• March 3, 2011
  • By Leonard Klie, Editor, CRM magazine and SmartCustomerService.com

Deal-a-Day Spending Likely to Reach $3.9B in U.S. by 2015

BIA/Kelsey, an adviser to companies in the local media industry, released a new forecast today on U.S. consumer spending on deal-a-day offers, which the firm expects will grow from $873 million in 2010 to $3.9 billion in 2015, representing a 35.1 percent compound annual growth rate (CAGR).

While this is the most likely growth case, BIA/Kelsey suggests a number of variables will have an impact on the actual development of deal a day, such as growth in the number of cities/sites, registered users, transactions per year for the average user, and the average price per transaction. Considering these variables, deal a day could grow to as much as $6.1 billion by 2015 (47.4 percent CAGR), while a very conservative outlook pegs the space at $2.1 billion (19.7 percent CAGR).

"Deal a day has experienced incredible growth during its three-year incubation period beginning in 2008," said Mark Fratrik, vice president, BIA/Kelsey, in a statement. "We expect this to continue as companies in the space are rapidly adding markets and increasing total user count. They are also subdividing existing metros to provide deals closer to where users live, which we believe will help offset any drop-off that may occur due to consumer fatigue as the novelty of the form fades."

While Groupon and LivingSocial lead a marketplace of 200-plus players, the broader field includes destination sites and white-label providers working with local media providers such as directory companies, newspapers, and radio and television operators. As of March 1, BIA/Kelsey estimates 178 cities currently have deal-a-day sites reaching 102 million people in the United States.

“With so many aggregators providing this kind of service, it is increasingly becoming a forte for local markets,” says Steve Passwaiter, vice president of business development at BIA/Kelsey.

For businesses, the use case is simple, Passwaiter says. “It’s a great way for local merchants to boost business,” he explains. “And it’s a pay-for-performance play. The only way the deal-a-day guy makes any money is for the merchant to make money.”

Look for growth to also come in the number of platforms supported, he adds, noting that all the major players in the space are moving to mobile platforms so users can access the services from their phones and laptops.

Other advances will include more use of geo-location, so merchants can target only those consumers within a certain geographic area, “These flash deals will really take hold. They’re the next craze to hit this industry,” Passwaiter says. “We’re also going to see more verticalization around income levels and other demographics.”

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