The future of the daily deals business

More than 400 daily deals companies are estimated in the United States, and about 200 abroad, according to the recent BIA/Kelsey's Deals 3D conference in San Francisco. While Groupon is by far the frontrunner in the multi-billion dollar daily deals space, big-name competitors are nipping at their heels, and may change the way daily deals are published and redeemed.

"You can think of daily deals as a US$300 billion media market, or a US$5 to $8 trillion commerce market," said Neal Polachek, President of BIA/Kelsey.

BIA/Kelsey summarised the four key changes that will take place in the daily deals space in the next year, as reported by PaidContent.org.

1. Facebook and Foursquare have partnered with American Express for the daily deals available on their sites. When users link their AmEx accounts to their Facebook and Foursquare accounts, they can see offers targeted to them. Payment is done via AmEx card at deal redemption. As credit cards companies such as AmEx, and perhaps soon, Visa and Mastercard, enter the space, "I think we're on the leading edge of a transformation of how the marketplace exchanges money," Polachek said.

2. With the influx of big-name competitors like Google Offers, AmazonLocal and Facebook Deals, the way offers are presented will go beyond Groupon-style email to include search and social network delivery, with the ability to target well beyond geography.

3. The average daily deal user subscribes to 3.5 email newsletters, and brand loyalty is non-existent. Panel members at the conference said most daily deals offer 50 percent off a product or service. Loyalty could be enhanced by differentiating offers from competitors, providing better percent-off deals, and better customer service for both customer and advertiser, panel members concluded.

4. In the next 12 to 18 months, what will happen to the hierarchy of players? Will incumbent Groupon go the way of MySpace? Panel members speculated that LivingSocial, which is the No. 2 player, will supplant Groupon because of its innovation in the social media and mobile spaces. The panel members speculated that the crowded marketplace will consolidate, as the bigger players could Hoover up big and small players such as Yelp, OpenTable, FourSquare and distant No. 3 daily dealer BuyWithMe.

Image: Groupon