After Acquiring 15 Groupon Clones, CrowdSavings Finds a Buyer for Itself
Two daily deal companies that are far off the radar are joining forces with Half Off Depot, agreeing to acquire CrowdSavings for $6.4 million in cash and stock.
Together, the two will be rebranded as nCrowd, and will be headquartered out of Atlanta.
There are two remarkable aspects to this transaction, even though nCrowd will still only be a fraction of the size of Groupon or LivingSocial.
First is that the two companies represent a total of 19 acquisitions combined, representing a significant percentage of the overall number of deals that have taken place in the U.S. Second is that this deal was able to get done at all, given the current state of the industry.
Over the past year, Groupon has become a clear winner in the space, despite thousands of startups trying to challenge it. Groupon’s staying power, in part, proves that while the coupon business was easy to replicate, it isn’t easy to scale. And even at Groupon’s scale, it still struggles.
Thus, finding a buyer has become increasingly difficult for those that remain in business.
For instance, in 2011, 63 daily deal companies were acquired, but last year, that number dropped to 28, according to 451 Research, which tracks mergers and acquisitions in the space. So far this year, only one deal has closed (that was for Totsy buying the assets of Mamasource).
The last notable deal was when Chase Bank purchased San Francisco-based Bloomspot for $35 million in December.
Even with the acquisition of CrowdSavings by Half Off Depot, the combined entity will still have a minuscule footprint. All told, nCrowd will have two million registered users who are signed up to receive daily emails in 17 markets. The company employs 70 people, who serve locations that are mostly in the South and Midwest, including Atlanta, Tampa, Jacksonville and Kansas City.
Half Off Depot bought CrowdSavings for about 6.5 million shares and about $1.5 million in cash, according to sources familiar with the transaction.
“We compete with Groupon, but we used to compete with 600 daily deals sites. There aren’t that many left anymore compared to how it used to be,” said Brian Conley, CEO of nCrowd (previously of Half Off Depot).
Conley said the four-year-old company has been able to stay afloat by expanding beyond daily deals to social commerce, which means assisting merchants with running Facebook contests and helping them to improve customer retention.
I first talked to Chad Jaquays, CEO of Crowdsavings.com, a year and a half ago, when his company was considered the most active acquirer in the daily deals space — in fact, it was so acquisitive that he built a page on the company’s website announcing, “We Buy Deal Sites.”
Many of the deals were tiny, costing Jaquays roughly $100,000 to $400,000 apiece. He was interested in acquiring more subscribers, but he also took other factors into consideration, like how many of those subscribers had purchased a deal before. In all, he purchased 15 companies, and now he’s found someone interested in buying his own.
The next logical question is, what’s the end goal? Will nCrowd ever get to Groupon’s scale?
Conley isn’t disillusioned.
“Who knows what the future holds,” he said. “I will make no prognostications as to whether we can beat the fastest-growing company ever. But we do feel like we have a unique value proposition for the merchants. Once it is well-understood, this thing could take off.”