Booming US online coupon site Groupon launched its Australian venture overnight, sparking a battle royale between Nine Entertainment Co. and Seven Media Group’s respective group buying sites Cudo and Spreets.
Groupon – which rejected a $6 billion takeover offer from Google in December – finally moved on the Australian market last night following months of speculation.
The move comes hot on the heels of Yahoo!7’s $40 million acquisition of top ranking group buying player (by revenue) Spreets and the launch of Cudo by Nine Entertainment Co. Network Ten also took a stake in Our Deal late last year.
Yahoo!7 paid $40 million for Spreets last month and according to research firm Telsyte, is the largest player in the market by sales volume – Spreets is generating about $6 million a month.
Scoopon is a close second followed by Jump On It and the rapidly growing Cudo, launched by Nine Entertainment three months ago, which is now generating $2-3 million per month.
Media stampede for fat margins
The stampede by media groups into the sector – which is also expected to see Facebook and Google launch their own initiatives shortly - is driven by huge margins compared to their traditional online advertising businesses.
Group buying sites take 25-50% of the value of a particular deal and the merchant, typically small and medium sized companies, pay nothing upfront.
The merchant splits the value of the promoted offer with the group buying promoter and generates immediate sales and customer trial.
Nine Entertainment Co.’s Cudo is taking the biggest margin of all the group buying operators currently in the market – 49% – and is using its TV, print and online media assets as a key argument to lure businesses to strike deals through Cudo.
Although Spreets is bigger in revenue terms, Cudo has been laying claim to the largest volumes of traffic to its website. Spreets chief executive Dean McEvoy, a former strategist at digital agencies Frontline and Hothouse, blasted Nine Entertainment Co’s tactic today after a report released from Telsyte yesterday ranked Spreets the top player in the market.
Telsyte said the group buying category would jump 284% to $240 million in consumer spending this year, rising to $545 million by 2014.
“This is not all about Cudo shouting from the rooftops how they can run ads on Channel 9 and not sell anything,” McEvoy told AdNews. “The fact that Cudo has got more audience than anyone says they are driving traffic to their website but they’re not selling anything. It shows they’re irrelevant to a lot of people. You’ve got to be relevant, rather than spray and play ads on TV that only drives traffic. It might look good but you’ve got to bring customers through the doors for merchants.”
McEvoy acknowledged Spreets would also start using the cross-promotional assets of the Seven Media group following the acquisition but said: “We were already number 1 before the Yahoo!7 acquisition because we built a real audience via word-of-mouth online. We email 570,000 people every day.”
Big brands getting on board
Although SME’s in dining, health and beauty and leisure have dominated group buying offers to date, the diversity of products and services is expanding quickly and even big brand marketers are now starting to move on the sector.
“Group buying is a low risk way to get foot traffic compared to other forms of advertising,” said Telsyte’s senior research manager Sam Yip. “You get tangible, immediate results. These deals run for 24 hours so merchants can see how many people purchased the deal very quickly.”
Indeed, even the online retail laggard, Harvey Norman, has trialed group buying via its home security venture in recent weeks.
Telsyte’s Yip said he was surprised with Groupon’s first offer today promoting a restaurant in Sydney’s beachside suburb of Manly. The $70 deal was for a lunch for two – Yip said the average cost of any offer on group buying sites in Australia was $44. But in the three hours AdNews tracked Groupon-Stardeals maiden offer, the number of packages sold had quadrupled to 278.
Groupon’s arrival in Australia via Stardeals.com.au also signals the company’s intent. Locked out of the Australian market by a clever “cyber squatting” move by the owners of number two player Scoopon to register groupon.com.au, many believed Groupon would pay a ransom for the domain name or acquire Scoopon. Instead, Groupon has launched via Stardeals.
It may still yet be forced into an acquisition if Groupon can’t force Scoopon to relinquish the name through the courts or online regulatory bodies.
“That’s possible,” said Telsyte’s Yip. “It’s a very competitive market. It’s all about grabbing share of customers and they don’t have that much loyalty to any of the sites. They gravitate to the best deals in the best locations with the best discounts.”
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