Over the past six months, daily deal sites including Groupon, Living Social and Gilt Groupe have attracted more than $1.69 billion in venture capital and other investments according to the new 2011 Daily Deal Investment Index released by Daily Deal Media. Overall, 22 Daily Deal companies have received investments in the past six months.
There are now more than 350 daily deal sites in the U.S. alone – five times the number over a year ago. The $858 million consumer spending in group buying in 2010 has been driven by hyper-local deals offered by merchants seeking visibility and new marketing channels. This is expected to grow to $1.9 billion in 2011 and to a further $4.5 billion by 2015, representing a significant 39.3% CAGR over 2010-2015.
Leading this charge are Groupon and LivingSocial, the most visible faces of this market, followed by powerful newcomers that include Google, Facebook, Bing and AT&T. Competition shows no signs of slowing down as an increasing number of startups launching due to low barriers to entry and high valuations.
Investment amounts have ranged from low single digit million dollars to multi-million dollar deals, with Groupon’s $950.0 million in January 2011 being the largest single-round funding till date. The top five companies—which also includes Living Social, Gilt Groupe, Angie’s List and Ideelli—together have garnered over $2.1 billion and approximately 90 per cent of the investments in the industry. Even within this set, Groupon and LivingSocial have together garnered over 72.0 per cent of the funding.
Despite the start-up action in
this industry, of the 270 daily deal companies tracked, only 34 companies have received funding from the investor community. This underscores the growing investor caution in identifying daily deal companies that offer real potential for market adoption, growth, and returns. The low barrier to entry and heavy competition are two major concerns cited by investors.
The results we have seen in this index illustrated that this market is still explosive, with the number of daily deal companies growing five-fold in the past year. Despite a conservative approach from many investors, as daily deals companies build scale and expand reach, they are finding support from the investor community. Daily Deal Media sees no signs of the market slowing down as an increasing number of sites test the market, helped by low barriers to entry.
Results of the report will be discussed at the 2011 Daily Deal Media Conference, the premier industry event for companies and investors in the Daily Deal market. The conference will be held September 8-9 in Chicago, and interested participants can register here.