The Deal With Daily Deals: A Fad Built on Big Data

So, you’ve been saving up for that really, really expensive gym membership or yoga class,or you’ve been dying to try that new chic restaurant that everyone is raving about but it’s just too expensive.  Maybe you’ve been working two jobs just so you can afford that perfect summer vacation.  Tough isn’t it?  With everyday expenses, monthly bills and mortgages, all your dreams may seem far from reality, as it is quite hard to balance everything and still have something left for you to indulge in.

That’s where the daily deals sites come into play.  All those expensive things you want: gym or yoga classes, dining at the best restaurants, the perfect summer vacation – all available at a fraction of the original price.  Believe it, it’s true.  This is the reason why the daily deals market is in full blast.

LivingSocial released their Q2 Member Must-Haves Study which gives us a general idea as to what consumers are most likely purchasing.  In the beauty category, massage topped the list with 154,085 vouchers sold; in food/dining out category Mexicans restaurants dominated the bunch with 107,159 vouchers sold; yoga sold 92,242 vouchers in the fitness category; while golf was on top with 60,628 vouchers sold in the entertainment category.

“The results from this quarter’s U.S. trend study paint a really strong picture of how LivingSocial is connecting its members with the things they like to do in their free time,” said Mandy Cole, Senior Vice President of Sales, LivingSocial. “We’re a burrito-eating, golf-playing, massage-loving bunch and LivingSocial is looking forward to introducing even more new activities that will excite and engage our members.”

They have five deal types that anyone can choose from: LivingSocial Daily Deals – unique, local deals delivered each morning encouraging local discovery and are live for 24 hours; LivingSocial Families – deals that help families discover the best kid- and parent-approved experiences in their neighborhoods; LivingSocial Instant Deals – real-time, instant offerings delivered via smartphones and the web helping answer the question, “What is cool to do right now?”;  LivingSocial Escapes – affordable, accessible “trips in a box” inspiring people around the world to find, share, and enjoy unique travel experiences;  LivingSocial Adventures – fully-produced events encouraging members to try something they wouldn’t have or perhaps didn’t know existed nearby.

And to add more excitement, LivingSocial just added Instant, a feature much like Groupon Now, a mobile app that gives you deals on the go.  Picture it like this: if you were one of those people who loves snipping out coupons in newspapers or magazines, this is a similar concept for your mobile phone.  LivingSocial is on a global tear, having expanded to Asia with the the acquisition of TicketMonster Inc. in South Korea, Ensogo in the Philippines, and DealKeren in Indonesia.

While LivingSocial is busy trying to figure out what new deals to offers, Groupon, another big daily deals site, is in a bit of a dilemma as they caved to pressure from investors and will stop referring to a metric called Adjusted Consolidated Segment Operating Income (ACSOI) that excludes marketing costs and though they have 115 million subscribers to date, could have trouble with their IPOs.

Nick Einhorn, an analyst at Connecticut-based IPO research house Renaissance Capital. “Less mature, less profitable companies could have a tougher time going public,” Einhorn told Reuters.

 Investor Place’s Tom Taulli, “the IPO market will freeze up. It will mostly be only standout companies – such as Zynga and Facebook – that will get traction. A company like Groupon, which has substantial losses, may have to delay its offering or cut the valuation.”

Daily deal sites are such a huge thing right now that behemoth companies like Google and Amazon have also taken a crack at it, launching their own Google Offer and Amazon Local respectively.  Google is taking the daily deals business seriously as they acquired a daily deals aggregation site, Dealmap.

So what is the big deal with daily deals?  Sites like Groupon and LivingSocial are the latest fad, being likened to “this year’s Facebook,” as if social networks and services are as fashionable as seasonal color pallets.  But it’s this data they’re collecting, on consumer patterns at the local level, that really distinguishes their value.  LivingSocial has been able to determine a very decided course of action based on consumer appeal in various niches, and with this latest infographic release, it’s evident that the daily deals site is keen on watching its market.

A new kind of business intelligence, daily deals are certainly a fad, but one that will bear new versions in the coming years.  We’ll see deeper integration with mobile wallet trends, social networks, NFC technology and a myriad of other service and retail applications.  This fad is only in its infancy, but by leveraging big data, the industry will sprout new roads to success, bringing pragmatism and personalization into the evolution of direct marketing.