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The Rise of Daily Deals

Groupon has filed for an IPO with the hope of cashing in on investors hunger for web start-ups. They filed yesterday and are looking to raise up to $750 million.

The announcement came on the same day as Amazon announced their launch of a daily deals site.

The premise of these sites is very simple: They offer one deal per 24 hours. In fact there is often more than one deal as different ones are offered depending on location. Companies that are signed up with the deal site will pay a commission for each person that buys the deal.

The forerunners to the daily deal sites were the likes of vouchercodes which simply give a list of the latest deals shops and businesses were offering.

The strong performance of the daily deal sites is likely to have been helped by the worldwide economic downturn – more than ever, people are looking for good deals. What is more, the deals on offer are for products that are in demand. In January this year, LivingSocial offered a $20 Amazon voucher for $10 dollars. Over a million vouchers were sold at a rate of 85 per second over the 24 hour period (Amazon did have a vested interest given that they had just become a major investor in LivingSocial). Better than half price deals are commonplace though, as companies use loss leaders to lure in new business.

Another reason for their success is that there hasn’t been a debate over whether businesses will benefit from promoting their services through them. The fact that there is just one main deal per region per day means the coverage for businesses is huge.

 

The IPO is being watched carefully, especially as people fear a repeat of the dotcom boom of the late 90’s. Overvalued or not, daily deal sites are quickly becoming an essential fix for many internet users and it doesn’t look like they will be disappearing any time soon.

 

 

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