Group deal websites predicted to see second wind

Group deal websites predicted to see second wind

There are predictions in the market that online group deals are set to see a second wind.

B&T Magazine
Posted by B&T Magazine

Group deals website Cudo was bought from mi9 for an undisclosed amount this week by ecommerce company AussieCommerce, owner of DEALS.com.au, TheHome, Ouffer.com and Pop.com.au.

Aussie Commerce’s managing director Adam Schwab, told B&T the acquisition would make the group more competitive against other group deal websites.

“Sites such as Oz Sales have had four of five years head start on us with a $250m plus turnover. The acquisition of Cudo will take Aussie Commerce from middle to top tier competitor.”

Schwab says Aussie Commerce’s turnover is currently around $100m plus.

The online group deals industry was valued by analyst firm Telsyte at more than $500m last year.

The combined revenues of the top five sites, Groupon, Scoopon, LivingSocial, Cudo, and OurDeal, showed greater than 9% year-on-year growth in 2012, with Groupon and Scoopon, accounting for 40% of that growth combined.

However, aggressive consolidation had seen only a modest increase of 1.4% for 2012 compared to the previous year. Cudo’s former CEO Billy Tucker, now founder of online consulting service 57 Signal, told B&T the industry is set to regain traction.

“There’s natural space for $1b of revenue in the market,” said Tucker.  

“It’s a good thing seeing fewer big players on the market because there will be a better share of profits.”

Back in 2011, during a boom in the industry, mi9 put a price tag of $60 million on Cudo. When asked by B&T about the price tag, Aussie Commerce managing director Schwab said that while he wouldn’t disclose the figure, the company had just had its most profitable year ever. A major attraction to the purchase was the ongoing marketing partnership with mi9 including integrated advertising.

Schwab says that while most facets of the online group deals market have a lifespan of around six to 12 months, travel deals have a lucrative future the company is preparing for.

 “We’re focusing on luxury escapes using Australian and international travel agents and a separate vertical,” Aussie Commerce will launch LuxuryEscapes.com.au in three weeks, complemented by a travel magazine.

Cudo’s former CEO Billy Tucker predicts the further consolidation of the industry would see the market reshape.

“Group buying started as entertainment. It used to be about the experience of getting the numbers up to win the deals, but now it is more about the discount and utility. It’s now less of the novelty and more of the discovery.”

Like, Schwab, Tucker also predicts travel as the next big market for group deal ecommerce, with Aussie Commere set to capture a good section of the audience.

“Cudo has been performing well. The consolidation was inevitable,” said Tucker.

“Australia’s market can only host around two or three big winners. We’ll see those emerge in the next six months.”