There is an avalanche of buzz around the daily deal business. This week alone, Google jumped into the space announcing they would purchase the daily deal aggregator Dealmap. Last week, Groupon announced a partnership with Foursquare, which Business Insiders Pascal-Emmanuel Gobry called, "a very smart deal."
Of course, most of the buzz in recent weeks has surrounded the astronomical IPOs that companies like Groupon and Living Social are filing. Seldom do I read an article that mentions a daily deal IPO that doesn't point to a possible sign of the"tech bubble" bursting (see cover story of Fortune magazine this week).
CNBC host Maria Bartiromo, said in a recent interview with genConnect, "We just went through this period where we threw out all fundamentals -- it didn't matter if the company had very little revenue, no earnings... Come back down to Earth and recognize that fundamentals really do in fact matter."
Everyone has good reason for questioning the high IPO price of the bigger daily deal companies. Groupon, according to the New York Times, "is still struggling to turn a profit" and lost $450 million last year. The major expense comes from the exorbitant amount of money being shelled out for email addresses. Groupon "spent $18 million to add about 3.7 million subscribers in the second quarter last year," the Times reported.
The second problem major daily deal companies are having is gaining repeat participants on the merchant side. A recent report stated that over 50 percent of Groupon's merchants did not want to run another deal with Groupon.
Reading about the daily deal struggles, I saw an opportunity to build something that would help both merchants and provide a great value to consumers. Over the last 6 years my business partner Benzion Aboud and I built one of America's biggest online retailers for home services (television, internet and home phone), along with a large email data base (where we collect 250,000 email addresses monthly).
On June 1, we launched Saveology Daily Deals. Being late to the game, we needed to be innovative with the business model. But in this struggling economy, we also wanted to make sure everyone benefited from participating in the daily deal.
For starters, we asked our home services consumers if they wanted to opt-in to the new Saveology Daily Deals. 4.5 million people said yes! Groupon spent $18 million to add about 3.7 million subscribers in the second quarter last year (according to their filing).
Our emails base made us profitable on day one, but it was also extremely important to ensure our merchants stayed happy. Saveology made a conscious effort to increase the revenue share for the merchant and also allowed them to cash in on the purchase of the daily deal (not the redemption of the coupon, like other major daily deal brands).
Saveology also wanted to create new ways for merchants to make money so launched a lead generator where Saveology offers a deal on such items as a car lease. A customer calls the number on the daily deal email and the car leasing company then pays us for the lead. The consumer gets a great deal, the merchant receives a great lead, and Saveology gets paid for sending out an email. A win-win for everyone involved.
We also created a coupon generator where Saveology takes existing coupons, deepens the discount (so the normal 25 percent off to your favorite store becomes 50 percent) and asks you to pay a few bucks for the coupon. This helps both consumers and merchants.
I live in South Florida, which was one of the hardest hit areas in the country by the recession. America needs companies with win-win solutions. While companies like Groupon have enjoyed a first mover advantage, their business model has hit a ceiling and merchants are unhappy. With Saveology we make merchants happy, both small and large, and we make customers happy with our refreshing approach to daily deals.
Maybe instead of the daily deal bubble popping, Saveology can help create a whole new, unpoppable bubble of its own.
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