Ads that really click
Deal-a-day websites are a hit, with buyers, sellers.
Groupon is adding 150 employees a month at its U.S. headquarters and trains them in a church because the conference rooms at its headquarters aren't big enough. Ideeli has crammed so much electronic equipment into its New York office that the power goes out every day.
And at LivingSocial, well, the living is a little too social. Its third office in Washington, open just two months, ran out of room so fast that employees have to work at narrow desks in the hallway.
These deal-a-day websites blast e-mail offers for deep discounts, sometimes good for only a few hours - and they're becoming so popular that their offices are starting to look as crowded as their subscribers' inboxes.
In just three years, the business model of these websites has changed local advertising, delivering faster results than other marketing methods. Store owners get immediate revenue and can see exactly how many customers an online offer brings in.
The exponential growth of those sites, plus the emergence of hundreds of clones, is reminiscent of tech companies before the dot-com stock bubble burst in 2000. But Lou Kerner, a social-media analyst at Wedbush, argues this isn't a fad: It's a new category of commerce that has changed how companies, including hair salons and sandwich shops, market their products.
Groupon, the No. 1 daily-deal site, has swelled over the last 18 months to 85 million subscribers from two million, while second-place LivingSocial has grown to 28 million from 120,000.
The sites are expected to generate $2.7 billion in revenue this year, more than double last year's total, according to Local Offer Network, which collects and distributes deals from hundreds of sites. The daily-deal market could reach $4 billion by 2015, says Mark Fratrik, vice president at the marketing research firm BIA/Kelsey.
While that's a small slice of the $142 billion in online retail sales, daily-deal revenue is growing much faster than overall e-commerce. The discounts and limited-time offers on daily-deal sites motivate shoppers to splurge on treats such as half-priced golf lessons at Miami's Better Golf Academy, or $75 worth of wine for $35.
Sites fall into two categories:
Group-buying sites, such as Groupon, LivingSocial, and BuyWithMe, that partner with small businesses to send subscribers a local offer each day. Occasionally, they partner with big companies such as the Gap to run a national deal. Subscribers can opt to purchase the voucher offer, usually good for half off. Then Groupon takes 30 percent to 50 percent of the revenue.
Flash-sale sites, such as RueLaLa and Gilt, that host limited-time sales for members only. They feature a different product or designer each day, such as Dolce & Gabbana dresses that didn't sell. Private sales allow designers to unload excess merchandise and market to more budget-conscious customers while maintaining an air of exclusivity.
Skeptics predicted traffic to daily-deal sites would flatten as the economy recovered from the 2007-09 recession and shoppers stopped worrying about finding a bargain.
The opposite has occurred.
The need for staff with both marketing chops and the ability to write snappy copy makes finding the right people difficult. Mike Rothman, general manager of Thrillist Rewards, says he is posting jobs faster than he can fill them. He has a dozen openings.