories
DMCNY Breakfast Series [source: Yipit]
04/11/2023 20
Deals – Revenue/Volume
DMCNY Breakfast Series [source: Yipit]
04/11/2023 21
Groupon’s S 1– Key Statistics
DMCNY Breakfast Series
Financial Snapshot:• 2010 Revenue: $713M• Run Rate Revenue: $2.6B (Q1 2011 annualized)• Revenue Growth: 2241% YoY (2010 vs 2009), 1357% YOY (Q1 2011
vs Q1 2010)• 2010 Gross Profit: $280M• Run Rate Gross Profit: $1.1B (Q1 2011 annualized)• 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
• 2010 Net Income: -$389M (net loss)
User & Merchant Statistics:• Subscribers (end of period): 83.1M (Q1 2011), 50.6M (2010), 1.8M
(2009) • Cumulative customers (unique buyers of Groupons): 15.8M (Q1
2011), 9.0M (2010), 0.4M (2009)• Featured merchants (may not have tipped): 56.8K (Q1 2011), 66.3K
(2010), 2.7K (2009)• Groupons sold: 28.1M (Q1 2011), 30.3M (2010), 1.2M (2009)
04/11/2023 22
Groupon’s S 1– Media
Interpretation
DMCNY Breakfast Series
Techcrunch- “Why Groupon is Poised for Collapse”- “Groupon Was The Single Worst Decision I Have Ever Made
As A Business Owner”
Concerns• Traffic is not necessarily profitable• Are margins sustainable• Will businesses still need to mortgage profits in the name of
cash flow• What percentage of merchants repeat• Fraudulent merchants• Dependence on lengthy merchant payment cycles
Not all press is negative – Yipit- “The Reports of Groupon’s Death Are Greatly Exaggerated”
04/11/2023 23
The Future - Questions
DMCNY Breakfast Series
How many competitors can the market support at scale?
How will Facebook and Google fair?
When will the competition for qualified consumer’s abate?
Will email remain king?
What kinds of product innovations and partnerships will occur in the mobile, location based services arena?
What kind of product innovations will occur to simplify redemption and create real track-ability?
Will the capital markets continue to fund “less than profitable” growth?
How will deal types evolve?
04/11/2023 24
Thank You
David Wolfe – COO – BuyWithMedavid@buywithme.com
DMCNY Breakfast Series