According to comScore, the biggest Groupon clone, LivingSocial, gets more unique visitors to its website than Groupon itself.Now, don’t be fooled: this does not mean that LivingSocial is a bigger business; in the terms that really matter — revenue — it is still much, much smaller. But for a daily deal site to have that much traffic is impressive nonetheless.
So this raises two questions: why does LivingSocial have more traffic but less revenue, and just how big is the gap between the two?
Why traffic isn’t a good proxy for revenue
For the most part, people come to daily deal sites for two reasons: they are subscribers who like today’s deal and are planning to buy it, or they clicked on an ad. Groupon and LivingSocial have similar websites, and comparable average deal prices, so you might expect this traffic to lead to signups and sales at similar rates. A few things distort that:
- The nature of the advertising matters. Some publishers run units that actually load advertisers’ sites in frames. These can count as unique visitors. LivingSocial gets 19% of its traffic from eVite, where it runs such ads. As an ecommerce business, LivingSocial doesn’t have much incentive to juice traffic stats — presumably that traffic is leading to plenty of real conversions. But it does presumably skew the traffic-sales ratio quite a bit.
- LivingSocial offers “365 things to do” lists in each of its market, encouraging some non-sales-driven visits.
- These numbers are for U.S. visits. Groupon is active in more non-U.S. cities, so ignoring the rest of the world ignores more of Groupon’s revenue.
Just how much bigger is Groupon than its competitors?
LivingSocial CEO Tim O’Shaughnessy says the revenue gap is “a lot smaller than everyone thinks.”
That, of course, depends on how big everyone thinks it is. If people think Groupon’s competitors are all mum and pop operations with no traction, then Tim is very right about this. LivingSocial raised $39 million last spring, and is, Tim tells us, on pace to do “well over $100 million” in revenue this year.
But that doesn’t quite qualify as nipping at Groupon’s heels. Groupon CEO Andrew Mason recently said on CNBC that his company was “many many multiples” bigger than its nearest competitor. We pressed him a little on what exactly that meant, and he told us that he is very confident that Groupon is generating “more than 3” times as much revenue as LivingSocial.
That is more or less in line with other reports about Groupon’s revenue. So it’s safe to say that Groupon isn’t worried about losing the top spot any time soon. But, given how rapidly both companies are growing, it also confirms that LivingSocial is becoming a huge company in its own right. The overwhelming majority of the hundreds of straight-up Groupon clones will never achieve much scale, but we see no reason why there can’t be two or three billion dollar companies in this space.
UPDATE: As we suggested above, comScore was including a large number of visits generated by ads running in iframes. comScore tries to exclude “non user-requested traffic” from its statistics. comScore has since caught the error, and updated its statistics. Groupon now has slightly more unique visitors than LivingSocial in the adjusted rankings.
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