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Daily Deals David Wolfe – COO – BuyWithMe [email protected] 05/16/2022 1 DMCNY Breakfast Series

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Overview of the Group Buying/Daily Deals space

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Page 1: David Wolfe Daily Deals

04/11/2023 1

Daily Deals

David Wolfe – COO – [email protected]

DMCNY Breakfast Series

Page 2: David Wolfe Daily Deals

04/11/2023 2

Table of Contents

• The Market

• Consumers

• Merchants

• Deals

• Groupon’s S1

• Future

DMCNY Breakfast Series

Page 3: David Wolfe Daily Deals

04/11/2023 3

The Market – “Daily Deals” defined

“Daily Deal” platforms provide a way for local businesses to connect with local customers.

Consumers use the platforms to discover new local businesses , get deep discounts, and share them with their friends.

Local businesses use the platforms to acquire new consumers on a performance basis.

A daily deal is an online CPA based marketing campaign for a local business

DMCNY Breakfast Series

Page 4: David Wolfe Daily Deals

04/11/2023 4

The Market - History

DMCNY Breakfast Series – [source Yipit]

Page 5: David Wolfe Daily Deals

04/11/2023 5

The Market – Industry Structure

DMCNY Breakfast Series – [source Yipit]

MERCHANTS

CONSUMERS

Daily Deal Sites

Merchant Services

SOON…

Merchant Agencies

Consumer Services

Aggregators

White Label

Publishers

Vertical Deal Sites

Data

Exchanges

Page 6: David Wolfe Daily Deals

04/11/2023 6

The Market – Traffic & Audience

DMCNY Breakfast Series – [source Yipit]

• Buyers predominantly female

• Affluent

• 25 – 40 year olds dominate

Page 7: David Wolfe Daily Deals

04/11/2023 7

The Market – Revenue

Groupon’s 1st quarter 2011 revenue - 655 million

These projections are already too conservativeDMCNY Breakfast Series [source: Silicon Alley Insider & EMarketer]

Page 8: David Wolfe Daily Deals

04/11/2023 8

The Market – Barriers to Scale

DMCNY Breakfast Series [source: Needham & Company LLC via Yipit]

• The Virtuous Cycle of Daily Deals

More Sales

More Conversions

More Deal Personalizatio

n

More Deals

More Subscribers

Improved Media Buying

More Salespeople

More Cities

Page 9: David Wolfe Daily Deals

04/11/2023 9

The Market – Key Value Streams

DMCNY Breakfast Series

Offer Deal

Purchase Deal

Redemp-tion

Match &

value creatio

n

Deal life-cycle

Acquire• Ads, Social, Branding

Convert• Web site, deal presentation

Retain• email, loyalty programs

Acquire• Merchandising, Boost Your Biz

Convert•Sales, Editorial

Retain•Account Management

Consumer life-cycle

Merchant life-cycle

- New merchant discovery - Positive experience

- New customers- Better inventory management- New business

Revenues

Consumer/viral referrals

Merchant referrals

Marketing Cost

Sales Cost

Production Cost

Page 10: David Wolfe Daily Deals

04/11/2023 10

Consumers – Basic experience

DMCNY Breakfast Series

consumer

Discovers deal

Participates in group

buy

Retrieves voucher

Redeems

Merchandized deal

delivered through

notification or app

Payment authorized

& cc stored

Deal activated & payments captured

payment processor

Voucher’s activated

for print or mobile access

redemption processed [mobile or

bulk process]

consumer consumer

Daily Deal Systems

consumer &

merchant

Page 11: David Wolfe Daily Deals

04/11/2023 11

Consumers – Benefits

DMCNY Breakfast Series

Key Benefits Key Risks/Liabilities

New experiences Printed voucher

Local experiences Deals not always relevant

Significant discounts Too many emails already

Easy to share and take advantage with friends

Pre-payment required

Discovery experience

Passive [not searching]

Active or intent- driven

[searching]

User – Anonymous

[unknown]

User – Identified [segment known, behavior known]

Page 12: David Wolfe Daily Deals

04/11/2023 12

Consumers – Acquisition

DMCNY Breakfast Series

• Groupon’s 1st quarter marketing spend 250 million• Industry eCPL’s : 5 – 10 $ range• Industry CAC : 10 – 45$ range• Industry LTV : 30 - 60$ range [annualized]• Industry Buyer/Subscriber ratios ~ 20%• Creative themes – general service value prop & business

category based (Hungry, Bored), deal specific

Page 13: David Wolfe Daily Deals

04/11/2023 13

Consumers – Challenges

DMCNY Breakfast Series

Over 50% of all revenue producing Daily Deal transactions are the direct result of an email. Can email remain the primary driver of engagement?

Inbox collisions and email fatigue seem likely

Little product and user experience differentiation

Archaic redemption methods

Adoption of mobile services remains under 20% across industry

Page 14: David Wolfe Daily Deals

04/11/2023 14

Merchants – Basic experience

DMCNY Breakfast Series

merchant

Signs-upCo-

creates deal

Consumers

redeem

Retrieves $$ &

statistics

Merchant identity & attributes

stored

Deal created & editorial

and image assets stored

Deal inserted

into production schedule

Redemption

processed [real-time mobile,

bulk voucher]

Campaign stats in

merchant portal. Check sent

consumer &

merchant

Daily Deal Systems

Deal is schedule

d

merchant merchant merchant

Deal runs

Deal merchandi

zed to consumers

& vouchers

sold

consumer

Page 15: David Wolfe Daily Deals

04/11/2023 15

Merchants – Benefits

DMCNY Breakfast Series

Key Benefits Key Risks/Liabilities

Acquire new customers Management of multiple paper vouchers

Ultimate performance based advertising model (only pay if they transact)

Cant track repeat behavior of new customers. Questionable ROI

Move distressed inventory Some customers discount hunters

Build brand awareness with local community

Cant manage flow & timing of new customers

Increase up-front cash flows

Cant always maintain positive margins with discounts

Leverage social networks for promotion

Sometimes cannibalize existing users

Redemption method limiting

Page 16: David Wolfe Daily Deals

04/11/2023 16

Merchants – Acquisition

DMCNY Breakfast Series

Local businesses are “sold” deals, they don’t “buy” them.

Effective merchant acquisition and retention require investment in specific organizational structures - Merchandising, Sales, & Account Management teams

Deal /campaign creation requires significant hand-holding.

Groupon’s self-service initiative not very successful to date.

250-750$ eCPL for small businesses with assisted model

Large, trained, inside/outside sales force requirement for performance at scale.

Page 17: David Wolfe Daily Deals

04/11/2023 17

Merchants – Profitability

DMCNY Breakfast Series [source: Yipit]

Merchant Profitability Per Voucher

Drivers Gross Profit / VoucherDeal Assumptions Existing CustomersDeal Value $50 Revenue from Groupon $2.2

Deal Discount 50% Revenue from Overage1 1.1Deal Price $25 Revenue from Existing Customers 3.2Overage % 14% Less: COGS 3.4Commission % 40% Less: Cannabalized GP 1.8Cost of Goods Sold % 40% GP from Existing Customers ($2.0)Credit Card Fee % 2.5%

GP from Breakage $2.9Buyer Mix AssumptionsUnredeemed (Breakage) % 20% New CustomersCurrent Customer % 20% Revenue from Groupon $8.6

New Customer % 60% Revenue from Overage1 4.2Revenue from Existing Customers 12.8

Repeat Visitor Assumptions Less: COGS 13.7

Conversion to Repeat %23 19% GP from Existing Customers ($0.9)Repeat Visits 3Vouchers per Customer 1.5 New Repeat CustomersCurrent Customers Already Going % 25% Revenue from Repeat Customers $13.0

Less: COGS 5.2GP from Existing Customers $7.8

Incremental GP / Voucher $7.9

Page 18: David Wolfe Daily Deals

04/11/2023 18

Merchant – Challenges

DMCNY Breakfast Series

Daily deals are an effective customer acquisition vehicle, but are less useful for retention and win back

The only basis of platform differentiation from a merchant perspective are volume and quality of consumer’s delivered

Return on marketing investment a hotly debated topic. Repeat visitor percentages sufficient for positive ROI not always met.

Fractured technologies for managing redemption - vouchers & smartphones. Beginning to see innovation around POS and payment systems integration.

Page 19: David Wolfe Daily Deals

04/11/2023 19

Deals – Categories

DMCNY Breakfast Series [source: Yipit]

Page 20: David Wolfe Daily Deals

04/11/2023 20

Deals – Revenue/Volume

DMCNY Breakfast Series [source: Yipit]

Page 21: David Wolfe Daily Deals

04/11/2023 21

Groupon’s S 1– Key Statistics

DMCNY Breakfast Series

Financial Snapshot:• 2010 Revenue: $713M• Run Rate Revenue: $2.6B (Q1 2011 annualized)• Revenue Growth: 2241% YoY (2010 vs 2009), 1357% YOY (Q1 2011

vs Q1 2010)• 2010 Gross Profit: $280M• Run Rate Gross Profit: $1.1B (Q1 2011 annualized)• Gross Profit Margins: 42% (Q1 2011), 39% (2010), 36% (2009) -->

i.e. for every $1 of Groupons sold, the company currently keeps $0.42 in net revenue and passes $0.58 to the merchant

• 2010 Net Income: -$389M (net loss)

User & Merchant Statistics:• Subscribers (end of period):  83.1M (Q1 2011), 50.6M (2010), 1.8M

(2009) • Cumulative customers (unique buyers of Groupons): 15.8M (Q1

2011), 9.0M (2010), 0.4M (2009)• Featured merchants (may not have tipped): 56.8K (Q1 2011), 66.3K

(2010), 2.7K (2009)• Groupons sold: 28.1M (Q1 2011), 30.3M (2010), 1.2M (2009)

Page 22: David Wolfe Daily Deals

04/11/2023 22

Groupon’s S 1– Media

Interpretation

DMCNY Breakfast Series

Techcrunch- “Why Groupon is Poised for Collapse”- “Groupon Was The Single Worst Decision I Have Ever Made

As A Business Owner”

Concerns• Traffic is not necessarily profitable• Are margins sustainable• Will businesses still need to mortgage profits in the name of

cash flow• What percentage of merchants repeat• Fraudulent merchants• Dependence on lengthy merchant payment cycles

Not all press is negative – Yipit- “The Reports of Groupon’s Death Are Greatly Exaggerated”

Page 23: David Wolfe Daily Deals

04/11/2023 23

The Future - Questions

DMCNY Breakfast Series

How many competitors can the market support at scale?

How will Facebook and Google fair?

When will the competition for qualified consumer’s abate?

Will email remain king?

What kinds of product innovations and partnerships will occur in the mobile, location based services arena?

What kind of product innovations will occur to simplify redemption and create real track-ability?

Will the capital markets continue to fund “less than profitable” growth?

How will deal types evolve?

Page 24: David Wolfe Daily Deals

04/11/2023 24

Thank You

David Wolfe – COO – [email protected]

DMCNY Breakfast Series