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

Ads Commerce 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

Se

rvic

es

P

latf

orm

B2B B2C

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 SocialGoogle Offers Amazon LocalTravelzoo 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

Ag

greg

ato

rs

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

© 2013 Karthik Ethirajan, all rights reserved 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

&T

Ale

rts

Veriz

on

Sele

cts


Simple Registration Flow

Promotional Video at https://alerts.att.com

Verizon Opt-in


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


Product Types

Merchant Analytics

Groupon Payments

A Local Deal

Number of Deals Sold

Time Left

Card Reader via Audio Jack

Referral Program

Social Integration


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

O2 M

ore

O

2 P

riority

Mo

men

ts

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


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


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


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


Source: Luma Partners

offers market analysis

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