Daily Deal Revenues Could Soar to $6 Billion in 2015
Spending on U.S. daily deals could soar as much as $3.9 billion in the next four years, up from only $873 million in 2010.
The estimates were released today by BIA/Kelsey, but seem conservative given some of the official figures known about the largest players in the space.
For instance, Groupon turned down a $6 billion offer from Google late last year, and then raised nearly $1 billion in venture capital.
Groupon also recently disclosed in an internal memo that it saw its revenue surge to $760 million last year from $33 million the previous year (although more than a third of its 2010 sales came from outside the U.S.).
But that’s only Groupon.
The No. 2 player in the space, LivingSocial, which raised $175 million from Amazon.com, said it was booking revenues of more than $1 million a day and is projected to record well over $500 million in revenue in 2011.
Both companies are well-positioned with nearly 200 other players trying to get into the space, and as of March 1, deals were being offered in 178 cities, reaching 102 million people, according to the research firm, which is hosting an event on the topic later this month in Boston.
The daily deal providers operate by building large local sales forces that negotiate deals on services and products at roughly 50 percent off. Customers then purchase the vouchers in advance, and the companies keep about half of the revenues from the sale.
BIA/Kelsey said its revenue expectations factor in that the novelty of these group-buying discounts will fade and e-mail open rates will fall as time passes. In its most optimistic scenario, U.S. revenues could hit as much as $6.1 billion in 2015.