Commentary

Groupon Traffic Tumbles -- Is Deal Fatigue to Blame?

The increasingly competitive group discount and daily deal marketplace may be approaching saturation, judging by new data from Experian Hitwise which shows that market-leader Groupon saw total traffic tumble 50% between the second week in June and the third week in August. The question is whether this indicates growing group discount fatigue among consumers.

Well, not entirely: Living Social, one of Groupon's main competitors, actually saw its traffic increase 27% over the same period, according to Experian. But the fact remains that overall traffic to sites in Experian's "Daily Deal and Aggregator" category declined 25%, suggesting that a broader trend may indeed be afoot. A separate survey of local deals customers conducted by PriceGrabber in June found slightly over half said they felt overwhelmed by the proliferation of daily deals and group discount offers.

None of this is particularly super news for Groupon, which has been gearing up for an IPO despite financial issues which have given some investors pause. According to a revised financial filing in June, Groupon posted a $420 million loss in 2010 and losses of $117.1 million and $102.7 million in the first and second quarters of 2011, respectively. Costs continue to increase in part because of the personnel-intensive approach to local sales. Meanwhile Groupon faces push back from deal partners who object to the standard 50%-50% revenue-sharing agreement (although rumor has it that some merchants have negotiated revenue sharing deals with a favorable 80%-20% split).

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None of this has stopped Groupon's valuation soaring from $1.3 billion in April 2010 to $3 billion in November, $4.75 billion in January, and around $25 billion today. Now we have possible signs of consumer fatigue, growing resistance from business partners, and the company has yet to post a profit: sounds like it's time for an IPO!

2 comments about "Groupon Traffic Tumbles -- Is Deal Fatigue to Blame?".
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  1. Doug Garnett from Protonik, LLC, August 30, 2011 at 4:42 p.m.

    Coupon clipping has always been of only limited appeal to the majority of consumers. There is a committed minority who love it.

    What makes sense is that Groupon hype brought new people to coupling to experiment with it. But now they are reverting to their true behavior - leaving the committed minority as Groupon's consumer.

    If so, this was always quite predictable - but the hype machine tends to ignore reality.

    Isn't it funny to note that the single best sales driving aspect of the web is ... Discount shopping. Not terribly inspiring.

  2. Doug Garnett from Protonik, LLC, August 30, 2011 at 4:43 p.m.

    Apologies for the auto-incorrect errors... :-)

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